THE 


i^vu-tiiiiU  iJE 


REP0R5.S-t)F  case's, 

ARGUED    AND  •  p^l^aSttiNtD    iN    THE 

tirts  iif  £xr!)n|iier  k  Cxrliinjiier  Cjjiintb  r. 

VOL.    I. 

lSTEII  term,  19  VICT.,  to  HILARY  VACATION,  20  VICT., 

BOTH    INCLUSIVE. 


BY 

E.  T.  HURLSTONE,  of  the  Inner  Temple, 

AND 

J.  P.  NORMAN,  OP  THE  Inner  Temfll, 
Esquires,  Barristers-at-Law. 


WITH  REFERENCES  TO  DECISIONS  IN  THE  AMERICAN  COURTS. 

J.   I.   CLARK   HARE, 

EDITOR. 


nilLADELPIIIA: 

T.  &  J.  W.  JOHNSON  &  CO.,  LAW  BOOKSELLERS, 

NO.     535     CUE8TNUT     8TKEET. 

1872. 


r5B 


Entered,  according  to  Act  of  Congress,  in  the  year  1857,  by 

T.  &  J.  W.  JOHNSON  A   CO., 

in  the  Clerk's  OflBce  of  the  District  Court  of  the  United  States,  for  the  Eastern  District  of 

Pennsylvania. 

STEREOTYPED  BT  HEARS  k  DUSEMBERT. 


A  TREATISE 


LAW    OF    MOETaAGES 


REAL  PROPERTY. 


BY 


LEONARD   A.  JONES, 


ACTHOR    ALSO    OF    TREATISES    ON  "  RAILROAD   SECURITIES,       '    CHATTEL 
MORTGAGES,"    "  LIENS,"   ETC.,    ETC. 


IN   TWO  VOLUMES. 
VOL.  L 


FOURTH  EDITION. 


BOSTON: 
HOUGHTON,  MIFFLIN  AND   COMPANY. 

NEW  YORK:  11  EAST   SEVENTEENTH   STREET. 

2ri)e  Uioasibe  Press,  (JTambribgc- 

1889. 


T 


Copyright,  1878,  1879, 1882,  and  1SS9, 
By   LEONARD  A.  JONES. 

All  rights  reserved. 


The  Riverside  Press,  Cambridge  : 
Printed  by  U.  0.  Houghton  &  Company. 


TO   THE  HONORABLE 

GEORGE   TYLER   BIGELOW,  LL.  D., 

FORMEKLY 

CHIEF  JUSTICE   OF   MASSACHUSETTS, 

IN   TESTIMONY   OF  THE  HIGH  REGARD  IN  WHICH   UIS  SERVICES 
ON   THE   BENCH   ARE  HELD, 

C|)t^  Creatine  t^  in^crilirt 
BY  THE   AUTHOR. 


77r>onj 


NOTE   TO   THE   FOURTH   EDITION. 


The  present  revision  includes  the  decisions  upon  mort- 
gages which  have  been  reported  since  the  preparation  of 
the  previous  edition.  The  number  of  new  cases  cited  is 
nearly  four  thousand.  Additions  to  the  text  have  been 
made  to  the  amount  of  about  a  hundred  pages.  Aside 
from  the  new  cases  cited  and  the  new  matter  added,  the 
only  material  change  made  in  this  edition  consists  in  the 
omission  of  those  sections  which  in  the  previous  editions 
were  devoted  to  a  statement  of  the  law  of  the  vendor's 
implied  lien.  These  have  been  incorporated  in  the  au- 
thor's treatise  upon  "  Liens."  The  sections  treating  of  the 
vendor's  lien  by  contract  have  been  retained,  inasmuch  as 
this  lien  is  in  effect  an  equitable  mortgage. 

L.  A.  J. 

Boston,  February  7,  1889. 

V 


FROM    THE  PREFACE   TO    THE   FIRST   EDITION. 


The  Law  of  Mortgages  is  a  subject  which  cannot  be 
treated  altogether  with  reference  to  general  principles. 
At  the  present  time  two  opposite  theories  of  the  nature 
of  a  mortgage  hold  about  equal  sway  in  this  country,  and 
this  difference  of  view,  at  the  foundation  of  the  subject, 
has  naturally  led  to  many  divergences  in  the  details  of  it. 
It  is  a  subject,  too,  which  legislation,  directly  and  indi- 
rectly, largely  controls.  All  that  part  of  it  which  relates 
to  remedies  is  closely  connected  with  the  systems  of  Civil 
Procedure  in  the  several  States,  which  are  quite  dissim- 
ilar. The  author  has  endeavored  to  follow  a  natural  or- 
der of  arrangement  in  this  treatise  ;  and  while  presenting 
not  merely  the  common  law  of  the  subject,  but  as  well  the 
modifications  of  that  law  made  through  statutory  enact- 
ments and  judicial  decisions,  in  order  to  avoid  confusion  of 
statement,  and  to  enable  one  who  consults  the  book  to 
turn  with  as  little  trouble  as  possible  to  the  statement  of^ 
the  law  upon  any  part  of  the  subject  for  any  State  in  the 
Union,  he  has  stated  in  detail  for  each  State  the  law  upon 
some  of  the  more  important  divisions  of  the  subject,  in 
which  there  is  a  want  of  harmony.  In  this  way,  at  the 
same  time,  a  fuller  presentation  of  the  law  and  of  tiie 
authorities  upon  these  topics  has  been  made  than  would 
otherwise  have  been  practicable. 

Boston,  Fehrunry  7,  1878. 

vii 


FROM  THE  PREFACE  TO  RAILROAD  SECURITIES. 


In  writing  my  Treatise  on  the  Law  of  Mortgages  of 
Real  Property,  I  at  first  intended  to  follow  out  the  appli- 
cation of  the  general  law  of  the  subject  to  mortgages 
made  by  railroad  companies  and  similar  corporations ;  but 
I  found  that  any  treatment  I  could  give  these  special  top- 
ics within  the  limits  of  that  work  would,  from  its  brevity, 
be  wholly  unsatisfactory.  This  fact,  together  with  the 
consideration  that  nearly  all  the  adjudications  upon  cor- 
porate mortgages  relate  to  matters  mostly  foreign  to  the 
general  Law  of  Mortgages,  led  me  to  omit  these  matters 
from  my  work  upon  the  general  subject.  The  volume 
upon  Railroad  Securities  is  intended  to  make  good  that 
omission.  In  that  it  was  my  purpose  not  to  include  sub- 
jects elementary  or  general  in  the  Law  of  Mortgages. 
The  public  nature  of  railroad  and  other  like  corporations 
having  public  duties  to  perform,  in  return  for  the  fran- 
chises granted  them,  and  the  nature  and  extent  of  their 
property,  have  introduced  into  mortgages  of  their  fran- 
chises and  property  new  elements  of  law  which  have  now 
developed  into  a  separate  branch  of  jurisprudence.  A 
glance  at  the  Table  of  Contents  of  that  volume  will  show 
how  widely  the  topics  considered  differ  from  those  which 
arise  under  ordinary  mortgages ;  and  even  when  the  titles 
are  the  same,  an  examination  of  the  treatise  will  generally 
show  that,  as  applied  to  these  corporate  securities,  the 
substance  of  the  law  is  different. 

Boston,  February  7,  1879. 

ix 


TABLE   OF   CONTENTS. 


CHAPTER  I. 

THE    NATURE    OF   A    MORTGAGE. 

SECTIOtr 

1.  History  of  the  Development  of  the  Law 1 

2.  The  Nature  of  a  Mortgage  in  the  different  States        .         .         .        .         17 

CHAPTER  n. 

FORM    AND    REQUISITES    OF    A    MORTGAGE. 

1.  The  Form  generally 60 

2.  The  Formal  Parts  of  the  Deed 63 

3.  The  Condition 69 

4.  Special  Stipulations     ..........         79 

5.  Execution  and  Delivery  .         .         .         .         .         .         .         .         .81 

6.  Filling  Blanks,  making  Alterations,  and  Reforming  ....         90 

CHAPTER   in. 

THE    PARTIES    TO    A    MORTGAGE. 
PART    I. 

Who  may  f/ive  a  Mortgage        .         .         .         .         .         .         .         .         .  102 

1.  Disability  of  Insanity 103 

2.  Disability  of  Infancy 104 

3.  Married  Women 106 

4.  Tenants  in  Common  of  Partnership  Real  Estate         .         .         .         .  119 

.5.  Corporations  .         .         .         .         .         .         .         .         .         .         .124 

6.  A  Power  to  mortgage          .........  129 

PART   II. 
Who  maij  take  a  Mortgage 131 

CHAPTER   IV. 

WHAT    MAY    ni:    THE    SUIi.JECT    OF    A    MORTGAGE. 

1.  Existing  Intenjsts  in  Real  Prof)Crly 136 

2.  Accessions  to  the  Mortgaged  Property 149 

xi 


TABLE   OF   CONTENTS. 
CHAPTER  V. 

EQUITABLE    MORTGAGES. 

SECTION 

1.  By  Agreements  and  Informal  Mortgages 163 

2.  By  Assignments  of  Contracts  of  Purchase      ......     172 

3.  By  Deposit  of  Title  Deeds 179 

CHAPTER   VI. 

THE  vendor's  LIEX  BY  CONTRACT  OR  RESERVATION. 

1.  Nature  and  Extent  of  such  Lien 217 

2.  Transfer  and  Enforcement  of  the  Lien 229 

CHAPTER   VIL 

ABSOLUTE    DEED    AND    AGREEMENT    TO    RECONVEY. 
PART    I. 

When  they  constitute  a  Mortgage 241 

PART  II. 
Wheii  they  constitute  a  Conditional  Sale 256 

CHAPTER   VIII. 

PAROL   EVIDENCE    TO    PROVE    AN    ABSOLUTE    DEED    A    MORTGAGE. 

1.  The  Grounds  upon  which  it  is  admitted         ......     282 

2.  What  Facts  are  considered 324 

CHAPTER  IX. 

THE    DEBT   SECURED. 

1.  Description  of  the  Debt 343 

2.  Future  Advances  ..........  364 

3.  Mortgage  of  Indemnity      .........  379 

4.  Mortgages  for  Support 388 

CHAPTER  X. 

INSURANCE. 

1.  Insurable  Interests  of  Mortgagor  and  Mortgagee        ....  396 

2.  Insurance  by  the  Mortgagor  for  the  Benefit  of  the  Mortgagee       .         .  400 

3.  Insurance  by  the  Mortgagee      .         .         .         .         .         .         .         •  418 

4.  A  Mortgage  is  not  an  Alienation  . 422 

xii 


TABLE    OF   CONTENTS. 
CHAPTER   XI. 

FIXTURES. 

SECTION 

1.  Rules  for  determining  what  Fixtures  a  Mortgage  covers    .         .         .  428 

2.  Machinery  in  Mills 444 

3.  Rolling  Stock  of  Railways  ........  452 

4.  Remedies  for  Removal  of  Fixtures 453 

CHAPTER  XII. 

REGISTRATION   AS    AFFECTING    PRIORITY. 

1.  Nature  and  Application  of  Registry  Acts 456 

2.  Registry  Acts  of  the  Several  States 480 

3.  Requisites  as  to  Execution  and  Acknowledgment       ....  527 

4.  Requisites  as  to  the  Time  and  Manner  of  Recording     ....  542 

5.  Errors  in  the  Record           .........  550 

6.  The  Effect  of  a  Record  duly  made 557 

CHAPTER  XIII. 

NOTICE    AS    AFFECTING    PRIORITY. 

1.  Notice  as  affecting  Priority  under  the  Registry  Acts  .         .         .  570 

2.  Actual  Notice 57g 

3.  Implied  Notice 584 

4.  Constructive  Notice 591 

5.  Lis  Pendens        ...........  599 

6.  How  far  Possession  is  Notice 600 

7.  Fraud  as  affecting  Priority .  602 

8.  Negligence  as  affecting  Priority 604 

CHAPTER  XIV. 

VOID    AND    USURIOUS    MORTGAGES. 

PART   I. 

Void  Mortgages. 

1.  Want  or  Failure  of  Consideration      .......  610 

2.  Illegal  Consideration     .         . 617 

3.  Mortgages  executed  on  Sunday 623 

4.  Fraudulent  Mortgages  .         .         .         . 624 

PART   II 
Usury. 

1.  ^Vhat  Mortgages  are  Usurious 633 

2.  C<jriif)0und  Interest         ..........     650 

3.  Coiillict  of  Laws 656 

xiii 


TABLE   OF   CONTENTS. 

CHAPTER   XV. 
A  mortgagok's  eights  and  liabilities. 

SECTION 

1.  As  to  Third  Persons 664 

2.  As  to  the  Mortganjee 667 

3.  His  Personal  Liability  to  the  Mortgagee 677 

4.  After-acquired  Titles  and  Improvements 679 

6.  Waste  by  Mortgagor     ..........  684 

CHAPTER   XVI. 

a  mortgagee's  rights  and  liabilities. 

1.  The  Nature  of  his  Estate  or  Interest 699 

2.  His  Rights  against  the  Mortgagor 707 

8.  His  Liability  to  Third  Persons 722 

CHAPTER  XVII. 
A  purchaser's  rights  and  liabilities. 

1.  Purchase  Subject  to  a  Mortgage 735 

2.  Assumption  of  Mortgage  by  Purchaser '40 

3.  Personal  Liability  of  Purchaser .      748 

CHAPTER   XVIII. 
a  lessee's  rights  and  liabilities  .        .         771 

CHAPTER   XIX. 

assignment  of  mortgages. 

1.  A  Formal  Assignment  ..........  786 

2.  Whether  an  Assignment  may  be  compelled        .....  792 

3.  Who  may  make  an  Assignment     ........  794 

4.  What  constitutes  an  Assignment 804 

5.  Equitable  Assignments           .........  813 

6.  Construction  and  Effect  of  Assignments 823 

7.  Whether  an  Assignee  takes  Subject  to  Equities 834 

CHAPTER  XX. 
merger  and  subrogation. 

PART  I. 
Merger  .............         848 

PART  II. 
Subrogation        .        . .874 


TABLE   OF   CONTENTS. 
CHAPTER  XXI. 

PAYMENT   AND   DISCHARGE. 

SKOTIOff 

1.  Tender  before  and  after  Default 886 

2.  Appropriation  of  Payments 904 

3.  Presumption  and  Evidence  of  Payment 913 

4.  Payment  by  Accounting  as  Administrator  ......  919 

5.  Changes  in  the  Form  of  the  Debt .  924 

6.  Revivor  of  Mortgage   ..........  943 

7.  Foreclosure  does  not  constitute  Payment          .....  950 

8.  Who  may  receive  Payment  and  make  Discharge          ....  956 

9.  Discharge  by  Mistake  or  Fraud 966 

10.  Form  and  Construction  of  Discharge .972 

11.  Entry  of  Satisfaction  of  Record 939 

1 2.  Statutory  Provisions  for  Entering  Satisfaction  of  Record    .         .         .  992 

XV 


THE  LAW  OF  MORTGAGES 

or    REAL    PROPERTY. 


CHAPTER   I. 

THE  NATURE   OF  A  MORTGAGE. 

I.  History  of  the  development  of  the  law,  I  11.  The  nature  of  a  mortgage  in  the  dif- 
1-16.  I  ferent  states,  17-59. 

I.  History  of  the  Development  of  the  Law. 
1.  Mortgages  used  by  the  Anglo-Saxons. — Mortgages,  or 
at  least  pledges  of  land  in  the  nature  of  mortgages,  were  not  un- 
known to  the  Anglo-Saxons  in  England.  In  at  least  two  ancient 
charters  the  transactions  are  clearly  enough  defined  to  show  that 
land  was  given  as  security  for  the  payment  of  money,  though  as 
to  the  manner  and  form  of  the  transfer,  and  the  rights  of  the  par- 
ties under  it,  very  little  can  be  made  out.  The  most  important 
of  these  cases  is  quoted  below.^     It  appears  from  this  that  the 

1  The  translation  is  taken  from  a  col-  her] ;  that  is,  that  her  father  left  her  land 

lection  of  essays  of  much  interest  recently  and  charter  as  he  rightfully  got,  and  his 

published  (1876),  entitled  Essays  in  An-  parents  left  them  to  him.     It  happened 

glo-Saxon  Law,  Appendix,  Case  No.  18,  that  her  father  borrowed  thirty  pounds  of 

p.  342.     See,  also,  the  Essay  on  Anglo-  Goda,  and  assigned  him  the  land  in  pledge 

Saxon  Land  Law,  p.   106.     As  a  coinci-  for  the  money,  and  he  held  it  seven  years, 

dence  it  may  be  mentioned  that  the  pres-  Then  it  happened  about  that  time  that  all 

ent  chapter  with  the  following  quotation  Kentish  men  were  summoned  to  Holme 

had  been  written  before  the  same  charter  on  military  service  ;  so  Sighelm,  her  father, 

had  appeared,  as  illustrating  Anglo-Saxon  was  unwilling  to  go  to  the  war  with  any 

mortgages,   in   the    third   edition  of  Mr.  man's    money   unpaid,   and   gave    thirty 

Fisher's  excellent  treatise  on  Mortgages,  pounds  to  Goda,  and  bequeathed  his  land 

It  is  to   be  observed  that  Eadgifu  men-  to  Eadgifu,  his  daughter,  and  gave  her 

tioncd  in   this   document  was    queen    of  the  charter.     When  he  had  fallen  in  war, 

Edward  the  Elder,  whose  reign  was  from  tiien  Goda  denied  the  return  of  the  money, 

A.  D.  901  to  925.  and  refused  to  give  up  tlie  land  till  some 

"Eadgifu  makes  known  to  the  arch-  time  in  the  sixth  year.  Then  [her  kins- 
bishop  and  the  community  of  Christ's  man]  15yrlisigc  Dyriiicg  fiinily  j)resscd  her 
(Jhurcli  how  her  land  at  Cooling  came  [to  claim,  until  the  Witaii,  who  then  were,  ad- 

volm  I.  1  \ 


§!•] 


THE   NATURE   OF  A   MORTGAGE. 


mortgagee  was  in  the  possession  of  the  land,  and  that  he  doubt- 
less had  the  use  of  the  land  in  return  for  the  use  of  the  money 
loaned  by  him.  Upon  the  payment  of  the  loan  it  was  his  duty 
to  render  back  the  land  to  the  mortgagor,  and  his  failure  to  do 
so  in  this  case  was  the  occasion  of  litigation,  commencing  in  the 
reign  of  Edward  the  Elder,  extending  through  the  reigns  of 
jEthelstan,  Edmund,  Eldred,  and  Edwy,  and  finally  ending  in 
the  reign  of  Edgar.  The  tribunal  was  the  Witan  or  national 
assembly,  which  was  also  the  highest  court  of  law  in  the  king- 
dom. 

From  another  charter  in  which  reference  is  made  to  a  mort- 
gage, it  seems  that  the  title  to  the  mortgaged  land,  at  some  time 
and  in  some  way  not  revealed,  became  vested  absolutely  in  the 
mortgagee,  who  conveyed  away  the  land.  Slight  as  the  knowl- 
edge is  which  these  charters  give  us  in  respect  to  the  law  of  the 
Anglo-Saxon   mortgage  of  real  property,   it  is  of    interest ;    for 


judged  to  Eadgifu  that  she  should  cleanse 
her  father's  hand  by  [an  oath  of]  as  much 
value  [namely,  thirty  pounds].  And  she 
took  oath  to  this  effect  at  Aylesford,  on 
the  witness  of  all  the  people,  and  there 
cleansed  her  father  in  regard  to  the  return 
of  the  money,  with  an  oath  of  thirty 
pounds.  Even  then  she  was  not  allowed  to 
enjoy  the  land  until  her  friends  obtained 
of  King  Edward  that  he  forbade  him 
[Goda]  the  land,  if  he  wished  to  enjoy  any 
[that  he  held  from  the  king]  ;  and  he  so 
let  it  go.  Then  it  happened,  in  course  of 
time,  that  the  king  brought  so  serious 
charges  against  Goda,  that  he  was  ad- 
judged to  lose  charters  and  land,  all  that 
he  held  [from  the  king,  and  his  life  to  be 
in  the  king's  hands].  The  king  then  gave 
him  and  all  his  property,  charters,  and 
lands  to  Eadgifu,  to  dispose  of  as  she 
would.  Then  said  she  that  she  durst  not, 
for  [fear  of]  God,  make  such  a  return  to 
him  as  he  had  merited  from  her,  and  gave 
up  to  him  all  his  lands  except  two  hides 
at  Osterland,  but  would  not  give  up  the 
charters  before  she  knew  how  truly  he 
would  hold  them  in  regard  to  the  lands. 
Then  King  Edward  died,  and  ^thelstan 
took  the  throne.  AVhen  it  seemed  to  Goda 
seasonable,  he  went  to  King  iEthelstan, 
and  prayed  him  to  intercede  with  Eadgifu 
for  the  return  of  his  charters;  and  the 


king  then  did  so,  and  she  returned  him 
all  except  the  charter  of  Osterland;  and 
he  relinquished  the  charter  voluntarily  to 
her,  and  thanked  her  with  humility  for 
the  others.  And,  further,  he,  with  eleven 
others,  gave  an  oath  to  her,  for  born  and 
unborn,  that  the  matter  in  dispute  was 
forever  settled  ;  and  this  was  done  in  the 
witness  of  King  ^thelstan  and  his  Witan, 
at  Hamme,  near  Lewes.  And  Eadgifu 
held  the  land,  with  the  charters,  during 
the  days  of  the  two  kings,  her  sons  [  J2thel- 
stan  and  Eadmund].  Then  Eadred  died, 
and  Eadgifu  was  deprived  of  all  her  prop- 
erty; and  two  sons  of  Goda  (Leofstan  and 
Leofric)  took  from  Eadgifu  the  two  be- 
fore-mentioned lands  at  Cooling  and  Os- 
terland, and  said  to  the  child  Edwy,  who 
was  then  chosen  king,  that  they  were  more 
rightly  theirs  than  hers.  This  then  re- 
mained so  till  Edgar  obtained  power  ;  and 
he  and  his  Witan  adjudged  that  they  had 
been  guilty  of  wicked  spoliation,  and  they 
adjudged  and  restored  to  her  her  property. 
Then,  by  the  king's  leave  and  witness, 
and  that  of  all  his  bishops  [and  chief 
men],  Eadgifu  took  the  charters,  and 
made  a  gift  of  the  land  to  Christ's  Church, 
[and]  with  her  own  hands  laid  them  upon 
the  altar,  as  the  property  of  the  commu- 
nity forever." 


HISTORY   OF  THE  DEVELOPMENT   OF   THE  LAW.      [§§  2,  3. 

while  we  find  the  elements  of  our  present  system  of  the  law  of 
real  property  in  the  customary  laws  of  the  period  preceding  the 
Norman  Conquest,  we  may  well  expect  to  find  in  this  source  as 
well  the  beginnings  of  the  law  of  mortgage  as  a  part  of  that 
system. 

2.  Vivum  vadium.  —  At  a  later  period,  as  is  apparent  from 
the  Domesday,  pledges  of  land  were  frequent.  Later  still,  in  the 
time  of  Glanville,  pledges  of  land  had  taken  two  distinct  forms, 
the  vivum  vadium  and  the  mortuum  vadium.  The  former  de- 
noted a  pledge  of  land  when  the  creditor  took  possession  of  the 
land  under  the  conveyance,  and  held  it  for  a  certain  period,  dur- 
ing which  the  rents  and  profits  received  by  him  went  towards 
the  payment  of  the  debt.  Upon  payment  of  the  debt  the  debtor 
was  entitled  to  have  his  lands  back  again,  and  might  recover 
them  by  suit  if  not  voluntarily  restored.  This  was.  apparently 
the  form  of  the  mortgage  referred  to  in  the  Anglo-Saxon  charter 
of  the  tenth  century  already  quoted  ;  and  the  mortgages  men- 
tioned in  Domesday  seem  to  imply  that  possession  of  the  prop- 
erty was  in  the  mortgagee ;  and  also,  in  the  time  of  Glanville, 
the  possession  seems  usually  to  have  followed  the  security. 

3.  This  form  of  mortgage  is  like  the  Welsh  mortgage  of  a 
later  period,  in  so  far  that  it  contains  no  condition  that  the  con- 
veyance is  to  be  void  upon  payment  of  the  debt,  as  is  the  case 
with  the  common  mortgage,  but  the  mortgagee  had  the  posses- 
sion of  the  property  assured  to  him,  and  received  the  rents  and 
profits  either  in  lieu  of  interest,  or  in  discharge  of  both  principal 
and  interest.  Under  this  form  of  mortgage  the  mortgagee  had 
no  remedy  whatever.  He  could  not  sue  for  the  debt.  There 
was  no  covenant  for  payment,  either  express  or  implied.^  He 
could  neither  compel  the  mortgagor  to  redeem  nor  cut  off  his 
right  of  redemption  by  foreclosure.  In  this  respect  the  transac- 
tion was  like  a  conditional  sale.  The  mortgagor  could  redeem  at 
his  option,  and  could  enforce  his  right  either  at  law  or  in  equity. 
After  full  payment  of  the  debt  from  the  rents  and  profits,  the 
mortgagor's  right  to  redeem  would  be  barred,  finally,  by  the 
lapse  of  the  statutory  period  of  limitation.     This  form  of  security 

1  IIowcl  V.  Price,  1  P.  Wms.  291 ;  Lon-  in  the  nature  of  such  a  mortgage,  though 
guet  V.  Scawen,  I  Ves.  Sen.  402.  A  mort-  it  provides  tliat  tlic  mortgagee  may  collect 
gage  which  secures  a  hond,  note,  or  other  the  rent  of  tlie  mortgaged  premises,  and 
personal  obligation  of  the  mortgagor,  and  apply  the  same  on  account  of  the  mort- 
is conditioned  to  become  void  on  payment,  gage  debt.  O'Neill  i'.  Gray,  .'19  Hun 
is  not  a  Welsh  mortgage,  or  a  mortgage  (N.  Y.),  566. 

3 


§  4.]  THE   NATURE   OF   A   MORTGAGE. 

is  the  same  as  one  form  of  the  Welsh  mortgage,  or  of  a  mortgage 
in  the  nature  of  a  Welsh  mortgage,  where  the  property  is  con- 
veyed to  the  mortgagee  and  his  heirs,  to  hold  until  out  of  the 
rents  and  profits  he  shall  have  received  both  principal  and  inter- 
est.^ The  principal  distinction  between  the  ancient  vivum  va- 
dium and  the  modern  Welsh  mortgage  seems  to  be  that,  while  in 
the  former  the  rents  were  applied  in  satisfaction  of  the  principal, 
in  the  latter  they  were  received  in  satisfaction  of  the  interest,  the 
principal  generally  remaining  undisturbed. 

4.  The  mortuum  vadium  was  the  designation  of  a  pledge  of 
land  of  which  the  mortgagee  did  not  necessarily  receive  the  pos- 
session, or  have  the  rents  and  profits  in  reduction  of  the  demand. 
In  the  time  of  Glanville  this  form  of  security  was  looked  upon 
with  much  disfavor  as  a  species  of  usury.  That  the  creditor  was 
liable  to  the  penalties  of  usury  if  he  received  money  for  the  use  of 
the  loan,  and  was  considered  dishonest  as  well,  is  a  sufficient  rea- 
son why  this  kind  of  security,  though  not  prohibited,  was  then 
seldom  used.  The  mortuum  vadium  spoken  of  by  Littleton  is  the 
common  law  mortgage.  It  had  then  become  a  conditional  estate ; 
the  condition  being  that  upon  payment  of  the  debt  at  a  fixed  time 
the  grantor  might  reenter,  but  upon  breach  of  the  condition  the 
conveyance  became  absolute.^  It  was  at  a  later  day  that  the 
equitable  right  of  redemption  after  forfeiture  became  an  incident 
of  the  mortgage.  The  nature  of  the  transaction  as  a  mere  secu- 
rity for  a  debt  was  not  then  regarded,  but  the  rules  applicable  to 
other  estates  upon  condition  were  enforced  with  all  their  strict- 
ness. This  is  illustrated  in  the  statement  of  Littleton,  that  if  the 
condition  was  that  the  debtor  should  pay  a  certain  sum  of  money 
to  the  mortgagee,  no  definite  time  being  fixed  for  the  payment,  if 
the  debtor  died  before  making  payment,  a  tender  of  payment  by 
his  heir  was  void,  because  the  time  within  which  the  payment 
should  be  made  was  past,  the  condition  that  the  debtor  should  pay 

1  Coote  on  Mort.  208 ;  Rankert  v.  gage,  and  in  Latin  mortuum  vadium.  And 
Clow,  16  Tex.  9  ;  Angier  v.  Mastersou,  6  it  seenieth  that  the  cause  why  it  is  called 
Cal.  61.  mortgage  is,  for  that  it  is  doubtful  whether 

2  Littleton's  Tenures,  lib.  iii.  ch.  5,  §  332.  the  feoffor  will  pay  at  the  day  limited 
"  {Of  Estates  upon  Condition.)  Item  :  If  such  sum  or  not;  and,  if  he  doth  not  pay, 
a  feoffment  be  made  upon  such  condition  then  the  land  which  is  put  in  pledge  upon 
that  if  the  feoffor  pays  to  the  feoffee,  at  a  condition  for  the  payment  of  the  money  is 
certain  day,  forty  pounds  of  money,  that  taken  from  him  forever,  and  so  dead  to 
then  the  feoffor  may  reenter ;  in  this  case  him  upon  condition.  And  if  he  doth  pay 
the  feoffee  is  called  tenant  in  mortgage,  the  money,  then  the  pledge  is  dead  as  to 
which  is  as  much  to  say  in  French  as  viort-  the  tenant." 

4 


HISTORY   OF   THE   DEVELOPMENT   OF   THE   LAW.        [§§  5,  6. 


being  as  much  as  to  say  that  he  should  pay  during  his  Hfetime. 
But  if  the  condition  was  that  the  payment  should  be  made  by  a 
day  certain,  then,  if  the  debtor  died  before  that  day,  his  heir  or 
executor  might,  as  his  representative,  tender  the  money  within 
the  time  limited. ^ 

5.  Such  restraints  upon  the  free  alienation  of  lands  were 
imposed  after  the  Norman  Conquest  under  the  feudal  system  then 
established  that  it  is  probable  that  mortgages  were  almost  un- 
known in  England  for  the  next  two  hundred  years.^  At  length 
the  statute  of  Quia  Emptores  ^  restored  freedom  of  alienation  to 
all  except  the  immediate  tenants  of  the  crown,  and  not  long 
afterwards  questions  relating  to  the  nature  of  mortgages  and  the 
respective  rights  of  the  parties  began  to  receive  the  attention  of 
the  courts  and  of  parliament. 

6.  Growth  of  the  doctrine  of  an  equity  of  redemption. — 
In  the  latter  part  of  the  reign  of  Elizabeth  it  seems  to  have  been 
an  unsettled  question  whether  an  absolute  forfeiture  of  the  estate 


1  Litt.  Tenures,  lib.  iii.  ch.  5,  §  337. 
"  Also,  if  a  feoffment  be  made  upon  con- 
dition that  if  the  feoffor  pay  a  certain  sum 
of  money  to  the  feoffee,  then  it  shall  be 
lawful  to  the  feoffor  and  his  heirs  to  enter ; 
in  this  case  if  the  feoffor  die  before  the 
payment  made,  and  the  heir  will  tender  to 
the  feoffee  the  money,  such  tender  is  void, 
because  the  time  within  which  this  ought 
to  be  done  is  past.  For  when  the  condi- 
tion is,  that  if  the  feoffor  pay  the  money 
to  the  feoffee,  this  is  as  much  to  say  as  if 
the  feoffor  during  his  life  pay  the  money 
to  the  feoffee ;  and  when  the  feoffor  dieth 
then  the  time  of  the  tender  is  past.  But 
otherwise  it  is  where  a  day  of  payment  is 
limited,  and  the  feoffor  die  before  the  day; 
then  may  the  heir  tender  the  money  as  is 
aforesaid,  for  that  the  time  of  the  tender 
was  not  past  by  the  death  of  the  feoffor. 
Also  it  seometh  that  in  such  case,  where 
the  feoffor  dieth  before  the  day  of  pay- 
ment, if  the  executors  of  the  feoffor  ten- 
der the  money  to  the  feoffee  at  the  day  of 
payment,  this  tender  is  good  enough ;  and 
if  the  feufTee  refuse  it,  the  heirs  of  the 
feoffor  may  enter.  And  the  rea.son  is,  for 
that  the  executors  represent  the  person  of 
their  testator."  Followed  in  Alsop  v.  Hall, 
1  Root  (Conn.),  346. 


2  Coote  on  Mortg.  5.  "  In  the  twen- 
tieth year  of  William's  reign,  and  on  the 
completion  of  Domesday  Book,  he  sum- 
moned a  meeting  of  all  the  principal  land- 
holders in  London  and  Salisburj^  and  ac- 
cepted from  them  a  surrender  of  their 
lands,  and  re-granted  them  on  perform- 
ance of  homage  and  the  oath  of  fealty. 
The  mesne  lords,  on  their  subinfeudations, 
also  demanded  homage  and  fealty,  and  it 
was  held  the  bond  of  allegiance  was  mu- 
tual, each  being  bound  to  defend  and  pro- 
tect the  other.  From  this  flowed  the  doc- 
trine that  the  tenant  could  not  transfer 
his  feud  without  his  lord's  consent,  nor 
the  lord  his  seigniory  without  his  tenant's 
consent,  although  the  tenants,  even  of  the 
crown,  it  would  seem,  might  grant  sub- 
infeudations {i.  e.  to  hold  of  themselves) 
without  license.  It  was  further  held,  the 
tenant  could  not  subject  his  lands  to  his 
debts  by  execution  of  law,  for,  if  he  could, 
he  might  have  effected  that  circuitously 
which  he  could  not  liy  direct  means  have 
accomplished.  Nor,  if  the  lands  came  to 
him  by  descent,  could  he  aliene  them 
without  the  consent  of  the  next  collateral 
heir." 

8  18  Edw.  I.  (a.  u.  1325). 


§  6.]  THE  NATURE   OF   A  MORTGAGE. 

had  not  been  incurred  by  a  non-payment  of  the  debt  at  the  day 
named  in  the  condition.^  But  the  right  of  the  mortgagor  to  re- 
deem after  forfeiture  seems  to  have  been  a  recognized  right  in 
the  reign  of  Charles  I.  ;2  although  at  the  close  of  the  reign  of 
Charles  II.  an  equity  of  redemption  was  declared  to  be  a  mere 
right  to  recover  the  estate  in  equity  after  breach  of  the  condition, 
and  not  such  an  estate  as  was  entailable  within  the  statute  de 
donis?  In  this  case  Chief  Justice  Hale  made  the  often  quoted 
remark,  "  By  the  growth  of  equity  on  equity,  the  heart  of  the 
common  law  is  eaten  out,  and  legal  settlements  are  destroyed." 
He  thought  the  mortgagor's  equity  of  redemption  had  already 
been  carried  too  far,  saying,  "  In  14  Richard  II.  the  parliament 
would  not  admit  of  redemption ;  but  now  there  is  another  settled 
course  ;  as  far  as  the  line  is  given,  man  will  go  ;  and  if  an  hun- 
dred years  are  given,  man  will  go  so  far,  and  we  know  not 
whither  we  shall  go.  An  equity  of  redemption  is  transferable 
from  one  to  another  now,  and  yet  at  common  law,  if  he  that  had 
the  equity  made  a  feoffment  or  levied  a  fine,  he  had  extinguished 
his  equity  in  law ;  and  it  hath  gone  far  enough  already,  and  we 
will  go  no  further  than  precedents  in  the  matter  of  equity  of  re- 
demption, which  hath  too  much  favor  already." 

Even  so  late  as  1787  it  was  strenuously  argued  before  the  High 
Court  of  Chancery,^  that  an  equity  of  redemption  was  not  an 
estate  in  land  of  which  a  husband  was  entitled  to  be  a  tenant  by 
the  curtesy.  It  was  insisted  that  the  equity  of  redemption  was 
no  actual  estate  or  interest  in  the  wife,  but  only  a  power  in  her 
to  reduce  the  estate  into  her  possession  again  by  paying  off  the 
mortgage ;  it  was  compared  to  the  case  of  a  proviso  for  a  reen- 
try in  a  conveyance  when  no  entry  had  ever  been  made,  and  to 
a  condition  broken  when  no  advantage  had  ever  been  taken 
thereof ;  that  the  wife  was  never  seised  in  fee  in  law,  because 
the  legal  estate  was  out  of  her  by  virtue  of  the  mortgage,  but 
had  only  a  bare  possession,  and  was  in  receipt  of  the  rents  and 
profits  ;  so  that  the  mortgagor  had  merely  a  right  of  action,  or 
of  suit  in  a  court  of  equity,  in  order  that  the  estate  might  be  re- 
conveyed  to  her  upon  complying  with  the  terms  in  the  mortgage. 

1  Goodall's   case,   5   Eep.  96 ;   Wade's     to  be  void,  just  as  it  would  have  been  at 
case,  lb.  115.  law  on  a  payment  according  to  the  con- 

2  Emanuel  College  v.  Evans,  1  Eep.  in     dition. 

Ch.  18.     In  this  case,  although  the  money        ^  Roscarrick  v.  Barton,  1    Ca.   in  Ch. 

was  not  paid  at  the  day  but  afterwards,  it     217. 

was  held  that  the  mortgage  term  ought        *  Casborne  v.  Scarfe,  1  Atk.  603. 

6 


HISTORY   OF   THE  DEVELOPMENT   OF   THE   LAW.  [§  7. 

But  Lord  Hardwicke  declared  that  an  equity  of  redemption  is 
an  estate  in  the  land,  for  it  may  be  devised,  granted,  or  entailed 
with  remainders,  and  such  entail  and  remainders  may  be  barred 
by  a  fine  and  recovery,  and  therefore  cannot  be  considered  as 
a  mere  right  only,  but  such  an  estate  whereof  there  may  be  a 
seisin  ;  the  person,  therefore,  entitled  to  the  equity  of  redemption 
is  considered  as  the  owner  of  the  land,  and  a  mortgage  in  fee  is 
considered  as  personal  assets. 

7.  When  the  doctrine  was  first  established,  —  Courts  of 
equity  had  become  fully  established  in  their  authority  in  the  reign 
of  James  I.,  and  although  many  equitable  principles  now  recog- 
nized in  the  doctrine  of  mortgages  were  not  fully  established  till 
long  afterwards,  it  is  probable  that  at  this  time  the  subject  of 
mortgages  was  so  far  within  their  jurisdiction  as  to  enable  them 
to  relieve  the  mortgagor  from  the  forfeiture  of  his  rights  through 
failure  to  pay  according  to  the  condition,  and  to  establish  the  doc- 
trine of  the  equity  of  redemption.^  "  No  sooner,  however,  was 
this  equitable  principle  established  than  the  cupidity  of  creditors, 
induced  them  to  attempt  its  invasion,  and  it  was  a  bold  but  nec- 
essary decision  of  equity,  that  the  debtor  could  not,  even  by  the 
most  solemn  engagements  entered  into  at  the  time  of  the  loan, 
preclude  himself  from  his  right  to  redeem;  for  in  every  other 
instance,  probably,  the  rule  of  law.  Modus  et  conventio  vincunt 
legem,  is  allowed  to  prevail.  In  truth  it  required  all  the  firmness 
and  wisdom  of  the  eminent  judges  who  successively  presided  in 
the  courts  of  equity  to  prevent  this  equitable  jurisdiction  being 
nullified  by  the  artifice  of  the  parties."  ^  Accordingly,  "  Once 
a  mortgage  always  a  mortgage,"  ^  became  one  of  the  most  im- 
portant maxims  in  this  branch  of  the  law ;  and  a  strict  adherence 
to  it  has  at  all  times  been  enforced.  The  parties  have  not  been 
allowed  to  provide  that  the  deed  creating  the  mortgage  shall  at 
any  time,  or  upon  the  happening  of  any  event,  cease  to  be  a  mort- 
gage, and  become  an  absolute  conveyance.*  Any  agreement  or 
stipulation  cutting  off  the  right  of  redemption  Las  always  been 
held  to  be  utterly  void.^  Even  a  subsequent  release  of  this  right 
by  the  mortgagor  has  always  been  looked  upon  with  suspicion, 

1  Coote  on  Mortg.  21.  s  Newcomb  v.  Bonham,  1  Vern.  7, 

2  Coote  on  Mortg.  21  ;  and  see  Price  v.  *  Coote,  22  ;  2  Story  V,>[.  Jiir.  §  1019. 
Perrie,  2  Freem.  258  ;  Willett  v.  Winnell,  6  Sec  §§  1038-1046  ;  iilsu,  Quiiriirmous 
1  Vern.  488;  Bowen  v.  Kdwards,  1  licp.  v.  Kenncily,  29  Ark.  .'■)44;  Lcc  r.  Evuns, 
n  Ch.  222.  8  Cul.  424. 

7 


§  8.]  THE   NATURE   OF  A   MORTGAGE. 

and  sustained  only  when  made  for  a  proper  consideration  and 
without  oppression  on  the  part  of  the  mortgagee.^ 

8.  The  different  views  of  the  nature  of  a  mortgage  at  law 
and  in  equity.  —  A  ruortgage  being  a  qualified  conveyance  of 
property,  whereby  the  owner  parts  with  it  so  far  as  to  make  it  a 
security  to  his  creditor,  and  his  creditor  holds  it  in  such  a  way 
that  the  owner  may,  by  equitably  fulfilling  his  obligation,  have 
his  own  again,  the  question,  what  are  the  respective  riglits  and 
titles  of  each,  is  one  that  lies  at  the  foundation  of  the  law  upon 
this  subject.  Originally  an  estate  upon  condition  at  law,  equity 
assumed  jurisdiction  to  relieve  the  mortgagor  against  an  absolute 
forfeiture  upon  his  default  in  performing  the  condition  subse- 
quent ;  and  for  two  hundred  years  and  more  a  mortgage  has  been 
one  thing  at  law  and  quite  another  thing  in  equity,  although  the 
equitable  view  of  the  subject  has  largely  encroached  upon,  and 
sometimes  quite  superseded,  the  legal,  even  in  courts  of  law.^ 

Courts  of  equity  could  not  alter  the  legal  effect  of  the  forfeiture 
■which  followed  a  breach  of  the  condition,  and  did  not  attempt  to 
do  so  ;  but  they  regarded  it  as  in  the  nature  of  a  penalty  which 
ought  to  be  relieved  against.  They  recognized  the  purpose  of 
the  mortgage  as  merely  a  pledge  to  secure  a  debt,  and  declared 
it  unreasonable  that  the  mortgagee  should,  by  the  failure  of  the 
debtor  to  meet  his  obligation  at  the  day  appointed,  be  entitled  to 
keep  as  his  own  what  was  intended  as  a  pledge.^  At  law  the 
legal  right  of  the  mortgagor  to  have  his  estate  again  was  forfeited ; 
but  in  equity  he  was  allowed  still  to  reclaim  it  upon  payment  of 
his  debt  with  interest.  This  is  the  equity  of  redemption.  From 
the  combined  influence  of  these  rules  of  law  and  principles  of 
equity  has  come  the  present  law  of  mortgages. 

The  equitable  view  of  a  mortgage,  as  merely  a  security  for  the 
payment  of   a  debt  or  the  performance   of  some  duty,  is  that 

1  Pritchard  v.  Elton,  38  Conn.  434,  could  have  proceeded  in  giving  the  debtor 

^  "  The  case  of  mortgages,"  says  Chan-  relief.     The  forfeiture  was  complete  ;  the 

cellor  Kent,  "  is  one  of  the  most  splendid  mortgagee,  by  the  default  of   the  mort- 

instances  in  the  history  of  our  jurispru-  gagor,  had  become  the  absolute  owner  of 

dence  of  the  triumph  of  equitable  princi-  the  estate ;  it  could  not  be  divested  from 

pies  over  technical  rules,  and  the  homage  him  without  a   reconveyance,  and   there 

which  those   principles  have   received  by  remained  no  remedy,  short  of  an  actual 

their  adoption  in  the  courts  of  law."     4  legislative  enactment,  without  disturbing 

Kent's  Com.  138.     "  It  is  difficult  to  con-  the  settled  landmarks  of  property."   Coote 

ceive,"  says  Mr.  Coote,  "had  the  courts  on  Mortg.  17. 

of  the  law  been  so  inclined  (which  it  does  ^  Coote  on  Mortg.  19. 
seem  they  were),  on  what  principle  they 


HISTORY   OF  THE  DEVELOPMENT   OF   THE  LAW.  [§  9. 

wliich  is  at  tlie  present  day  so  constantly  presented,  both  in 
theory  and  practice,  that  it  is  difficult  to  realize  that  the  rules  of 
the  common  law  in  respect  to  it  remain  for  the  most  part  unal 
tered  ;  that  the  transaction  is  still  a  conveyance  conditional  upon 
the  non-payment  of  the  debt  on  a  day  certain,  and  that  upon  a 
breach  of  the  condition  the  mortgagor  at  law  is  without  right  or 
remedy.  The  whole  legal  estate  upon  the  default  passes  irrevo- 
cably to  the  mortgagee.  But  at  this  point  a  court  of  equity 
allows  and  enforces  the  right  of  i-ederaption  ;  and  the  jurisdiction 
of  courts  of  equity  to  give  this  remedy  is  fully  recognized  in 
courts  of  law. 

9.  In  courts  of  law  the  rigor  of  the  doctrine,  in  respect  to 
the  conditional  character  of  the  mortgage,  was  not  at  all  abated 
in  England  until  the  enactment  of  the  statute  of  7  Geo.  II.  ch. 
20,1  which  permitted  a  mortgagor,  when  an  action  was  brought 
on  the  bond,  or  ejectment  on  the  mortgage,  pending  the  suit,  to 
pay  to  the  mortgagee  the  mortgage  money,  interest,  and  all  costs 
expended  in  any  suit  at  law  or  in  equity ;  or,  in  case  of  a  refusal 
to  accept  the  same,  to  bring  such  money  into  court  where  such 
action  was  pending,  and  the  moneys  so  paid  or  brought  into  court 
were  declared  to  be  a  satisfaction  and  discharge  of  the  mortgage, 
and  the  court  was  required,  by  rule  of  court,  to  compel  the  mort- 
gagee to  assign,  surrender,  or  reconvey  the  mortgaged  premises 
to  the  mortgagor,  or  to  such  other  person  as  he  should  for  that 
purpose  nominate  and  appoint.  "  In  cases  strictly  within  the 
terms  of  this  statute,  the  English  courts  of  law  have  exercised  an 
equitable  jurisdiction,  to  enforce  redemption  on  payment  of  the 
mortgage  debt  after  default  in  payment,  according  to  the  condi- 
tion, by  compelling  a  reconveyance.  Except  in  cases  within  this 
statute,  the  doctrine  of  the  English  courts  is  in  accordance  with 
the  ancient  common  law,  that  at  law  a  failure  to  pay  at  the  day 
prescribed  forfeits  the  estate  of  the  mortgagor  under  the  condi- 
tion, leaving  him  only  an  equity  of  redemption,  which  chancery 
will  lay  hold  of  and  give  effect  to,  by  compelling  a  reconveyance 
on  equitable  terms."  ^ 

This  statute  is  strictly  construed,  and  is  not  applicable  in  any 
case  in  which  the  mortgagor  is  himself  the  actor.     It  is  applicable 

'  Reiinactcd  in  New  Jersey,  December     Davis  v.  Teays,  3  Gratt.  (Va.)  283;  Con- 
3,  1794,  Nix.   Dip.   (4th  ed.)    608.     See,     necticut  Gen.  Sts.  (1875)  p.  471. 
also,  "Virginia  Code  (1873),  ch.  131,  §  21 ;         2  i>er  Mr.  .Justice  Depuc,  in  Shields  v. 

Lozcar,  34  N.  J.  L.  496. 

9 


§§  10,  11.]  THE  NATURE   OF   A   MORTGAGE. 

only  in  tbe  cases  mentioned  in  the  preamble  and  inti'oductory 
words  of  the  statute,  and  was  not  intended  to  supplant  bills  for 
redemption  which  afford  a  more  complete  remedy.^ 

10.  The  respective  claims  of  mortgagor  and  mortgagee  in 
courts  of  common  law  and  of  equity  afford  a  notable  instance  of 
the  rise  of  a  trust  through  the  mere  existence  of  another  legal 
relationship.^  "  In  a  court  of  common  law,  a  mortgage  is  an  ordi- 
nary conveyance  following  upon  a  contract  for  a  sale  or  for  a 
lease.  The  mortgagee  takes  the  place  of  the  mortgagor  as  owner 
of  the  land,  and  the  mortgagor  that  of  the  mortgagee  as  owner 
of  the  money  borrowed,  the  subsequent  repayment  of  the  money 
and  reconveyance  of  the  land  being  regulated  by  what  is  in  fact 
nothing  else  than  a  subsidiary  contract.  In  a  court  of  equity 
the  mortgagee  is  recognized  as  having  nothing  more  than  the  sort 
of  security  for  his  debt  which  is  provided  by  a  conditional  power 
of  sale,  and,  whether  he  be  in  possession  of  the  land  or  not,  is 
treated  as  the  mere  trustee  of  the  land  for  the  benefit  of  the  mort- 
gagor and  his  heir.  The  money  lent  descends,  on  the  death  of 
either  of  the  parties,  as  a  debt  due  from  the  one,  or  his  executors, 
to  the  other,  or  his  executors." 

11.  The  modern  common  law  doctrine  of  mortgages.  —  At 
common  law  the  legal  estate  vested  in  the  mortgagee  and  was 
forfeited  upon  default.  Equity  established  the  right  of  redemp- 
tion after  default.  From  these  principles  is  derived  the  doctrine 
of  mortgages  as  it  exists  at  the  present  day,  in  England  and  in 
a  large  part  of  our  own  country.  The  legal  title  passes  to  the 
mortgagee  by  the  deed,  but  the  mortgagor  has  after  default  a 
right  to  redeem,  which  he  may  enforce  in  equity.  A  mortgage 
is  one  thing  at  law  and  another  in  equity  ;  in  the  one  court  it  is 
an  estate,  and  in  the  other  a  security  onl3^  The  mortgagee  has 
certain  legal  remedies  and  the  mortgagor  certain  equitable  rem- 
edies. These  have  been  so  adjusted  that  a  perfectly  defined  sys- 
tem is  the  result.  Courts  of  law  and  courts  of  equity  mutually 
recognize  the  jurisdiction  of  each  other  over  this  subject.  Courts 
of  law  have  so  far  adopted  the  principles  of  equity  that  they 
allow  the  legal  title  of  the  holder  of  the  mortgage  to  be  used  only 
for  the  purpose  of  securing  his  equitable  rights  under  it.  Courts 
of  equity  allow  the  mortgagee,  for  the  purpose  of  protecting  and 

1  Good-title  v.  No-title,  11  Moore,  491  ;         ^  Mr.  Sheldon  Ames,  in  his  Science  of 
Hurst  V.  Clifton,  4  Ad.  &  E.  809  ;  Shields     Jurisprudence,  p.  269. 
.  Lozear,  34  N.  J.  L,  496. 

10 


HISTORY   OF   THE   DEVELOPMENT   OF   THE   LAW.  [§  11. 

enforcing  his  lien  against  the  mortgagor,  the  remedies  of  an 
owner ;  he  may  enter  into  and  hold  possession,  and  take  the  rents 
and  profits  in  payment  of  his  mortgage  debt,  and  may  have  his 
action  of  ejectment  to  recover  such  possession,  and  hence  is  some- 
times called  the  owner.^  The  mortgagee  has  something  more  than 
a  mere  lien  ;  he  has  a  transfer  of  the  property  itself  and  a  legal 
estate  in  it,  giving  him  a  standing  at  law  as  well  as  in  equity .2 
His  interest  can  be  called  a  lien  only  in  a  loose  and  general 
sense,  in  contradistinction  to  an  absolute  and  indefeasible  estate.^ 

In  equity  a  mortgage  of  land  is  regarded  as  a  mere  security  for 
a  debt  or  obligation,  which  is  considered  as  the  principal  thing, 
and  the  mortgage  only  as  the  accessory .*  The  legal  title  vests  in 
the  mortgagee  merely  for  the  protection  of  his  interest,  and  in 
order  to  give  him  the  full  benefit  of  the  security  ;  but  for  other 
purposes  the  mortgage  is  a  mere  security  for  the  debt.^ 

A  recital  in  a  mortgage  that  the  note  secured  is  collateral  to 
the  mortgage  does  not  change  the  character  of  the  instruments  or 
their  relation  to  each  other  under  the  general  rule  as  to  principal 
and  incident ;  and  the  fact  that  the  note  is  indorsed  by  a  third 
person  makes  no  difference.^ 

As  to  all  persons  except  the  mortgagee  and  those  claiming 
under  him,  it  is  everywhere  the  established  modern  doctrine  that 
a  mortgagor  in  possession  is  at  law,  both  before  and  after  breach 
of  the  condition,  the  legal  owner."  This  is  the  rule  not  merely 
in  courts  of  equity,  but  in  courts  of  law  as  well.  Lord  Mansfield, 
by  his  decisions  upon  the  subject  of  mortgages,  did  much  to  nat- 
uralize these  equitable  doctrines  in  courts  of  law.  In  a  case  be- 
fore the  King's  Bench,  he  said :  "  It  is  an  affront  to  common  sense 
to  say  the  mortgagor  is  not  the  real  owner ; "  and  therefore  he 
held  that  a  mortgagor  in  possession  gains  a  settlement,  because 
the  mortgagee,  notwithstanding  the  form,  has  but  a  chattel,  and 
the  mortgage  is  only  a  security.* 

Again,  in  construing  a  will,  he  held  that  whatever  words  were 
sufficient  to  carry  the  money  due  on  a  mortgage  would  carry  the 
interest  in  the  land  along  with  it,  saying,^  "  that  a  mortgage  is  a 

1  Clark  V.  Reyburn,  1  Kans.  281.  6  Glass  v.  Ellison,  9  N.  H.  69  ;  Gabbert 

2  Barnard   v.   Eaton,    2   Cush.  (Mass.)     v.  Schwartz,  69  Ind.  450. 

294,  .304.  6  Catlin  v.  Ilenton,  9^ Wis.  476. 

8  Conard   v.  Atlantic    Ins.    Co.  1    Pet.         "  §§  667,  702. 
386,  441  ;  Evans  v.  Mcrriken,  8  G.  &  J.         «  Tlie  Kiiif;  c.  St.  Michael's,  Doujcc.  630. 
(Md.)  .39,47.  9  Martin  v.  Mowlin,  2  Burr.  9G9,  978, 

*  Timms  i;.  Shannon,  19  Md.  296.  decided  in  1760. 

11 


§  12.]  THE  NATURE   OF   A  MORTGAGE. 

charge  upon  the  land ;  and  whatever  would  give  the  money  will 
carry  the  estate  in  the  land  along  with  it,  to  every  purpose.  The 
estate  in  the  land  is  the  same  thing  as  the  money  due  upon  it. 
It  will  be  liable  to  debts ;  it  will  go  to  executors  ;  it  will  pass  by 
a  will  not  made  and  executed  with  the  solemnities  required  by 
the  statute  of  frauds.  The  assignment  of  the  debt,  or  forgiving 
it,  will  draw  the  land  after  it,  as  a  consequence  ;  nay,  it  would  do 
it,  though  the  debt  were  forgiven  only  by  parol,  for  the  right  to 
the  land  would  follow,  notwithstanding  the  statute  of  frauds." 

12.  Lord  Mansfield's  views.  —  It  is  true  that  some  opinions 
expressed  by  Lord  Mansfield  would  seem  to  lead  to  the  conclusion 
that  he  regarded  a  mortgage  even  at  law  as  merely  a  security  for 
a  debt,  and  not  a  legal  conveyance.^  "  Lord  Mansfield,  indeed," 
says  Mr.  Coventry,^  "  appears  to  have  entertained  mistaken  con- 
ceptions on  this  and  other  subjects  connected  with  the  law  of 
mortgages.  His  chief  error  seems  to  have  been  in  mixing  rules  of 
equity  with  rules  of  law,  and  applying  the  former  in  cases  where 
the  latter  only  ought  to  have  prevailed." 

An  unqualified  adoption  of  some  of  the  expressions  of  Lord 
Mansfield  is  inconsistent  with  a  legal  view  of  the  nature  of  mort- 
gages ;  it  would  lead  to  the  conclusion  that  a  mortgage  is  merely 
a  security  and  not  an  estate  in  the  land.  The  English  courts  by 
universal  consent  have  refused  to  adopt  this  conclusion  ;  but  in 
this  country  his  lead  has  been  followed  in  about  half  of  the 
states ;  and  the  adoption  of  equitable  principles  by  courts  of  law 
has  been  followed  by  legislative  enactments  taking  from  the  mort- 
gagee the  right  of  possession,  so  that  in  these  states  it  is  the  estab- 
lished doctrine  that  a  mortgage  confers  no  title  or  estate  upon  the 
mortgagee,  but  only  a  security.  The  legal  character  of  the  mort- 
gage has  wholly  given  place  to  the  equitable. 

1  See,  also,  Ren  v.  Bulkeley,  Doug,  things  in  his  decisions  which  show  that 
292  ;  Eaton  i;.  Jaques,  2  Doug.  455.  bis  mind  had  received  a  tinge  on  that  sub- 

2  In  note  to  Powell  on  Mortg.  267,  n.  ject  not  quite  consistent  with  the  constitu- 
Lord  Redesdale,  in  Shannon  v.  Bradstreet,  tion  of  England  and  Ireland  in  the  admin- 
1  Sch.  &  Lef.  52,  65,  speaking  of  Lord  istration  of  justice.  It  is  a  most  important 
Mansfield's  tendency  to  give  courts  of  law  part  of  that  constitution  that  the  juris- 
the  power  of  courts  of  equity,  said  :  "Lord  dictions  of  the  courts  of  law  and  equity 
Mansfield  had  on  his  mind  prejudices  de"  should  be  kept  perfectly  distinct;  nothing 
rived  from  his  familiarity  with  the  Scotch  contributes  more  to  the  due  administra- 
law,  where  law  and  equity  are  adminis-  tion  of  justice ;  and,  though  they  act  in  a 
tered  in  the  same  courts,  and  where  the  great  degree  by  the  same  rules,  yet  they 
distinction  between  them  which  subsists  act  in  a  different  manner,  and  their  modes 
with  us  is  not  known  ;  and  there  are  many  of  affording  relief  are  different." 

12 


HISTORY   OF  THE  DEVELOPMENT  OF  THE  LAW.       [§§  13,  14. 

13.  The  courts  of  New  York  at  an  early  day  took  the  lead  in 
this  direction.  The  first  important  step  was  to  deny  the  legal 
character  of  the  mortgagee's  title  prior  to  a  breach  of  the  condi- 
tion and  a  taking  of  possession  by  the  mortgagee  in  consequence.^ 
Before  default  he  was  not  allowed  to  take  possession ;  on  the  con- 
trary, the  mortgagor  in  possession  could  maintain  trespass  against 
him.2  But  after  a  breach  of  the  condition  and  possession  taken 
by  the  mortgagee,  he  was  regarded  as  invested  with  the  legal 
estate.'^  The  right  to  take  possession,  even  upon  a  breach  of  the 
condition,  was  finally  taken  away  by  statute.*  This  enactment 
was  regarded  as  completing  the  change  in  the  nature  of  mort- 
gages, and  removing  from  them  the  last  remaining  common  law 
attribute. 

And  yet  an  examination  of  the  cases  in  New  York  in  which 
questions  in  regard  to  the  nature  of  mortgages  are  involved  and 
discussed  shows  considerable  conflict  and  contradiction  of  views. 
This  is  especially  the  case  with  the  decisions  prior  to  the  statute 
taking  from  the  mortgagee  the  right  to  recover  possession  of  the 
mortgaged  property ;  and  even  since  that  statute,  although  in 
theory  the  legal  title  remains  in  the  mortgagor  until  foreclosure, 
it  has  been  frequently  admitted  by  judges  and  legal  writers,  that 
for  some  purposes  and  in  some  cases  his  interest  must  be  treated 
and  regarded  as  a  title  for  the  purpose  of  protecting  his  equitable 
rights.^  Where  the  mortgagor's  interest  is  regarded  as  the  legal 
estate  in  the  land,  it  is  undoubtedly  a  misnomer  to  call  it  an 
equity  of  redemption  either  befoi-e  or  after  default.*^  But  although 
the  term  has  ceased  to  be  an  accurate  description  of  his  right  in 
the  land,  it  has  an  established  place  among  legal  terms,  and 
doubtless  will  continue  to  be  used  to  describe  his  interest  even  in 
states  which  have  by  statute  changed  his  actual  rights. 

14.  There  are  incongruities  in  both  theories.  —  Many  at- 
tempts have  been  made  to  state  a  perfectly  harmonious  and  con- 
sistent system  of  law  in  regard  to  mortgages,  but  complete  suc- 
cess has  never  attended  them.  On  the  one  hand,  the  modern 
common  law  view  of  mortgages,  by  which  the  mortgagee  is  re- 

1  Phvfc  u.  Kiley,  15  Wend.  (N.  y.)  248.         &  Thomas  on   Mortg.   16;    llubbcll   v. 

2  Bryan   v.   But  s,   27    Barb.    (N.    Y.)     Moulson,  53  N.  Y.  225;  White  y.  Kitten- 
503;  Ilunyan  v.  MerHCicau,  H  Johns.  (N.     myer,  30  Iowa,  268,  271. 

Y.)  534.  8  Per  Earl,  C,  in  Trimni  v.  Marsh,  54 

3  Bolton  V.  Brewster,  32  Barb.  (N.  Y.)  N.  Y.  599;  Chick  v.  Willctt.s,  2  Ivans. 
389.  384,  per  Crozier,  C.  J. 


*  2  li.  S.  312,  §  57,  enacted  1828. 


13 


§  14.]  THE  NATURE   OF  A   MORTGAGE. 

garded  as  tlie  owner  of  the  legal  estate  for  the  purpose  of  pro- 
tecting and  enforcing  his  rights,  and  the  mortgagor  is  regarded  as 
the  legal  owner  as  against  every  other  person,  is  objected  to  as 
presenting  the  incongruous  position  that  one  person  may  be  the 
legal  owner  for  one  purpose,  and  at  the  same  time  another  per- 
son may  be  the  legal  owner  for  another  purpose ;  that  in  one 
court  the  mortgagee  is  the  legal  owner,  and  in  another  the  mort- 
gagor is  the  legal  owner ;  that  after  the  legal  title  has  passed  to 
the  mortgagee  by  a  legal  conveyance,  it  may  be  defeated  by  the 
act  of  the  mortgagor  from  whom  the  title  has  passed,  merely  by 
payment  before  forefiture.^ 

On  the  other  hand,  it  has  been  thought  that  by  regarding  a 
mortgage  both  at  law  and  in  equity  as  a  mere  security,  a  more 
harmonious  and  consistent  doctrine  regarding  this  instrument 
would  be  secured.  It  is  admitted  that  this  doctrine  is  anomalous. 
That  a  legal  conveyance  does  not  pass  a  legal  title  is  not  in  ac- 
cordance with  legal  principles.^  Moreover,  it  has  been  found  that 
in  order  to  secure  the  equitable  rights  of  parties,  the  mortgagee's 
interest  must  in  some  cases  be  treated  and  regarded  as  a  title. 
This  is  admitted  by  Mr.  Justice  Andrews  in  a  recent  case  before 
the  Court  of  Appeals  of  New  York;^  and  he  mentions  instances 
in  the  decisions  of  that  state  where  the  mortgagee's  interest  has 
been  so  treated  and  regarded  notwithstanding  the  doctrine  that 
he  has  a  lien  only.  It  is  claimed,  however,  that  no  title  in  a 
strict  sense  vests  in  him,  but  only  that  his  interest  for  some  pur- 
poses is  in  the  nature  of  a  legal  title.  He  is  treated  as  if  he  had  a 
legal  title,  by  being  protected  in  his  possession,  when  he  has  once 
acquired  it,  until  the  debt  is  fully  paid.'^  The  only  remedy  for 
recovering  possession  from  him  in  such  case  is  by  a  bill  in  equity 
to  redeem,^  as  is  the  case  where  the  mortgagee  is  regarded  as 
holding  the  legal  estate. 

In  other  ways  also  the  mortgagee  is  treated  as  holding  an  es- 
tate. He  is  deemed  a  purchaser  to  the  extent  of  his  interest,  and 
is  protected  in  his  rights  in  the  same  way  and  to  the  same  extent 
as  a  purchaser  of  an  absolute  estate.^  As  an  estate  in  him,  his 
interest  is  protected  against  a  claim  of  dower  by  the  wife  of  the 

1  White  V.  Rittenmyer,  30  Iowa,  268,         ^  Hubbell  v.  Moulson,  53  N.  Y.  225. 
271.  6  See  Frisbey  v.  Thayer,  25  Wend.  (N. 

2  White  V.  Eittenmyer,  supra.  Y.)  396,  399;  James  v.  Johnson,  6  Johns. 

3  Hubbell  v.  Moulson,  53  N.  Y.  225.  (N.  Y.)  Ch.  417;    ^.   C,  2  Cowen,  246; 
*  Mickles  v.  Townsend,  18  N.  Y.  575,     Ledyard  v.  Butler,  9  Paige  (N.  Y.),  132, 

584  ;  §  715.  137. 

14 


HISTORY   OF   THE  DEVELOPMENT   OF  THE  LAW.  [§  15. 

mortgagor  when  she  has  released  this  right  in  the  mortgage,  al- 
though she  may  be  entitled  to  it  in  the  equity  of  redemption.^ 
And  so  also  a  title  acquired  by  the  mortgagor  after  making  the 
mortgage  enures,  by  force  of  the  covenant  of  warranty  contained 
in  it,  to  the  benefit  of  the  mortgagee. 

15.  What,  then,  are  the  practical  distinctions  between  a 
mortgage  regarded  as  a  legal  estate  in  the  mortgagee,  and  a  mort- 
gage regarded  as  a  mere  personal  lien  ?  In  what  respect  are  the 
rights  of  both  the  mortgagor  and  the  mortgagee,  where  the  one 
view  prevails,  the  same  as  they  are  where  the  other  prevails ;  and 
in  what  respect  are  their  rights  diflferent  under  the  one  doctrine 
from  what  they  are  under  the  other? 

In  the  first  place,  wherein  are  the  two  doctrines  in  harmony  as 
regards  the  rights  and  interests  of  the  mortgagor  ?  Everywhere 
the  mortgagor's  interest  in  the  land  may  be  sold  upon  execution  ; 
his  widow  is  entitled  to  dower  in  it ;  it  passes  as  real  estate  by 
devise  ;  it  descends  to  his  heirs  at  his  death  as  real  estate ;  it  gives 
him  a  right  of  settlement  as  an  owner  of  real  estate ;  he  is  a  free- 
holder ;  he  may  maintain  a  real  action  for  the  land  against  a 
stranger,  and  the  mortgage  cannot  be  set  up  as  a  defence. 

In  the  second  place,  wherein  are  the  rights  and  interests  of  the 
mortgagee  the  same,  whether  regarded  under  the  one  theory  or 
the  other  ?  Everywhere  it  is  held  that  he  has  no  such  estate  as 
can  be  sold  on  execution  ;  his  widow  has  no  right  of  dower  in  it ; 
upon  his  death  the  mortgage  passes  to  his  personal  representa- 
tives as  personal  estate  ;  and  it  passes  by  his  will  as  personal 
property. 

The  practical  distinctions  between  these  views  are  these  :  Under 
the  common  law  view,  as  we  may  term  the  former,  the  mortgagee 
is  entitled  to  immediate  possession  of  the  mortgaged  property  as 
an  incident  to  the  title  when  not  restrained  by  the  terms  of  the 
mortgage ;  and  upon  default  he  is  always  entitled  to  the  possession 
and  may  recover  it  by  action  at  laAV  ;  whereas,  under  the  equi- 
table view,  the  mortgagor  is  entitled  to  possession  until  foreclos- 
ure, unless  perhaps  he  may  by  express  contract  give  this  right  to 
the  mortgagee.  This  is  the  great  difference  resulting  from  these 
dilTerent  theories.  In  large  degree  resulting  from  these  diilerent 
ways  of  viewing  the  interest  of  the  parties  follow  the  further  dis- 
tinctions :  that  while  generally,  under  the  former  view  of  the  law, 
a  tender  or  payment  to  defeat  the  mortgagee's  title  must  be  made 
J  Van  Dyne  v.  Thayre,  19  Wend.  (N.Y.)  162. 

15 


§  16.]  THE  NATURE   OF  A  MORTGAGE. 

at  or  before  the  law  day,  as  the  day  of  payment  is  termed,  under 
the  latter  view  a  payment  at  any  time,  though  after  default,  re- 
vests the  interest  in  the  mortgagor  ;  and  while  under  the  former 
view  it  is  generally  held  that  a  transfer  of  the  mortgage  interest 
can  only  be  made  by  an  assignment  or  deed  duly  executed  as  a 
conveyance,  under  the  latter  view  it  is  held  that  a  mere  transfer 
of  the  mortgage  note  by  indorsement  or  delivery  passes  the  inter- 
est in  the  land  as  an  incident  of  the  debt.  These  two  distinctions 
do  not,  however,  necessarily  and  inevitably  attend  the  different 
theories. 

16.  How,  then,  may  a  mortgage  at  the  present  day  be  de- 
fined ?  —  Baron  Parke,  speaking  of  the  mortgagor,  said :  "  He 
can  be  described  only  by  saying  he  is  a  mortgagor."  ^  In  the 
same  way  it  may  be  said  that  the  most  accurate  and  comprehen- 
sive definition  of  a  mortgage  is  that  it  is  a  mortgage.  As  re- 
marked by  Lord  Denman,  "It  is  very  dangerous  to  attempt  to 
define  the  precise  relation  in  which  mortgagor  and  mortgagee 
stand  to  each  other,  in  any  other  tei'ms  than  those  very  words."  ^ 
A  definition  broad  enough  to  cover  any  view  of  the  transaction, 
and  any  form  of  it,  can  only  be  that  it  is  a  conveyance  of  land  as 
security.  This  embraces  the  two  things  essential  to  constitute  a 
mortgage.  If  more  be  attempted,  it  results  in  a  description  of 
some  one  of  the  many  forms  which  a  mortgage  may  take.  In  a 
note  are  given  references  to  definitions  and  descriptions  of  mort- 
gages by  several  eminent  authors  and  judges.  But  to  define  the 
different  kinds  of  mortgages,  and  the  many  different  rights  under 
them,  is  the  service  attempted  by  a  treatise  on  the  subject.^ 

1  Litchfield  v.  Eeady,  20  L  J  Ex.  51  v.  Burnham,  44  Maine,  286,  299 ;  Wing  v 

2  Higginbotham  v.  Barton,  11  Ad.  &  Cooper,  37  Yt.  169,  179;  G.  S.  of  New 
El.  307,  314.  Hampshire,  1867,  ch.  122,  §  1. 

3  Washburn's  Real  Prop.  ch.  16,  §  1;  By  the  Code  of  California,  a  mortgage 
Fisher  on  Mortg.  (3d  ed.)  p.  2 ;  Coventry,  is  defined  to  be  "a  contract,  by  which 
in  Powell  on  Mortg.  p.  4 ;  Cruise,  1  Dig.  specific  property  is  hypothecated  for  the 
of  Law  of  Real  Prop.  (Am.  ed.)  tit.  xv.  performance  of  an  act,  without  the  neces- 
ch.  i.  §  11;  Coote  on  Mortg.  p.  1 ;  Erskine  sity  of  a  change  of  possession."  Civil 
V.  Townsend,  2  Mass.  493,  495 ;  Carter  v.  Code  1872,  §  2920  ;  adopted  also  by  Civil 
Taylor,  3  Head  (Tenn.),  30;  Briggs  v.  Code  of  Dakota  1871,  §  1608.  In  Florida 
Fish,  2  D.  Chip.  ( Vt.)  100;  Montgomery  it  is  provided  that  all  conveyances  secur- 
w.  Bruere,  1  Southard  (N.  J.),  260,  268;  ing  the  payment  of  money  shall  be  deemed 
Lundi;.  Lund,  1  N.  H.  39,  41 ;  Mitchell  mortgages.     Bush's  Dig.  1872,  p.  605. 

16 


IN   THE   DIFFERENT   STATES.  [§§  17,  18. 

11.    The  Nature  of  a  Mortgage  in  the  different  States. 

17.  Generally.  —  As  already  stated,  the  conflicting  views  of 
the  nature  of  mortgages  entertained  at  law  and  in  equity  have 
resulted  in  the  just  and  harmonious  system  which  is  now  admin- 
istered in  the  courts  of  England  and  in  most  of  the  courts  of  the 
older  States  of  America.  In  these  courts  a  mortgage  is  regarded 
as  a  conveyance  in  fee,  and  this  construction  is  thought  best 
adapted  to  give  to  the  creditor  full  protection  in  preserving  and 
enforcing  his  securities,  while  at  the  same  time  the  debtor  is 
secured  in  his  right  to  redeem.  In  other  states,  however,  this 
system  has  been  changed,  for  the  most  part  by  statute,  so  that 
a  mortgage  is  regarded  as  merely  a  pledge,  and  the  rights  and 
remedies  under  it  are  wholly  equitable,  so  that  a  second  system 
has  grown  out  of  the  first.  There  are  also  a  few  modifications 
of  each. 

In  examining  the  various  questions  that  arise  under  the  law  of 
mortgages,  it  is  often  important  to  distinguish  between  the  opin- 
ions of  courts  acting  under  these  different  views  of  the  nature 
of  a  mortgage.  On  several  topics  frequent  reference  will  be  made 
to  the  distinguishing  features  of  the  two  systems.  On  these  top- 
ics authorities  of  several  states  having  the  same  system  will  be 
harmonious,  but  will  differ  from  those  of  several  states  in  which 
the  other  system  prevails.  It  is  therefore  thought  best  to  give 
briefly,  under  the  name  of  each  state,  the  law  there  in  force  upon 
this  fundamental  matter  of  the  nature  of  the  conveyance  in  mort- 
gage, as  announced  by  the  courts  or  enacted  by  statute. 

18.  In  Alabama  a  mortgage  passes  to  the  mortgagee,  as  be- 
tween him  and  the  mortgagor,  the  estate  in  the  land.  It  confers 
something  more  than  a  mere  security  for  a  debt :  it  confers  a  title 
under  which  the  mortgagee  may  take  immediate  possession,  un- 
less it  appears  by  express  stipulation,  or  necessary  implication, 
that  the  mortgagor  may  remain  in  possession  until  default.^  Af- 
ter the  law  day,  the  legal  estate  is  absolutely  vested  in  the  mort- 
gagee, and  the  mortgagor  lias  nothing  left  but  an  equity  of  re- 
demption.2  A  conveyance  by  the  mortgagee  will  pass  the  legal 
title,  though  tlie  debt  be  not  assigned."     Nothing  but  payment, 

1  Knox  V.  Easton,  38  Ala.  345  ;  Welsh  2  Pauljing  v.  Barron,  32  Ahv.  9  ;  Barker 
V.  Phillips,  54  Ala.  309 ;  Toomer  v.  Kan-     v.  Bell,  37  Ala.  354. 

dolpli,  CO  Ala.  356.  a  Welsh  v.   Phillips,  supra ;  Tooraer  i-. 

Bandolph,  supra, 
VOL.  I.  2  -in 


§§  19,  20.]  THE   NATURE   OF  A   MORTGAGE 

or  a  release  of  the  mortgage,  or  a  reconveyance,  can  operate  in  a 
court  of  law  to  revest  the  title  in  the  mortgagor  ;  and  it  is  ques- 
tioned whether  payment  alone  after  the  law  day  is  sufficient.^ 
But  as  against  all  persons  other  than  the  mortgagee  and  his  as- 
signs, the  mortgagor  is  regarded  as  the  owner  of  the  fee,  and  is 
entitled  to  the  possession.*^ 

19.  In  Arkansas  the  mortgagee  was,  in  an  early  case,  consid- 
ered as  having  the  legal  estate  after  condition  broken,  following 
in  this  respect  some  of  the  earlier  cases  in  New  York.^  In  later 
cases,  it  is  said  that  the  legal  title  passes,  at  law,  directly  to  the 
mortgagee,  subject  to  be  defeated  by  the  performance  of  the  con- 
ditions of  the  mortgage ;  and  that  the  right  of  possession  follows 
the  legal  title  unless  it  be  expressly  provided  in  the  deed,  or 
clearly  appears  to  be  the  intention  of  the  parties,  that  the  mort- 
gagor shall  remain  in  possession  until  default.*  Whenever  the 
mortgagee  is  entitled  to  possession,  he  may  acquire  it  by  an  ac- 
tion of  ejectment.  He  may  upon  default  pursue  any  or  all  of 
his  remedies :  may  bring  actions  for  the  debt,  for  possession,  and 
to  foreclose  the  equity  of  redemption  and  sell  the  land.^ 

20.  In  California  a  mortgage  does  not  convey  the  legal  title 
for  any  purpose,  either  before  or  after  condition  broken.  It  is  a 
mere  security  for  the  payment  of  money,  and  passes  no  estate  in 
the  land.  This  is  the  declaration  of  the  Code.^  *'  It  was  from  a 
consideration  of  the  character  of  the  instrument,"  says  Chief  Jus- 
tice Field,'  "  as  settled  by  these  decisions  and  the  modern  cases 
generally,  that  we  were  induced  to  adopt  the  equitable  doctrine 
as  the  true  doctrine ;  and  it  was  from  a  consideration  of  the  pro- 
visions of  the  statute  which  led  us  to  go  beyond  those  cases,  and 
carry  the  doctrine  to  its  legitimate  and  logical  result,  and  regard 
the  mortgage  as  a  security  under  all  circumstances,  both  at  law 

1  Powell  y.  Williams,  14  Ala.  476;  Bar-  Turner  v.  "Watkins,  31    Ark.   429,   437; 

ker  V.  Bell,  37  Ala.  354.  Terry  v.  Rosell,  32  Ark.  478. 

'^  Knox  V.  Easton,  38  Ala.  345;  Man-         ^  Fitzgerald  v.  Beebe,  supra;  Gilchrist 

Sony  y.  U.  S.  Bank,  4  Ala.  735;  Allen?;,  v.  Patterson,   18  Ark.  575;    Reynolds  v. 

Kellam,  69  Ala.  442 ;  Denby  v.  Mellgrew,  Caual  &  Banking  Co.  of  N.  0. 30  Ark.  520. 
58  Ala.  147  ;  Cotton  v.  Carlisle,  4  So.  Rep.         6  civil  Code  1885,  §  2927  ;    McMillan 

670.  V.  Richards,  9  Cal.  365,  where  Mr.  Justice 

3  Pitzgerald  v.  Beebe,  7  Ark.  310 ;  Phyfe  Field  examines  the  subject  at  great  length ; 

V.  Riley,  15  Wend.  (N.  Y.)  248  ;  Reynolds  Dutton  v.  Warschauer,  21  Cal.  609  ;  Mack 

V.  Canal  &  Banking  Co.  of  N.  0.  30  Ark.  v,   Wetzlar,  39  Cal.    247  ;    Goodeuow  v. 

520.  Ewer,  16  Cal.  461,  467;  Kidd  v.  Teeple, 

*  Kannady  v.  McCarron,  18  Ark.  166;  22  Cal.  255. 


18 


■^  Dutton  V.  Warschauer,  supra. 


IN   THE   DIFFERENT   STATES.  [§  20. 

and  in  equity.  Mortgages,  tberefoi-e,  executed  before  the  statute, 
can  only  be  treated  as  conveyances  when  that  character  is  essen- 
tial to  protect  the  just  rights  of  the  mortgagee  ;  mortgages  since 
the  statute  are  regarded  at  all  times  as  mere  securities,  creat- 
ing only  a  lien  or  incumbrance,  and  not  passing  any  estate  in  the 
premises."  ^ 

It  is  fully  settled  that  a  mortgage  does  not  convey  the  title, 
but  only  creates  a  lien  on  the  property,  the  title  remaining  in 
the  mortgagor  subject  to  the  lien.^  It  is  provided  by  statute  that 
the  mortgagee  shall  not  be  entitled  to  possession  unless  author- 
ized by  the  express  terms  of  the  mortgage.^  Entry  and  posses- 
sion by  the  mortgagee  do  not  affect  the  nature  of  his  interest. 
They  can  neither  abridge  nor  enlarge  that  interest,  nor  convert 
what  was  previously  a  security  into  a  seisin  of  the  freehold.*  But 
if  the  mortgagee,  after  condition  broken,  take  possession  by  con- 
sent of  the  mortgagor,  it  is  presumed,  in  the  absence  of  clear 
proof  to  the  contrary,  that  he  is  to  receive  the  rents  and  profits, 
and  apply  them  to  the  debts  secured,  and  that  he  is  to  hold  pos- 
session until  the  debt  is  paid.^  This  possessory  right  may  be 
transferred  by  express  terms,  though  it  does  not  pass  by  an  or- 
dinary assignment.^  Even  an  absolute  deed  without  any  defea- 
sance, if  in  fact  made  to  secure  a  debt,  so  that  in  equity  it  is  a 
mortgage,  passes  no  title  to  the  grantee.'  Of  course,  under  this 
view  of  the  nature  of  a  mortgage,  payment  after  default  oper- 
ates to  discharge  the  lien  equally  with  payment  at  the  matu- 
rity of  the  debt.^  Under  such  a  deed  the  grantee  is  entitled  to 
recover  the  premises  in  ejectment,  unless  the  defendant  in  an- 
swer sets  up  his  equities,  with  an  offer  to  pay  the  amount  of  the 
mortgage  lien,  and  prays  that  the  conveyance  be  decreed  a  mort- 
gage.^ 

1  Stat.  1851,  §  260,  declared  a  mortgage  tier  v.  Brenhara,  40  Cal.  221  ;  HafHey  v. 

shall  not  be  deemed   a  conveyance  what-  Maier,  13  Cal.  13. 

ever  its  terms,  so  as  to  enable  the  owner  3  Q[y[\  Code,  §  2927.  The  owner  may 
of  the  mortgage  to  recover  possession,  make  an  independent  contract  for  the 
wi;hout  a  foreclosure  and  sale.  But  prior  mortgagee's  possession.  Fogarty  r.  Saw- 
to  this  statute  a  mortgage  was  not  a  con-  yer,  supra. 
ditional  estate  which  became  absolute  on  *  Nagle  v.  Macy,  9  Cal.  426. 
a  breach  of  condition,  as  at  common  law.  ^  Frink  v.  Lc  Koy,  49  Cal.  314  ;  Dut- 
Skinner  v.  Buck,  29  Cal.  253.  ton  v.  War.^chiuicr,  21  Cal.  C09. 

■^  Mack   V.    Wctzlar,    supra  ;    Harp    v.  ''  Dutton  v.  AVarscIiauer,  supra. 

Calahan,  46  Cal.  222  ;  Jackson  v.  Lodge,  ^  Jackson  v.  Lodge,  36  Cal.  28. 

30  Cal.  28;  Boggs  v.  Hargrave,  16  Cal.  8  Johnson  v.  Sherman,  15  Cal.  287. 

559  ;   Fogarty  v.   Sawyer,    1 7    Cal.    589  ;  »  Pico  v.  Gallardo,  52  Cal.  206. 
Bludworth  v.  Lake,  33  Cal.  255 ;  Carpen- 

19 


§§  21,  22.]  THE   NATURE   OF  A   MORTGAGE 

But  a  deed  of  trust  to  secure  a  debt  is  not  a  mortgage  requir- 
ing judicial  foreclosure,  but  a  conveyance,  of  the  legal  title  ;  and 
being  sucli  a  conveyance,  and  not  merely  a  lien  or  charge  upon 
the  property,  it  is  not  affected  by  the  statute  of  limitations,  which 
operates  equally  to  bar  the  debt  and  a  mortgage  given  to  secure 
it ;  but  the  trustee  under  such  deed  may,  after  such  periods  of 
general  limitation,  proceed  to  sell  the  land.^ 

21.  So  in  Colorado  a  mortgage  is  considered  a  security  only, 
and  does  not  before  foreclosure  confer  any  right  of  entry  on  the 
mortgagee.2  But  it  seems  that  a  mortgagee  who  has  acquired 
possession  may  retain  it ;  and  that  he  may  recover  the  property 
by  ejectment  against  third  persons,  not  holding  under  the  mort- 
gagor.^ The  Code  now  provides  that  a  mortgage  of  real  prop- 
erty shall  not  be  deemed  a  conveyance,  whatever  its  terms,  so  as 
to  enable  the  owner  of  the  mortgage  to  recover  possession  of  the 
property  without  foreclosure  and  sale ;  but  this  provision  does 
not  apply  to  trust  deeds  with  powers  of  sale.* 

22.  In  Connecticut  a  mortgage  passes  the  legal  estate  subject 
to  be  defeated  by  performance  of  the  condition,  and  the  mort- 
gagee may  maintain  ejectment ;  but  the  mortgagor  is  to  be  re- 
garded as  the  owner  of  the  property,  subject  to  the  rights  of  the 
mortgagee  to  enforce  payment  of  his  debt  by  means  of  his  title.^ 
When  the  debt  is  satisfied  after  forfeiture,  if  the  legal  title  be 
permitted  to  remain  vested  in  the  mortgagee,  he  holds  it  in  trust 
for  the  mortgagor.^  The  mortgage  when  paid  is  no  longer  an  in- 
cumbrance, though  it  may  be  a  cloud  on  the  title.'^  Courts  of 
law  have  adopted  equitable  principles  as  to  the  effect  of  a  mort- 
gage, holding  that  it  is  a  conveyance  merely  by  way  of  pledge 
for  the  debt,  and  that  the  mortgagee  holds  the  title  solely  for  this 
purpose,  aside  from  preserving  and  enforcing  his  security.^  The 
mortgagor  is  the  owner  of  the  mortgaged  land  as  against  every 
one  but  the  mortgagee.    His  equity  of  redemption  may  be  devised, 

1  Grant  v.  Burr,  54  Cal.  298.  6  Cross  v.  Robinson,  21  Conn.  379,  387  ; 

2  Drake  v.  Eoot,  2  Col.  685,  per  Hal-     Dudley  v.  Cadwell,  19  Conn.  218,  227; 
lett,  C.  J.  Phelps  v.  Sage,  2  Day,  151. 

8  Eyster  v.  Gaff,  2  Col.  228.  7  Clinton   v.  We^^tbrook,   38  Conn.  9 

*  Code  of  Civil  Procedure,  1887,  §  261  Doton  v.   Russell,    17    Conn.    1.46,    154 

in  Laws  1887,  p.  174.  Griswold  v.  Mather,  5   Conn.  435,  440 

5  Chamberlain  v.  Thompson,  10  Conn.  New  Haven  Savings  Bank  v.  McPartlan, 

243,  251  ;  Beach  v.  Clark,  6  Conn.  354  ;  40  Conn.  90. 

Rockwell  V.  Bradley,  2  Conn.  5  ;  Middle-  »  gates  v.  Coe,  10  Conn.  280,  294  ;  and 

town  Sav.  Bank  v.  Bates,  11  Conn.  519,  see  Lacon  v.  Davenport,  16  Conn.  331. 

523. 

20 


IN   THE  DIFFERENT   STATES.  [§§  23-25. 

granted,  levied  upon,  and  set  off  in  execution.  The  wife  of  a 
mortgagor  is  entitled  to  dower,  and  the  husband  of  a  mortgagor 
to  curtesy.  A  mortgagor  in  possession  may  acquire  a  settlement, 
may  maintain  trespass  against  his  mortgagee,  and  may  take  the 
emblements,  without  being  liable  to  account ;  and  although  the 
mortgagee  has  only  a  chattel  interest,  —  a  mere  pledge  for  the 
payment  of  the  debt,  — yet  the  legal  title  vests  in  him  upon  the 
execution  of  the  mortgage,  subject  to  be  defeated  only  on  per- 
formance of  the  condition  ;  and  after  condition  broken  the  only 
relief  for  the  mortgagor  is  in  equity.^ 

23.  In  Dakota  Territory  a  mortgage  does  not  entitle  the 
mortgagee  to  the  possession,  but  after  the  execution  of  it  the 
mortgagor  may  agree  to  such  change  of  possession  upon  a  new 
consideration. 2 

24.  In  Delaware  a  mortgage,  as  between  the  mortgagor  and 
mortgagee,  is  only  a  security  for  the  payment  of  the  debt,  and, 
so  long  as  the  mortgagor  continues  in  possession,  does  not  convey 
the  legal  title  to  the  mortgagee ;  but  in  the  mean  time  it  is  a 
lien  of  so  high  a  nature,  that  it  is  not  divested  by  a  sale  of  the 
premises  on  a  judgment  subsequently  obtained  against  the  mort 
gagor.  Yet  after  breach  of  the  condition  and  possession  obtained 
by  the  mortgagee,  the  legal  title  is  in  the  mortgagee,  and  it  is  no 
longer  in  the  power  of  the  mortgagor,  or  any  one  claiming  under 
him,  to  recover  possession  by  ejectment.^  As  against  every  one 
but  the  mortgagee,  the  mortgagor  in  possession  before  foi-eclosure 
is  regarded  as  the  owner  and  freeholder,  with  the  civil  and  polit- 
ical rights  belonging  to  that  character.*  The  mortgagee  may, 
upon  breach  of  the  condition,  use  at  the  same  time  all  the  reme- 
dies the  law  affords  against  the  person  and  the  property ;  and  he 
cannot,  without  some  special  equity  in  favor  of  the  debtor,  be 
restrained  from  proceeding  at  his  election  upon  either  or  both  his 
remedies.'' 

25.  In  Florida  a  mortgage  is  not  deemed  a  conveyance  so  as 
to  entitle  the  mortgagee  to  recover  possession  without  a  foreclos- 
ure.'' It  does  not  pass  an  estate  in  fee.  It  is  a  specific  lien  upon 
the  property,  and  the  mortgagor  is  divested  of  the  title  only  by 

1  Chamberlain  v.  Thompson,  10  Com.  v.  Cornog,  3  Del.  Ch.  407,  41G  ;  Walker  r. 

243,  251.  Farmers'  I$iink  (Del.),  14  All.  Kip.  819;  S. 

'^  K.  Codes  1883,  §  1733.  C.  10  Atl.  Hep.  94,  100,  jjcr  Siilisbury,  Ch. 

•■!  Hull  V.  Tunnell,  1  Iloust.  320.  6  Newhold  v.  Newbold,  1  Del.  Cli.  310. 

*  Cooch  V.  Gerry,  3  liar.  280;  Cornog  ''  BuhIi  Dig.  of  Stat.  \bT2,  pp.  011,612. 

21 


§§  26,  27.]  THE  NATURE   OF   A  MORTGAGE 

forfeiture  of  the  condition  and  a  foreclosure  sale.^  It  is  held, 
however,  that  a  deed  of  trust  conveying  land  to  trustees,  with 
power  to  sell  and  convey  it  in  fee  and  apply  the  proceeds  to  the 
payment  of  certain  liabilities  of  the  grantor,  is  not  a  mortgage, 
but  is  a  conveyance  which  vests  the  legal  title  in  the  trustees.^ 

26.  In  Georgia  a  mortgage  is  a  mere  security  for  a  debt,  and 
the  mortgagee  can  neither  enter  nor  maintain  ejectment.^  All 
he  can  do  is  to  foreclose  and  sell,  and  make  his  money  out  of  the 
sale  ;  and  the  rents  and  profits  belong  to  the  mortgagor  until  the 
sale,  for  the  reason  that  the  title  remains  in  hifn  until  the  sheriff 
sells  him  out,  and  puts  another  in  his  place.*  No  title  passes  by 
the  mortgage  :  it  is  only  by  foreclosure  that  the  title  is  changed.^ 
It  is  now  declared  in  the  Code  that  a  mortgage  is  only  a  security 
for  a  debt,  and  passes  no  title.^  But  an  absolute  deed  with  a 
bond  to  reconvey  passes  the  legal  title.''  The  deed  and  bond  do 
not,  separately  or  together,  indicate  the  creation  of  a  mere  lien, 
but  the  purpose  indicated  is,  to  divest  the  grantor  of  title,  and  to 
vest  title  in  the  grantee,  until  the  debt  be  paid.^ 

27.  In  Illinois  it  is  held,  in  accordance  with  the  rulings  of  the 
English  courts  of  common  law  jurisdiction,  that,  as  an  incident  to 
the  ownership  in  fee  by  the  mortgagee,  he  can  enter  before  condi- 
tion broken  or  bring  ejectment,  unless  the  mortgage  provides  that 
the  mortgagor  shall  retain  possession.  In  such  case,  and  always 
upon  breach  of  the  condition,  the  mortgagee  may  bring  his  action 
without  giving  the  party  in  possession  any  notice  to  quit.^  The 
condition  is  broken  when  one  or  more  instalments  are  due  and 
unpaid  ;  because,  the  condition  being  an  entirety,  it  is  indivisible, 
and  a  failure  to  pay  any  part  of  the  debt  is  a  breach  of  the 
condition.  The  mortgagee  may  pursue  all  his  remedies  at  the 
same  time :  he  may  proceed  against  the  debtor  personally ;  against 
the  property  by  bill  in  chancery  for  a  strict  foreclosure,  or  for  a 

1  McMahon  v.  Russell,  17  Fla.  698.  '  §  292;  Broach  v.  Bai-field,  57  Ga.  601; 

2  Soutter  V.  Miller,  15  Fla.  625.  Phinizy  v.  Clark,  62    Ga.    623  ;  Allen  v. 
8  Vason  V.  Ball,  56  Ga.  268 ;  Davis  v.     Frost,  62  Ga.  659. 

Anderson,  1    Ga.  176  ;    Ragland  v.  Jus-  ^  Gibson  v.  Hough,  60  Ga.  588;  West 

tices,   10   Ga.  65  ;   Elfe  v.  Cole,   26    Ga.  v.  Bennett,  59  Ga.  507. 

197;  United  States  v.  Athens  Armory,  35  9  Carroll  v.  Ballance,  26  III.  9  ;  Van- 

Ga.  344 ;  Seals  v.  Cashin,  2  Ga.  Dec.  76  ;  sant  v.  AUmon,  23  111.  30,  33  ;  Delahay  v. 

Carter  v.  Gunn,  64  Ga.  651.  Clement,    3    Scam.    201,   202  ;  Nelson  v. 

*  Vason  V.  Ball,  supra,  per  Jackson,  J.  Pinegar,  30  III.  473 ;  Jackson  v.  Warren, 

5  Burnside  v.  Terry,  45  Ga.  621 ;  Jack-  32  111.  331  ;  Pollock  v.  Maison,  41  111.  516; 
son  V.  Carswell,  34  Ga.  279.  Harper  v.  Ely,  70  111.  581. 

6  Code  1882,  §  1954. 


IN   THE   DIFFERENT    STATES.  [§§  28,  29. 

foreclosure  and  sale  ;  or,  when  the  debt  is  all  due,  by  seire  facias  ; 
and  he  may  bring  ejectment  for  the  possession,  or  make  peaceable 
entry .^  But  even  after  condition  broken,  a  mortgage  is  not  an 
absolute  outstanding  title  of  which  a  stranger  can  take  advantage 
to  defeat  a  recovery  in  ejectment  by  the  mortgagor.^  Except  as 
against  the  mortgagee,  the  mortgagor  is  regarded  for  all  beneficial 
purposes  as  the  owner  of  the  land.^ 

28.  In  Indiana  the  common  law  doctrine,  that  the  legal  estate 
vests  in  the  mortgagee,  was  adhered  to  many  years,  as  appears 
by  the  earlier  cases  ;  but  it  no  longer  prevails.  The  settled  doc- 
trine in  this  state  is  that  a  mortgage  is  but  a  lien  on  the  land  as 
a  security  for  the  debt,  and  that  the  legal  title  remains  in  the 
mortgagor,  subject  to  the  lien  of  the  mortgage.*  It  is  provided 
by  statute  that,  in  the  absence  of  stipulations  to  the  contrary,  the 
mortgagor,  until  foreclosure,  may  retain  possession  of  the  mort- 
gaged estate.^ 

29.  Iowa.  —  The  interest  of  the  mortgascee  is  regarded  as  a 
lien  upon  the  land  for  the  debt,  which  may,  by  certain  proceed- 
ings, ripen  into  a  title,  or  rather  may  divest  the  title  of  the  mort- 
gagor. Some  act  of  the  mortgagee  is  necessary,  that  he  may  ac- 
quire an  indefeasible  title  which  the  mortgagor  will  not  be  able 
to  defeat  by  redemption.  The  interest  of  the  mortgagor  is  an 
estate  of  inheritance,  which  is  in  no  way  affected  by  the  mort- 
gage before  entry  and  foreclosure,  except  by  the  lien  created. 
The  fact  that  a  mortgage  confers  upon  the  mortgagee  a  right  of 
entry  upon  breach  of  the  condition  gives  him  no  additional  right, 
inasmuch  as  the  right  exists  under  the  law,  without  such  provi- 
sion.*^ It  is  now  provided  by  statute  that,  in  the  absence  of  stipu- 
lations to  the  contrary,  the  mortgagor  retains  the  legal  title  and 
the  right  of  possession." 

A  conveyance  absolute  in  terms  to  secure  the  payment  of  a 
debt,  though  in  substance  a  mortgage,  differs  from  a  statutory 
mortgage  in  that  the  legal  title  passes  to  the  grantor,  who,  by 

1  Karnes  v.  Lloyd,  52  111.  113  ;  Erickson  ^  G.  &.  H.  Stat.  p.  335.     Prior  to  1843, 
V.  Rafferty,  79  111.  209.  when  this  statute  was  passed,  the  mort- 

2  Hall  V.  Lance,  25  111.  277  ;  Oldham  v.  gagee  could  recover  possession  at  any  time 
Pfleger,  84  111.  102.  unless  restrained  by  the  terms  of  the  niort- 

3  Fitch  V.  Pinckard,  4  Scam.  C9  ;  Val-  gage. 

lette  V.  Bennett,  69  111.  632.  6  White  v.  Rittcnmyer,  30  Iowa,  208; 

♦  Fletcher  v.  Holmes,  32  Ind.  497,  513;  Courtney  v.  Carr,  6  Iowa,  238  ;   Hall  v. 

Francis  i-.  J'orter,  7  Ind.  213;  Morton  v.  Savill,  3  Greene,  37. 

Noble,  22  Ind.  160;  Grahle  v.  McCulloh,  7  u.  Code  1880,  §  1938. 
27  Ind.  472  ;  lleasoncr  v.  Edmundson,  5 

Ind.  393.  23 


§§  30-32.]  THE   NATURE   OF   A   MORTGAGE 

virtue  thereof,  can  at  any  time  before  or  after  condition  broken 
recover  possession  by  an  action  at  law,  unless  the  grantor  inter- 
poses his  equitable  defence.^ 

30.  In  Kansas  the  legal  estate  remains  in  the  mortgagor  after 
making  a  mortgage,  and  it  is  provided  by  statute  that,  in  the  ab- 
sence of  stipulations  to  the  contrary,  he  may  retain  possession  of 
the  mortgaged  estate.^  "  Some  of  the  states  still  adhere  to  the 
common  law  view,  more  or  less  modified  by  the  real  nature  of  the 
transaction  ;  but  in  most  of  them,  practically,  all  that  remains 
of  the  old  theories  is  their  nomenclature.  In  this  state,  a  clear 
sweep  has  been  made  by  statute.  The  common  law  attributes 
of  mortgages  have  been  wholly  set  aside  ;  the  ancient  theories 
have  been  demolished ;  and  if  we  could  consign  to  oblivion  the 
terms  and  phrases  —  without  meaning  except  in  reference  to  those 
theories  —  with  which  our  reflections  are  still  embarrassed,  the 
legal  profession,  on  the  bench  and  at  the  bar,  would  more  readily 
understand  and  fully  realize  the  new  condition  of  things."  ^ 

A  trust  deed,  being  merely  a  mortgage,  is  regarded  as  conveying 
no  estate  or  title  in  the  land,  but  as  creating  merely  a  lien.* 

31.  In  Kentucky,  since  the  adoption  of  the  Civil  Code,  a  mort- 
gage is  regarded  as  a  mere  security  for  debt,  and  substantially, 
both  at  law  and  in  equity,  the  mortgagor  is  the  real  owner  of  the 
mortgaged  property  until  foreclosure.^  The  rents  and  profits  of 
the  mortgaged  premises  belong  to  the  mortgagor  until  he  is 
divested  of  the  title,  unless  there  is  a  specific  pledge  of  them  in 
the  mortgage.^ 

32.  In  Louisiana  a  mortgage  is  a  species  of  alienation,  but 
not  a  sale.  It  is  an  alienation  of  a  right  on  the  property,  not  of 
the  property  itself.  The  title,  as  well  as  the  possession,  remains 
in  the  owner.-"  The  Civil  Code  of  this  state  defines  a  mortgage 
as  "  a  rigbt  granted  to  the  creditor  over  the  property  of  the 
debtor  for  the  security  of  his  debt,  and  gives  him  the  power  of 
having  the  property  seized  and  sold  in  default  of  payment.  Mort- 
gage is  a  species  of  pledge,  the  thing  mortgaged  being  bound  for 
the  payment  of  the  debt,  or  fulfilment  of  the  obligation.     The 

1  Richards  v.  Crawford,  50  Iowa,  494;  *  Lenox   v.  Reed,  12  Kans.  223,  227  ; 
Burdick   v.   Wentworth,   42    Iowa,   440  ;  Robbins  v.  Sackett,  23  Kans.  301. 
Farley  v.  Goocher,  1 1  Iowa,  570.  ^  WooUey  v.  Holt,  14  Bush,  788  ;  Doug- 

2  Dassler's  Stat.  1876,  eh.  68,  §  1  ;  Seek-  lass  v.  Cline,  12  Bush,  608  ;  Taliaferro  v. 
ler  V.  Delfs,  25  Kans.  159.  Gay,  78  Ky.  496. 

«  Chick  V.  Willetts,  2  Kans.  384.     See,         ^  Taliaferro  v.  Gay,  supra. 
also,  Waterson  v.  Devoe,  18  Kans.  223.  "^  Duclaud  v.  Rousseau,  2  La.  Ann.  168. 

24 


IN   THE  DIFFERENT   STATES.  [§§  33-35. 

conventional  mortgage  is  a  contract,  by  which  a  person  binds 
the  whole  of  his  property,  or  a  portion  of  it  only,  in  favor  of  an- 
other, to  secure  the  execution  of  some  engagement,  but  without 
divesting  himself  of  the  possession."  ^  A  conventional  mortgage 
is  one  founded  upon  the  covenants  of  the  parties  in  contradistinc- 
tion to  a  legal  mortgage. 

33.  In  Maine  a  mortgage  vests  the  mortgagee  with  the  legal 
estate,^  and  it  is  provided  by  statute  that  he  may  enter  before 
breach  of  the  condition,  when  there  is  no  agreement  to  the  con- 
trary.3  The  mortgagor,  as  to  every  one  but  the  mortgagee,  is 
considered  as  having  the  legal  estate  and  the  power  of  conveying 
it  or  incumbering  it  subject  to  the  lien  of  the  mortgage.'^ 

34.  Maryland.  —  The  mortgagee  has  the  legal  estate,  and  is 
entitled  to  possession  immediately*  upon  the  execution  of  the 
mortgage,  unless  there  be  some  agreement  of  the  parties  to  the 
contrary.^  Ordinarily  he  may  pursue  all  his  remedies  at  the 
same  time.^  As  to  all  other  persons,  the  mortgagor  is  deemed 
the  owner.  He  may,  therefore,  when  the  mortgage  allows  him 
to  remain  in  possession  until  default,  maintain  ejectment  against 
a  third  party  who  rests  his  defence  entirely  on  possession  and 
an  outstanding  title  in  the  mortgagee.''  Moreover,  being  the  sub- 
stantial owner,  he  is  entitled  to  sue  for  damages  done  the  estate 
by  a  third  person.^ 

35.  In  Massachusetts  the  English  characteristics  of  a  mort- 
gage are  retained.  It  confers  upon  the  mortgagee  a  legal  estate 
and  the  right  of  possession.  "  The  first  great  object  of  a  mort- 
gage," says  Chief  Justice  Shaw,^  "  is,  in  the  form  of  a  convey- 
ance in  fee,  to  give  to  the  mortgagee  an  effectual  security,  by  the 
pledge  or  hypothecation  of  real  estate,  for  the  payment  of  a  debt, 
or  the  performance  of  some  other  obligation.  The  next  is  to  leave 
to  the  mortgagor,  and  to  purchasers,  creditors,  and  all  others 
claiming  derivatively  through  him,  the  full  and  entire  control, 
disposition,  and  ownership  of  the  estate,  subject  only  to  the  first 

1  CivilCodel870,  arts.  3278.3279,3290.  olis  &  Elkridge  R.  R.  Co.  v.   Gautt,  39 

^  §  702 ;  Blaney  v.  Bcarce,  2  Me.  132.  Md.  115. 

3  Rev.  Stat.  1883,  ch.  90,  §  2.  «  Wilhelm    v.    Leo,   2    Md.    Ch.   322; 

*  Wilkins  V.  French,  20  Me.  111.  Brown  v.  Stewart,  1  Md.  Ch.  87. 

6  Brown    v.   Stewart,    1    Md.   Ch.   87  ;  ^  George's   Creek  Coal  &    Iron  Co.  v. 

Leigliton  v.  Preston,  9  Gill,  201  ;  Jamie-  Detmold,  1  Md.  22.5,  237. 

son  V.  Bruce,  6  G.  &  J.  72,  per  Archer,  «  Annapolis  &  Elkridge  R.  R.   Co.   v. 

J.;    McKiin   v.   Mason,  3   Md.   Cii.    180;  Gantt,  .s«/)ra. 

Sumwalt  V.  Tucker,  34  Md.  89;  Annap-  "  Ewer  v.  Ilohbs,  5  Met.  1-3. 

25 


§  36.]  THE  NATURE   OF   A  MORTGAGE 

purpose,  that  of  securing  the  mortgagee.  Hence  it  is  that,  as  be- 
tween mortgagor  and  mortgagee,  the  mortgage  is  to  be  regarded 
as  a  conveyance  in  fee ;  because  that  construction  best  secures 
him  in  his  remedy  and  his  ultimate  right  to  the  estate,  and  to  its 
incidents,  the  rents  and  profits.  But  in  all  other  respects,  until 
foreclosure,  when  the  mortgagee  becomes  the  absolute  owner,  the 
mortgage  is  deemed  to  be  a  lien  or  charge,  subject  to  which  the 
estate  may  be  conveyed,  attached,  and  in  all  other  respects  dealt 
with  as  the  estate  of  the  mortgagor.  And  all  the  statutes  upon 
the  subject  are  to  be  so  construed;  and  all  rules  of  law,  whether 
administered  in  law  or  in  equity,  are  to  be  so  applied  as  to  carry 
these  objects  into  effect."  And  in  another  case  the  same  eminent 
jurist  says  :  ^  "Mortgaging  is  not  such  a  conveying  away  of  the 
estate  as  divests  the  entire  title  of  the  owner.  It  is  a  charge  or 
incumbrance  created  out  of  that  estate,  and  may  amount  to  a 
small  part  only  of  its  value.  Although,  as  between  mortgagor 
and  mortgagee,  it  is  a  transmission  of  the  fee,  which  gives  the 
mortgagee  a  remedy  in  the  form  of  a  real  action,  and  constitutes 
a  legal  seisin,  yet  to  most  other  purposes  a  mortgage,  before  the 
entry  of  the  mortgagee,  is  but  a  pledge  and  real  lien,  leaving  the 
mortgagor  to  most  purposes  the  owner."  ^ 

36.  In  Michigan  no  action  of  ejectment  can  be  maintained  by 
a  mortgagee,  or  his  assigns  or  representatives,  for  the  recovery  of 
the  mortgaged  premises,  until  the  title  shall  have  become  absolute 
upon  a  foreclosure  of  the  mortgage.^  Not  being  allowed  as  mort- 
gagee to  bring  an  ejectment  suit,  he  is  not  allowed  to  maintain  a 
bill  for  foreclosure  as  a  proceeding  auxiliary  to  the  ejectment 
suit.  Nor  can  he  convert  a  bill  in  aid  of  ejectment  proceedings 
into  a  foreclosure  bill  by  merely  substituting  the  ordinary  prayer 
for  foreclosure  in  place  of  the  prayer  originally  niade.^  The 
mortgagee  has  no  legal  title  in  the  land  mortgaged,  but  only  a 
lien  for  the  security  of  the  mortgage  debt.^  A  mortgage  in  com- 
mon law  form,  executed  prior  to  the  statute  which  deprived  mort- 
gagees of  the  right  of  possession,  gave  the  mortgagee  or  his 
assigns  the  right  to  go  into  the  enjoyment  of  the  lands  and  hold 

1  Howard  v.  Robinson,  4  Cush.  119-123.  3  Annot.  Stats.  1882,  §  7847. 

2  See,   also,   §   702  ;   Norcross   v.   Nor-  *  Livingston  v.  Hayes,  43  Mich.  129. 
cross,  105  Mass.  265;  Bradley  i>.  Fuller,  &  Caruthers  y.  Humphrey,  12  Mich.  270; 
23  Pick.  1,9;  Hajigood  v.  Blood,  11  Gray,  Gorham  v.  Arnold,  22  Mich.  247  ;  Wagar 
400  ;  Sparhawk  v.  Bagg,  16  lb.  583  ;  Steel  v.  Stone,  36  Mich.  364  ;  Lee  v.  Clary,  38 
V.  Steel,  4  Allen,  417;  Silloway  i;.  Brown,  Mich.  223. 

12  lb.  30, 

26 


IN  THE   DIFFERENT   STATES.  [§§  37,  38. 

them  until  redeemed. ^  Under  the  existing  statute  a  mortgagor 
is  entitled  to  recover  possession  from  liis  mortgagee  at  any  time 
before  his  rights  liave  been  foreclosed.^ 

A  conveyance  in  trust  to  secure  an  indebtedness  is  only  a  mort- 
gage, and  does  not  preclude  the  mortgagor  from  claiming  the 
title  in  fee.^  But  an  absolute  deed,  though  intended  as  a  mort- 
gage, gives  the  grantee  the  legal  title  and  the  right  of  possession.* 

37.  In  Minnesota  it  is  declared  by  statute  that  a  mortgage  of 
real  property  shall  not  be  deemed  a  conveyance,  so  as  to  enable 
the  owner  qi  the  mortgage  to  recover  possession  of  it  without 
a  foreclosure.^  Referring  to  this  statute  Chief  Justice  Emmet 
says :  ^  "  This,  it  appears  to  me,  deprives  the  mortgagee  of  the 
only  material  advantage  which  remained  to  him  from  being  con- 
sidered the  owner  of  the  fee ;  and  although,  out  of  deference  to 
the  past,  we  may  still  regard  him  as  the  legal  owner,  he  is  such 
in  theory  only,  having  no  right  to  interfere  with  the  possession 
save  by  consent  of  the  mortgagor.  The  effect  of  the  change  just 
referred  to  is  to  dissipate  whatever  of  title  he  may  formerly  have 
had  beyond  that  of  a  mere  lien  or  security.  And  although  the 
mortgagee  may,  by  obtaining  a  strict  foreclosure,  eventually  se- 
cure possession,  and  thus  complete  his  title  under  the  mortgage, 
yet,  as  the  courts  may,  and  in  practice  generally  do,  direct  the 
property  to  be  sold,  even  when  a  strict  foreclosure  is  asked  for, 
he  is  by  no  means  certain  of  ever  perfecting  that  title,  which  the 
mortgage  pui-ports  to  convey.  And  if  the  property,  by  direction 
of  the  court  or  otherwise,  be  sold  to  satisfy  the  mortgage,  the  pur- 
chaser, when  he  receives  his  deed,  takes,  not  the  title  of  the  mort- 
gagee, for  that  is  extinguished  by  the  application  of  the  proceeds 
of  the  sale  ;  nor  does  he  take  simply  the  title  of  the  mortgagor 
at  the  time  of  the  sale,  for  that  is  incomplete;  but  he  takes  the 
title  which  was  in  the  mortgagor  at  the  time  the  mortgage  was 
given,  which  is  equivalent  to  both." 

38.  In  Mississippi,  upon  a  breach  of  the  condition  of  a  mort- 
gage the  legal  title  becomes  absolute  in  the  mortgagee,  who  there- 

1  Hoffman  v.  Harrington,  33  Midi.  392 ;         ^  q.  S.  1878,  ch.  75,  §  29. 

Scliwarz  I'.  Sears,  Walk.  Ch.  170;  Stevens  "  Adams   v.   Corriston,   7    Minn.   456; 

i;.   Brown,  lb.  41 ;  Mundy  v.  Munroe,  1  and  see  Donnelly  v.   Simonton,  7  Minn. 

Mich.  eS.  167;  Berthold  r.  Holman,  12  Minn.  335  ; 

2  Humphrey  v.  Hurd,  29  Mich.  44.  Bertliold  v.  Fox,   13  Minn.   501  ;  Rico  v. 

3  Flint  &  J'cro  Marquette  lly.   Co.  v.  St.  Paul  &  Pacific  R.  R.  Co.  24  Minn. 
Auditor  General,  41  Mich.  635.  464. 

*  Jeffery  v.  Hursh,  42  Mich.  563. 

27 


§  39.]  THE  NATURE   OF   A   MORTGAGE 

upon  becomes  entitled  to  the  possession  of  the  property  as  an 
incident  to  the  title.^  The  Code  now  provides  that  before  a  sale 
under  a  mortgage,  or  deed  of  trust,  the  mortgagor  or  grantor  shall 
be  deemed  the  owner  of  the  legal  title  of  the  property  conveyed, 
except  as  against  the  mortgagee  and  his  assigns,  or  the  trustee, 
after  breach  of  the  condition  of  the  mortgage  or  deed.^  The  debt 
is  consideped  as  the  principal,  and  the  mortgage  as  an  incident 
only.  The  mortgagee,  notwithstanding  the  form  of  the  convey- 
ance, has  but  a  security.  The  principles  long  established  in  chan- 
cery have,  under  the  Code,  become  naturalized  in  the  courts  of 
common  law,  so  that  until  foreclosure  the  mortgagee  is  regarded 
as  having  a  chattel  interest  only.  Even  after  the  mortgagee  has 
taken  possession,  the  mortgaged  estate  is  regarded  as  a  pledge 
only.^ 

As  respects  third  persons,  and  the  mortgagee  also  until  after 
forfeiture,  the  mortgagor  is  the  owner  of  the  legal  estate,  and  the 
mortgagee  has  only  a  security  for  the  debt.  "  The  legal  title," 
says  Chief  Justice  Simrall,  in  a  recent  case,*  "  may  be  asserted 
by  the  mortgagee,  but  only  for  the  protection  of  his  debt,  and  to 
make  the  security  available  for  its  payment." 

39.  Missouri.  —  By  a  mortgage,  or  a  deed  of  trust  in  the  na- 
ture of  a  mortgage,  the  legal  title,  after  condition  broken,  passes 
to  the  mortgagee  or  trustee.  The  addition  of  a  power  to  sell, 
without  judicial  proceedings  to  foreclose,  cannot  avoid  the  legal 
effect  of  the  grant.^  The  trustee,  after  dishonor  of  the  notes  se- 
cured, may  enter,  and  without  sale  or  foreclosure  may  maintain 
his  possession  for  the  use  of  the  beneficiary,  not  only  against  all 
outsiders,  but  against  the  maker  of  the  deed  himself,  until  the 
payment  of  the  debt.  It  has  long  been  established  in  this  state 
that  after  condition  broken  the  mortgagee  may  maintain  eject- 
ment.^ 

1  Hill  V.  Robertson,  24  Miss.  368 ;  Har-  sidered  as  real  property  to  enable  him  to 
mon  V.  Short,  8  S.  &  M.  433.  maintain  ejectment  for  the  recovery  of  the 

2  R.  Code  1880,  §  1204;  Carpenter  v.  possession  of  the  land  mortgaged;  when 
Bowen,  42  Miss.  28.  contemplated  in  every  other  point  of  view, 

^  Buckley  v.  Daley,   15  Miss.  338,  345.  it  is  personal  property."     To  same  effect 

"  The  relation  of  debtor  and  creditor  ex-  is  Carpenter  v.  Bowen,  42  Miss.  28,  49. 

ists,"  says   Chief  Justice  Peyton,   "and  *  Buck  y.  Payne,  52  Miss.  271. 

the  equity  of  redemption  is  unimpaired.  ^  Johnson  et  al.  v.  Houston,  47  Mo.  227  ; 

Although  the  mortgagee  has  a  chattel  in-  Woods  v.  Hilderbrand,  46  Mo.  284  ;  Ken- 

terest  only,  yet,  in   order  to   render   his  nett  v.  Plummer,  28  Mo.  142. 

pledge   available,   and   give   him   the  in-  6  Walcop  v.  McKinney,    10   Mo.  229  ; 

tended  beuefit  of  his  security,  it  is  con-  Sutton  v.  Mason,  38  Mo.  120;  Reddick  v. 

28  Gressman,  49  Mo.  389. 


« 

IN  THE  DIFFERENT   STATES.  [§§  39a-41. 

Where  a  mortgage  debt  is  payable  by  instalments,  the  condition 
is  broken  by  non-payment  of  any  one  of  them,  and  the  mortgagee 
ma}'  thereupon  enter  or  bring  ejectment,  and  it  is  no  defence  to 
such  a  suit  that  all  the  instalments  are  not  due.  The  authoriza- 
tion contained  in  a  mortgage,  to  sell  only  in  event  that  "  the  said 
notes  should  not  be  well  and  truly  paid,"  should  be  construed 
to  mean  in  case  they  should  not  be  paid  as  they  respectively  be- 
come due.  The  mortgagee  is  not  by  such  condition  compelled  to 
wait  till  the  last  note  is  dishonored  before  applying  his  remedy.^ 
But  although  a  mortgage  is  a  conveyance  in  fee  upon  condition, 
it  is,  even  after  the  condition  is  broken  and  the  legal  title  has 
passed  to  the  mortgagee,  merely  a  security  for  the  debt,  and 
is  extinguished,  and  the  title  revested,  whenever  the  debt  is 
paid,- 

39  a.  Montana  Territory.  —  A  mortgage  of  real  property  is 
not  deemed  a  conveyance,  whatever  its  term,  so  as  to  enable  the 
owner  of  the  mortgage  to  recover  possession  of  the  real  property 
without  foreclosure  and  sale.^ 

40.  Nebraska.  —  The  doctrine  is  established  that  the  mort- 
gagee is  not  seised  of  the  freehold,  either  at  law  or  in  equity, 
either  before  or  after  condition  broken.^  It  is  provided  by  statute 
that  the  mortgagor,  in  the  absence  of  stipulations  to  the  contrary, 
retains  the  legal  title  and  right  of  possession.^  A  deed  of  trust 
to  secure  the  payment  of  a  debt,  being  in  effect  a  mortgage,  is 
held,  in  accordance  with  the  general  rule  that  a  mortgage  does 
not  pass  the  legal  title,  not  to  vest  a  legal  estate  in  the  trustee.*^ 

41.  In  Nevada  the  courts  seem  inclined  to  hold  that  the  title 
does  not  pass  from  the  mortgagor  before  breach  of  the  condition." 
It  is  provided  by  statute  that  a  mortgage  of  real  property  shall 
not  be  deemed  a  conveyance,  whatever  its  terms,  so  as  to  enable 
the  owner  of  the  mortgage  to  recover  possession  of  the  land 
witliout  a  foreclosure  and  sale.^  But  a  deed  absolute  in  form 
vests  tlie  legal  title  in  the  grantee.^ 

1  Reddick  r.  Gressman,  49  Mo.  389.  6  Compiled  Stats.   1885,  p.   482;   Con- 

2  Pease  v.  Pilot  Knob  Iron  Co.  49  Mo.  nolly  i-.  Giddings,  37  N.  W.  Rep.  939. 
124.  «  Webb  v.  Hoselton,  4  Neb.  308  ;  Kvger 

3  Com  p.    Stats.    1887,    Code    of    Civ.  y.  Ry  ley,  SM/jra;  Hurley  y.  Estes,  si//jm. 
Proced.  §371;    Gallatin   Co.  v.  Beattie,         '  Whiiinore  v.   Sliiverick,  3  Nev.  288; 
3   Mont.   173;   Pee  v.   Swingly,   13    Pac.  Ilymim  t;.  Kelly,  1  Nev.  179. 

licp.  375.  8  Q.  S.  1885,  Civ.  Proced.  §  3284. 

*  Kygcr  V.  Ityley,  2  Neb.  20,  28  ;  Hur-  «  Bropliy  Mining  Co.  v.  IJrophy  &  Dale 

ley  V.  Estes,  6  Neb.  386;  Union  Mut,  Life  Gold  and  Silver  Mining  Co.  15  Nev.  101. 
InH.  Co.  V.  J.ovitt,  10  Neb.  301 ;  McHugh 

I.  Smiley,  17  Neb.  020.  29 


§§  42,  43.]  THE   NATURE   OF   A   MORTGAGE 

42.  New  Hampshire.  —  The  seisin,  or  possession,  as  well  as 
tlie  title,  passes  directl}'-  to  the  mortgagee  unless  he  is  restrained 
by  the  provisions  of  the  deed ;  and  upon  a  breach  of  the  condi- 
tion he  is  in  any  case  entitled  to  the  possession.  The  mortgagor 
retains,  as  against  the  mortgagee,  nothing  more  than  a  mere 
power  to  regain  the  fee  upon  the  performance  of  a  condition,  and 
this  condition  is  strictly  a  condition  precedent.^  As  against  all 
other  persons  the  mortgagor  is  regarded  as  the  owner,  and  may 
maintain  a  real  action  to  recover  possession.  The  mortgagee  has 
the  .legal  title  merely  so  far  as  is  necessary,  in  order  to  enable 
him  to  obtain  the  full  benefit  of  the  security,  and  prevent  any 
violation  of  his  rights  under  the  mortgage.^  Whenever  the  mort- 
gagee is  entitled  to  possession  he  may  doubtless  treat  the  posses- 
sion of  the  mortgagor  as  a  disseisin,  at  bis  election,  and  may  at 
once  maintain  a  writ  of  entry  for  the  recovery  of  possession,  with- 
out notice  to  quit ;  but  until  such  election  the  possession  of  the 
mortgagor  cannot  be  regarded  as  a  disseisin,  but  as  permissive, 
and  bearing  in  many  respects  a  close  analogy  to  sti'ict  tenancy  at 
will  or  at  sufferance.  Until  this  power  of  election  is  exercised, 
the  mortgagor  is  in  with  the  privity  and  assent  of  the  mortgagee, 
and  in  subordination  to  his  title ;  and  it  is  therefore  held,  upon 
the  ground  of  such  presumed  assent,  that  the  mortgagor  is  not 
liable  to  the  mortgagee  for  the  rents  and  profits  while  so  in  pos- 
session.^ 

43.  In  New  Jersey  the  nature  of  the  mortgage  as  a  convey- 
ance of  an  estate  to  the  mortgagee  in  fee  simple,  subject  to  be 
defeated  by  the  performance  of  the  condition,  remains  as  it  was 
at  common  law,  with  the  modification  that  the  mortgagee  cannot 
enter  immediately  as  at  common  law,  but  only  upon  breach  of 
the  condition.*  A  mortgage  is  merely  auxiliary  to  the  debt,  and 
the  estate  of  the  mortgage  is  annihilated  by  the  extinguishment 
of  the  debt  secured  by  it,  even  after  the  day  of  payment  named 
in  the  condition.  In  fact,  the  latter  conclusion  will  necessarily 
follow  whenever  the  mortgage  is  regarded,  not  as  a  common  law 

1  Brown  v.  Cram,  1  N.  H.  169  ;  South-  Great  Falls  Co.  v.  Worster,  15  N.  H.  412, 
erin  v.  Mendum,  5  N.  H.  420  ;  M'Murphy     444. 

V.   Minot,  4   N.   H.  251,   255;    Tripe  v.  s  Chellis  i;.  Stearns,  22  N.  H.  312 ;  Fur- 

Marcy,  39  N.  H.  439  ;  Hobart  v.  Sanborn,  bush  v.  Goodwin,  29  N.  H.  321,  332. 

13  N.  H.  226.  *  Sanderson  v.  Price,  1  Zab.  637,  646, 

2  Ellison  V.  Daniels,  11  N.  H.  274;  note;  Shields  ?;.  Lozear,  34  N.  J.  L.  496, 
Parish  f.  Gilmanton,  11  N.  H.  293,  298;  per  Depue,  J.;  Kircher  v.  Schalk,  39  N. 
Whittemore    v.    Gibbs,    24    N.   H.  484;  J.  L.  335,  337. 

30 


IN   THE  DIFFERENT   STATES. 


[§§  43a,  44. 


conveyance  on  condition,  but  as  a  security  for  the  debt,  the  legal 
estate  being  considered  as  subsisting  only  for  that  purpose.^  In 
this  state  the  generally  received  aspect  in  which  a  mortgage  is 
regarded  is  as  a  mere  security  for  the  debt.^ 

43  a.  New  Mexico  Territory.  —  In  the  absence  of  a  stipula- 
tion to  the  contrary,  the  mortgagor  of  real  property  has  the  right 
of  possession  thereof.^ 

44.  New  York.  —  Following  the  views  of  Lord  Mansfield,  the 
courts  of  New  York  from  the  first  regarded  a  mortgage  as  merely 
a  security  of  a  personal  nature  upon  the  land  of  the  mortgagor, 
who  retained  the  legal  title,  at  least  until  possession  taken.^  But 
prior  to  the  Revised  Statutes  of  1828,  the  title  of  the  mortgagee 
must  in  fact  have  been  something  not  very  different  from  the 
legal  estate,  for,  unless  prevented  by  the  terms  of  the  mortgage, 
he  had  the  right   to  recover  possession  of  the  property  b}'^  eject- 


1  Wade  V.  Miller,  32  N.  J.  L.  296; 
Schalk  V.  Kingsley,  42  N.  J.  L.  32,  35. 

-  Shields  v.  Lozear,  34  N.  J.  L.  496, 
per  Depue,  J.,  citing  Osborne  v.  Tunis,  1 
Dutch.  633,  651  ;  Montgomery  v.  Bruere, 
1  South.  260,  279,  per  Southard,  J.,  whose 
dissenting  opinion  was  adopted  in  the 
Court  of  Errors,  2  South.  865. 

The  case  of  Sanderson  v.  Price,  1  Zab. 
637,  646,  note,  is  referred  to  by  Depue,  J.^ 
in  Woodside  v.  Adams,  40  N.  J.  L.  417, 
422,  where  he  says  that  "this  decision, 
though  perhaps  not  satisfactory  to  the  pro- 
fession when  it  was  promulgated,  has  come 
to  be  regarded  as  settled  law  ;  and  it  may 
now  be  considered  the  established  doctrine 
of  the  courts  of  this  state  that  a  mortgage 
of  lands  is  not  a  common  law  convcy.ince 
on  condition,  but  a  mere  security  for  the 
mortgage  debt,  the  legal  estate  being  con- 
sidered as  subsisting  in  the  mortgagee 
only  for  that  purpose.  Tlie  consequence 
of  these  decisions  is  the  separation,  iu  legal 
contemplation,  of  the  estate  of  the  mort- 
gagor from  that  of  the  mortgagee,  and 
the  recognition  of  an  actual  and  distinct 
legal  estate  in  each.  Tiie  legal  estate  of 
the  mortgagee,  after  breach  of  condition, 
liaa  all  the  incidents  of  a  common  law 
title,  for  the  purposes  of  an  action  of 
ejectment;  but  its  existence  is,  neverthe- 
less, regarded  as  compatible  with  a  Icga 


estate  at  the  same  time  in  the  mortgagor. 
This  legal  estate  of  the  mortgagor  is  ca- 
pable of  conveyance,  mortgage,  or  a  sale 
under  execution  against  him,  at  any  time 
before  his  estate  is  divested  by  foreclos- 
ure. 

"  The  cases  clearly  recognize  the  equity 
of  redemption  of  a  mortgagor  as  a  legal 
estate,  and  as  such  it  must  subsist  until 
extinguished  in  the  manner  in  which  legal 
estates  are  by  law  extinguishable.  Entry 
on  the  mortgaged  premises  does  not  work 
an  extinguishment.  It  merely  operates 
to  transfer  the  possession  to  the  mort- 
gagee with  all  the  rights  that  actual  pos- 
session confers,  leaving  the  ultimate  rights 
of  the  parties  unaffected." 

3  Comp.  Laws  1884,  §  1593. 

^  Waters  v.  Stewart,  1  Caiues  Cas.  47, 
per  Kent,  J.;  Jackson  v.  Willard,  4 
Johns.  41  ;  llunyau  v.  Merserean,  11  lb. 
534 ;  Packer  v.  llochcster  &  Syracuse 
R.  11.  Co.  17  N.  Y.  283 ;  Power  v.  Lester, 
23  N.  Y.  527 ;  Merritt  v.  Bartholick,  36 
N.  Y.  44;  Trimm  v.  Marsh,  54  N.  Y. 
599;  Bryan  v.  Butts,  27  Barb.  503; 
Calkins  v.  Calkins,  3  lb.  305 ;  Stanard  v. 
Ehlridge,  16  Johns.  254  ;  Jackson  v  Bron- 
son,  19  lb.  325  ;  Astor  v.  Hoyt,  5  Wend. 
603 ;  S.  C.  2  Paige,  68 ;  Bell  v.  Mayor  of 
New  York,  10  Paige,  49;  Kartright  v. 
Cady,  21  N.  Y.  343. 

81 


§§  45,  46.]  THE  NATURE   OF  A  MORTGAGE 

ment,  and  after  default  he  could  so  recover  it  at  any  time.^  This 
right  was  taken  away  then,  and  so  far  as  possession  before  fore- 
closure is  concerned,  his  only  right  is  to  retain  possession  when 
he  has  once  obtained  it  by  the  mortgagor's  consent.^  It  is  said 
that  he  does  not,  however,  acquire  any  estate  from  his  posses- 
sion^. 

45.  In  North  Carolina  upon  the  execution  of  a  mortgage  the 
mortgagor  becomes  the  equitable,  and  the  mortgagee  the  legal, 
owner,  and  this  relative  situation  remains  until  the  mortgage  is 
redeemed  or  foreclosed.  Until  the  day  of  redemption  is  passed 
the  mortgagor  has  no  special  equity,  but  he  may  pay  the  money 
according  to  the  proviso,  and  avoid  the  conveyance  at  law ;  and 
this  privilege  is  termed  his  legal  right  of  redemption.* 

After  the  special  day  of  payment  has  passed,  the  mortgagor 
still  has  an  equity  of  redemption  until  there  is  a  foreclosure,  and 
this  right  is  regarded  as  a  continuance  of  the  old  estate  ;  and  so 
long  as  he  is  permitted  to  remain  in  possession,  he  is  considered 
to  hold  by  virtue  of  his  ownership,  and  is  not  accountable  for  the 
rents  and  profits  of  the  mortgaged  lands.  If  the  mortgagor  be 
allowed  to  remain  in  possession  for  a  long  period  by  the  acquies- 
cence and  implied  approval  of  the  mortgagee,  he  is  not  a  tres- 
passer ;  and  although  he  may  not  be  a  tenant,  he  is  a  permissive 
occupant,  and  as  such  is  entitled  to  a  reasonable  demand  to  ter- 
minate the  implied  license  before  an  action  can  be  brought  to  re- 
cover possession.^ 

The  mortgagee,  after  forfeiture,  may  recover  the  land  in  an 
action  at  law  by  virtue  of  his  title  as  mortgagee.^ 

46.  In  Ohio  a  mortgagee  is  regarded  as  holding  the  legal  title 
to  the  estate  during  the  continuance  of  the  mortgage,  but  neither 
in  a  court  of  law  nor  of  equity  is  he  permitted  to  use  this  legal 
title  except  for  the   purpose    of  making  effectual  the  security.'^ 

1  Jackson  v.  Dubois,  4  Johns.  216.  jurors.     He  has  not  any  legal  estate,  but 

2  2  R.  S.  312,  §  57 ;  Waring  v.  Smyth,  the  act  does  not  provide  that  he  shall  be  a 
2  Barb.  Ch.  119,  1.35.  The  mortgagee  legal  freeholder;  that  he  is  an  equitable 
cannot  maintain  an  action  to  recover  the  freeholder  is  sufiicient.  State  v.  Ragland, 
mortgaged  premises.    Code  of  Civil  Pro-  75  N.  C.  12. 

cedure,  1880,  §  1498.  ^  Hemphill  v.  Hoss,  supra. 

3  Parker  v.  Rochester  &  Syracuse  R.  R.  ^  Wittkowski  v.  Watkins,  84  N.  C.  456. 
Co.  17  N.  Y.  283,  295.     See  §  13.  '  Harkrader  v.  Leiby,  4  Ohio  St.  602. 

*  Hemphill  v.  Ross,  66  N.  C.  477  ;  and-  "But  it  is  incorrect  to  say  that  a  mort- 

see  Ellis  v.   Hussey,   66  N.   C.   501.    A  gage  does  no  more  than  to  create  a  mere 

mortgagor  in  possession   is   a  freeholder  lien  upon  the  property,"    Per  Ranney,  J. 
within  the  meaning  of  an  act  relating  to 

32 


IN   THE  DIFFERENT  STATES.  [§§   47-49. 

The  legal  title  as  between  the  parties  is  held  to  be  in  the  mort- 
gagee. As  to  all  the  world  beside,  it  is  in  the  mortgagor.  After 
condition  broken,  the  mortgagee  may  recover  possession  by  an 
action  of  ejectment.^ 

47.  By  statute  in  Oregon  a  mortgagor  cannot  against  his  will 
be  divested  of  possession  of  the  mortgaged  premises,  even  upon 
default,  without  a  foreclosure  and  sale.^  But  if  a  mortgagor 
choose,  he  can  give  possession  to  the  mortgagee,  and  when  this  is 
done,  and  the  duration  of  the  mortgagee's  possession  is  not  lim- 
ited by  agreement,  the  latter  may  retain  possession  until  the  debt 
is  paid ;  and  until  it  be  paid  the  mortgagor  cannot  recover  pos- 
session by  an  action  of  ejectment.^ 

48.  In  Pennsylvania  a  mortgage  passes  to  the  mortgagee  the 
title  and  right  of  possession  to  hold  till  payment  be  made.  He 
may  enter  at  pleasure,  and  take  actual  possession.  His  estate  is 
conditional,  and  ceases  upon  payment  of  the  debt;  but  until  the 
condition  is  performed,  both  his  title  and  his  right  of  possession 
are  as  substantial  and  real  as  though  they  were  absolute.*  As 
between  the  parties,  the  mortgage  transmits  the  legal  title  to  the 
mortgagee,  and  leaves  the  mortgagor  only  a  right  to  redeem.  As 
to  all  others,  the  mortgage  is  a  lien  merely  and  not  an  estate. 
This  is  the  view  taken  both  in  courts  of  equity  and  courts  of  law.^ 
It  is  well  settled  that  a  mortgagee  or  his  assignee  may  maintain 
ejectment  and  recover  possession  of  the  mortgaged  property  be- 
fore the  condition  is  broken,  unless  there  be  a  stipulation  in  the 
instrument  to  the  contrary.^ 

49.  Rhode  Island.  —  The  common  law  doctrine  of  the  nature 

1  Allen  V.  Everly,  24  Ohio  St.  97,  114;  gal  remedy  to  enforce  the  right.  But  a 
Kands  v.  Kendall,  1.5  Ohio,  671.  lien  vests  no  estate  and  is  a  mere  incident 

2  Annot.  Laws  1887,  p.  383,  §  326  ;  Bes-  of  the  debt,  to  be  enforced  by  a  remedy  at 
ser  V.  Hawthorn,  3  Orcg.  129;  Anderson  v.  law,  which  may  be  limited.  It  is  true,  if 
Baxter,  4  Oreg.  110;  Semple  v.  Bank  of  the  mortgagee  be  held  out,  he  may  have 
Britisli  Columbia,  .5  Sawyer,  88 ;  S.  C.  lb.  to  resort  to  ejectment,  but  this  is  to  avoid 
394  ;  Witherell  i'.  Wiberg,  4  Sawyer,  232.  a  conflict  and  the  statutory  penalties  for 

2  Roberts  v.  Sutherlin,  4  Oreg.  219.  forcible  entry,  for  otherwise  he  may  take 
*  "  Thus  we  perceive,"  says  Chief  Jus-  peaceable  possession,  and  is  not  liable  as 
ticc  Agncw  in  a  recent  case,  "  an  interest  a  trespasser."  Tryon  v.  Rlunson,  77  Pa. 
or  estate  in  the  land  itself,  capable  of  en-  St.  250;  and  see  numerous  cases  in  that 
joyment,  and  enabling  the  mortgagee  to  state  cited  by  tlio  learned  judge  in  sup- 
grasp  and  hold  it  actually,  and  not  a  port,  and  in  illustration,  of  this  doctrine, 
mere  lien  or  potentiality,  to  follow  it  by  ^  Brobst  v.  Brock,  10  Wall.  519. 
legal  process  and  condemn  it  for  payment.  ^  Youngnian  v.  Elmira  &  Williams- 
The  land  passes  to  the  mortgagee  by  the  port  K.  R.  Co.  65  Pa.  St.  278,  285,  and 
act  of  the  party  himself,  and  needs  no  le-  cases  cited. 

VOL.  I.  3  33 


§§  50-53.]  THE  NATURE   OF  A   MORTGAGE 

of  mortgages  prevails  in  this  state.  The  mortgagee  may  recover 
possession  by  suit  at  law.  Upon  any  breach  of  the  condition, 
such  as  the  non-payment  of  interest,  the  mortgagee  may  maintain 
ejectment,  though  the  principal  sum  be  not  due.^  The  mort- 
gagee's remedy  for  waste  done  by  the  mortgagor,  when  a  writ  of 
estrepement  will  not  lie,  is  usually  to  be  sought  in  equity ;  but 
it  is  a  wrong  at  law  also,  and  therefore  a  mortgagee  may  main- 
tain against  a  mortgagor  an  action  of  replevin  for  wood  and  tim- 
ber cut  on  the  land  in  waste  of  the  same.^ 

50.  South  Carolina.  Since  the  act  of  1791  a  mortgage  has 
not  been  a  conveyance  of  any  estate,  but  simply  a  lien  to  secure 
the  payment  of  a  debt.^  It  is  provided  that  the  mortgagee  shall 
not  be  entitled  to  maintain  any  possessory  action  for  the  mort- 
gaged estate  even  after  the  mortgage  is  due,  but  that  the  mort- 
gagor shall  still  be  deemed  the  owner  of  the  land  and  the 
mortgagee  the  owner  of  the  money  lent  or  due.* 

51.  In  Tennessee  the  legal  title  vests  in  the  mortgagee,  who 
is  entitled  to  immediate  possession,  unless  the  mortgage  otherwise 
provides.  He  may  recover  possession  without  first  giving  notice 
to  quit.^ 

52.  Texas.  —  A  mortgage  is  but  a  security,  and  the  title  re- 
mains in  the  mortgagor,  subject  to  be  divested  by  foreclosure. 
In  this  respect  a  deed  of  trust  is  held  not  to  differ  from  a  mort- 
gage ;  the  legal  title  and  right  of  possession  remain  with  the 
grantor.^ 

63.    Utah  Territory.  —  It  is  provided  that  a  mortgage  shall 

1  Carpenter  v.  Carpenter,  6  R.  I.  542  ;  er  rights  over  the  mortgaged  estate  than 

Waterman  v.  Matteson,  4  R.  I.  539,  545.  courts  of  equity  do." 

"  Formerly,"  says  Chief   Justice  Ames,  ^  "Waterman  v.  Matteson,  supra ;  §  688. 

"  the  right  of  the  mortgagor  was,  upon  ^  Navassa  Guano  Co.  v.  Richardson,  2 

breach  of  the  condition  of  the  mortgage,  S.  E  Rep.  307;  Simons  v.  Bryce,  10  S.  C. 

wholly  gone  at  law;  and  his  equity  to  re-  354  ;  Warren  v.  Raymond,  12  S.  C.  9. 

deem  was  recognized  only  by  the  tribunal  *  R.  S.  1873,  p.  536;    G.   S.   1882,   § 

able  to  enforce  such  a  right.    It  is  true  2299;  Thayer  v.  Cramer,  1  McCord  Ch. 

that  in  modern  times  the  courts  of  law  395;    Nixon   v.   Bynum,   1    Bailey,    148; 

have,  for  many  purposes,  treated  the  mort-  Hughes  v.  Edwards,  9  Wheat.  489  ;  In  re 

gagor  in  possession  as  the  real  owner  of  Bennett,  2  Hughes,  156,  158;  Williams  v. 

the  estate,  looking  upon  a  mortgage  in  Beard,  1  S.  C.  309. 

the  same  light  that  a  court  of  equity  does,  ^  Henshaw  v.  Wells,  9  Humph.    568  ; 

as  a  mere  security  for  the  mortgage  debt;  Vance  v.  Johnson,  10  lb.  214. 

but  we  can  see  no  reason  why  such  courts  6  Wright  [v.  Henderson,   12   Tex.   43  ; 

should  recognize  in  a  mortgagor  in  pos-  Walker  v,  Johnson,  37  lb.  127,  129  ;  Mann 

session  under  a  forfeited  mortgage  great-  v.  Falcon,  25  Tex.  271. 

34 


IN   THE   DIFFERENT   STATES.  [§§  54-57. 

not  be  deemed  a  conveyance,  so  as  to  entitle  the  mortgagee  to 
recover  possession  witLout  foreclosure.^ 

54.  In  Vermont  the  mortgagor's  right  of  possession  is  by  stat- 
ute continued  as  against  the  mortgagee  until  condition  broken, 
unless  otherwise  stipulated  in  the  mortgage.^  Upon  the  happen- 
ing of  that  event  the  interest  of  the  mortgagor  becomes  abso- 
lutely vested  in  the  mortgagee,  and  he  has  a  right  to  the  im- 
mediate possession  of  the  estate.^  He  may  assert  this  right  by 
entering  peaceably  by  his  own  act,  or  may  bring  an  action  of 
ejectment  without  previous  notice  to  quit.  Until  he  asserts  this 
right,  the  mortgagor  in  possession  is  regarded  as  the  owner  of 
the  land,  and  may  use  and  occupy  it  without  accounting  to  the 
mortgagee.* 

65.  Virginia.  —  At  law,  the  mortgagee  has  the  legal  estate, 
and  the  immediate  right  of  possession,  unless  there  be  some  stip- 
ulation in  the  mortgage  deed  to  the  contrary.  Upon  a  breach  of 
the  condition,  the  mortgagee  may  enter,  or  recover  possession  by 
action  without  previous  notice.  He  is  then,  to  all  intents  and 
purposes,  the  legal  owner  of  the  land,  and  vested  with  full  legal 
title.  The  mortgagor  is  then  regarded  as  a  tenant  at  sufferance, 
and  is  not  entitled  to  the  emblements.  In  equity,  however,  the 
mortgagor  may  redeem,  and  the  mortgagee  in  possession  is  re- 
garded as  merely  a  trustee  of  the  property,  with  liability  to  ac- 
count.'^ Trust  deeds  are  used  almost  exclusively  in  place  of  mort- 
gages, and  the  legal  title  vests  in  the  grantee  in  such  deeds. 

55  a.  Washington  Territory.^  —  A  mortgage  of  real  property 
is  not  deemed  a  conveyance  so  as  to  enable  the  owner  of  the 
mortgage  to  recover  possession  of  the  real  property  without  a 
foreclosure  and  sale  according  to  law. 

66.  West  Virginia.  —  Trust  deeds  are  used  in  place  of  mort- 
gages. The  law  in  regard  to  mortgages  is  that  which  prevailed 
in  Virginia  before  the  separation. 

67.  In  Wisconsin  the  fee  of  the  premises  does  not  vest  in  the 
mortgagee,  except  upon  foreclosure  sale.^  It  is  provided  by  stat- 
ute that  no  action  shall  be  maintained  by  the  mortgagee  for  the 

1  CivilPractice  Act  1870,  §  260;  Com-  son  v.  Hooper,  13  Vt.  653;  Walker  v. 
piled  Laws  1876,  p.  478.  King-,  44  Vt.  GOl. 

2  K.  Laws  1880,  §  1258.  6  2  Minor's  Institutes,  300-330;  Faulk- 
'  Ilagar  v.  Brainerd,  44  Vt.  294  ;  Lull     ner  v.  Brockcnbrouffh,  4  Kand.  245. 

V.  Matthews,  19  Vt.  322.  0  Code  1881,  §  546. 

♦  Hooper  v.  WIIhoii,  12  Vt.  695;   Wil-        ^  Wood  v.  Trask,7  Wis.  566;  Schreiber 

V.  Carey,  48  Wis.  208. 
35 


§  58.]  THE  NATURE   OF   A  MORTGAGE 

recovery  of  possession  of  the  mortgaged  premises  until  the  equity 
of  redemption  shall  have  expired.^  The  statute  in  effect  pre- 
serves the  fee  in  the  mortgagor  until  foreclosure,^  when  it  vests 
in  the  purchaser  at  the  sale.  When,  however,  the  mortgagee 
has,  after  default,  gone  into  peaceable  possession,  he  cannot  be 
ejected  by  the  mortgagor  while  the  mortgage  remains  unsatisfied. 
The  only  remedy  of  the  mortgagor  is  by  bill  to  redeem,  under 
which  he  must  pay  whatever  is  due  upon  the  mortgage  debt.^ 

58.  As  a  summary  of  this  examination  it  will  be  found  that 
in  Alabama,  Arkansas,  Connecticut,  Illinois,  Maine,  Maryland, 
Massachusetts,  New  Hampshire,  New  Jersey,  North  Carolina, 
Ohio,  Pennsylvania,  Rhode  Island,  Tennessee,  Vermont,  Virginia, 
and  West  Virginia,  the  courts  have  adhered  to  the  doctrines  of 
the  common  law  as  regards  the  nature  of  the  mortgage  interest 
and  the  respective  rights  of  the  parties.  They  regard  the  mort- 
gage deed  as  passing  at  once  the  legal  title  to  the  mortgagee,  sub- 
ject to  defeasance,  as  a  condition  subsequent  which  divests  or  de- 
feats the  estate  on  performance  of  it.  The  right  of  possession 
follows  the  title  so  that  the  mortgagee  may  enter  into  possession 
of  the  mortgaged  property  immediately  unless  restrained  by  ex- 
press provision,  or  necessary  implication,  of  the  mortgage ;  and  in 
any  case  upon  breach  of  the  condition  he  becomes  entitled  to  the 
possession  and  may  recover  it  by  action. 

In  Delaware,  Mississippi,  and  Missouri  the  common  law  doc- 
trine is  so  far  modified,  that  until  breach  of  the  condition  and 
possession  taken  the  mortgagor  is  regarded  as  the  owner  of  the 
legal  estate,  not  only  as  against  third  persons,  but  as  against  the 
mortgagee  himself.  But  upon  forfeiture  and  entry  of  the  mort- 
gagee, he  is  regarded  as  having  the  legal  title  for  the  purpose  of 
enforcing  his  demand  and  obtaining  satisfaction  out  of  the  prop- 
erty. 

In  other  states  the  common  law  doctrine  upon  this  subject  has 
been  wholly  abrogated  by  statute,  and  both  at  law  and  in  equity, 
and  both  before  and  after  a  breach  of  the  condition,  a  mortgage 
is  regarded  as  merely  a  lien  upon  the  property.  It  passes  no  title 
or  estate  in  it  to  the  mortgagee,  and  gives  him  no  right  of  posses- 

1  E.  S.  1878,  §  3095.  Stark  r.  Brown,  12  "VVis.  572;   Roche  v. 

2  Wood  V.  Trask,  7  Wis.  566.  Knight,  21  Wis.  324  ;  Schreiber  v.  Carey, 

3  Heunesy  v.  Farrell,  20  Wis.  42  ;  Tall-  48  Wis.  208,  214 ;  Wisconsin  Cent.  R.  R. 
man  v.  Ely,  6  Wis.  244 ;  Gillett  v.  Eaton,  Co.  v.  Wisconsin  River  Land  Co.  36  N. 
6  Wis.  30;    Fladland   v.   Delaplaine,    19  W.  Rep.  837,  839. 

Wis.  459 ;  Avery  v.  Judd,  21   Wis.  262 ; 
36 


IN  THE  DIFFERENT   STATES.  [§  59. 

sion  before  foreclosure.  This  is  the  doctrine  of  mortgages  in  Cali- 
fornia, Dakota  Territory,  Florida,  Georgia,  Indiana,  Iowa,  Kan- 
sas, Kentucky,  Louisiana,  Michigan,  Minnesota,  Montana  Terri- 
tory, Nebraska,  Nevada,  New  Mexico  Territory,  New  York, 
Oregon,  South  Carolina,  Texas,  Utah  Territory,  Washington  Ter- 
ritory, and  Wisconsin.  In  Iowa,  Kansas,  and  Nevada  the  statutes 
imply  that  the  parties  may  by  express  stipulation  give  the  right 
of  possession  to  the  mortgagee. 

69.  Grouping  the  states  geographically,  it  will  be  noticed 
that  the  English  doctrine  of  the  nature  of  mortgages,  with  slight 
modifications,  prevails  east  of  the  Mississippi  River  in  a  large 
majority  of  the  states ;  while  west  of  the  Mississippi,  except  only 
in  the  states  of  Missouri  and  Arkansas,  the  doctrine  everywhere 
prevails  that  a  mortgage  passes  no  estate  or  right  of  possession. 
This  change  from  the  common  law  rule  may  be  traced  to  two 
sources :  to  the  views  of  the  early  jurists  of  New  York,  who 
adopted  and  carried  to  logical  conclusions  the  opinions  of  Lord 
Mansfield;  and  to  the  civil  law^  established  in  Louisiana,  under 
which  a  mortgage  is  merely  a  pledge,  giving  no  right  of  posses- 
sion. The  influence  of  the  civil  law  is  seen  in  the  codes  of  a  few 
states ;  but  the  most  potent  influence  in  bringing  about  this 
change  in  the  nature  of  mortgages  in  the  new  states  and  terri- 
tories has  come  from  their  adoption  to  a  large  extent  of  the  Code 
and  judicial  authorities  of  the  State  of  New  York.  As  to  the 
nature  of  a  mortgage,  the  civil  law  doctrine,  and  what  may  be 
called  the  equitable  doctrine  adopted  in  New  York  and  the  other 
states  mentioned,  are  practically  and  essentially  the  same. 

1  "  In  the  Roman  law  there  were  two  applied  to  movables  or  immovables,  .  ,  . 

sorts  of  transfers  of  property,  as  security  so  that  it  answered  very  nearly  to  tlie  cor- 

for  debts :  namely,  the  pignus  and  the  hij-  responding  term  pledge   in   the   common 

potheca.     The  pignus,  or  pledge,  was  when  law,  wJiich,  although   sometimes  used   in 

anything   was    ])ledged   as  a  security  for  a  general  sense  to   include  mortgages  of 

money  lent  and  the  possession  thereof  was  land,  is,  in  the  stricter  sense,  confined  to 

passed  to  the  creditor,  upon  the  condition  the  pawn  and   deposit  of  personal  prop- 

of  returning   it   to   the  owner  when  the  erty.     In  the  Ronnm  law,  however,  there 

debt  was  paid.     The  hy potheca  was  when  was  generally  no  substaniial  difference,  in 

the  thing  pledged  was  not  delivered  to  the  the  nature  and  extent  of  the  rights  and 

creditor,  but  remained  in  the  possession  of  remedies  of  the  parties,  between  movables 

the  debtor.  ...  It  seems  that  the  word  and  immovables,  whether  pledged  or  hy- 

pignus  was  often  used  indiscriminately  to  potliecated."     2  Story  Eq.  Jur.  §§   1005, 

describe  both  species  of  securities,  whether  1006. 

37 


CHAPTER  11. 


FORM  AND   REQUISITES   OF  A  MORTGAGE. 


I.  The  form  generally,  60-62. 
II.  The  formal  parts  of  the  deed,  63-68. 

III.  The  condition,  69-78. 

IV.  Special  stipulations,  79,  80. 


V.  Execution  and  delivery,  81-89. 
VI.  Filling  blanks,    making   alterations, 
and  reforming,  90-101. 


I.   The  Form  Generally. 

60.  No  particular  form  is  necessary  to  constitute  a  mort- 
gage.^ It  must  be  in  writing,^  and  must  clearly  indicate  the 
creation  of  a  lien,  specify  the  debt  to  secure  which  it  is  given, 
and  the  property  upon  which  it  is  to  take  effect.^  Fulfilling  these 
conditions,  it  is  immaterial  that  the  mortgage  should  be  embraced 
in  one  instrument.  As  will  be  elsewhere  noticed,  a  mortgage  is 
frequently  made  by  an  absolute  deed  with  a  separate  defeasance 
executed  by  the  grantee  ;  and  an  absolute  deed  with  a  defeasance 
resting  in  parol  may  be  a  mortgage  also.  In  this  chapter,  how- 
ever, it  is  proposed  to  treat  of  the  form  and  requisites  of  a  formal 
legal  mortgage,  or  deed  of  trust. 

The  term  "  mortgage  "  has  a  technical  signification  at  law,  and 
is  descriptive  of  an  instrument  having  all  the  requisites  necessary 
to  establish  it  in  a  court  of  law,  as  distinguished  from  that  which 
may  be  so  regarded  in  a  court  of  equity.*  A  mortgage  which 
only  a  court  of  equity  will  recognize  is  properly  designated  an 
"  equitable  mortgage." 

A  formal  mortgage  differs  from  a  warranty  deed  in  a  condi- 
tion added,  that  if  the  grantor  pay  a  certain  sum  of  monej',  or  per- 
form other  obligations  named,  then  it  shall  be  void.  Other  things 
besides  the  payment  of  the  principal  sum  of  money  are  usually 


1  Georgia  Code  1882,  §  1955  ;  Burnside 
V.  Terry,  45  Ga.  621 ;  De  Leon  v.  Higuera, 
15  Cal.  483  ;  Woodworth  v.  Guzman,  1 
Cal.  203  ;  Baldwin  v.  Jenkins,  23  Miss. 
206 ;  Mason  v.  Moody,  26  Miss.  1 84. 

38 


Quoted  with  approval  in  Harris  v.  Jones, 
83  N.  C.  317,  321. 

2  Porter  v.  Muller,  53  Cal.  677. 

8  New  Orleans  Nat.  Banking  Asso.  v. 
Adams,  109  U.  S.  211. 

*  Walton  V.  Cody,  1  Wis.  420. 


THE   FORM   GENERALLY.  §  61.] 

made  part  of  the  condition,  as  for  instance  the  payment  of  inter- 
est, of  taxes  upon  the  premises,  of  insurance  upon  any  buildings 
there  may  be  upon  the  land,  together  with  a  covenant  against 
making  or  suffering  waste. 

A  mortgage  in  some  states  usually  contains  also  a  power  au- 
thorizing the  mortgagee  to  sell  upon  the  happening  of  any  breach 
of  the  condition  ;  but  this  is  not  an  essential  requisite  of  a  mort- 
gage, and  will  be  treated  of  elsewhere. 

61.  Statutory  forms.  —  The  form  of  the  granting  part  of  the 
deed  as  well  as  the  condition  differs  much  in  different  parts  of  the 
country.  In  some  states  statutes  have  been  enacted  by  which 
deeds  and  mortgages  are  reduced  to  the  shortest  possible  forms ; 
and  statutory  forms  are  given  in  some  states,  which  are  declared 
to  be  good  and  effectual.i  All  that  is  requisite  to  a  good  deed 
or  mortgage  may  be  expressed  in  a  very  few  words.  It  was  re- 
marked by  Coke,  that  if  a  deed  of  feoffment  be  without  premises^ 
habendum^  tenendum^  reddendum,  clause  of  warranty,  etc.,  it  is 
still  a  good  deed.  "  For  if  a  man  by  deed  give  land  to  another 
and  to  his  heirs  without  more  saying,  this  is  good,  if  he  put  his 
seal  to  the  deed,  deliver  it,  and  make  livery  accordingly."  ^ 

By  statute  the  legal  tenor  and  effect  of  the  different  covenants 
may  be,  and  in  some  states  are,  obtained  simply  by  naming  them 
without  repeating  the  covenants  themselves.  In  like  manner  the 
full  effect  of  a  power  of  sale  may  be  had  by  simple  reference  in 
the  mortgage  to  a  statutory  power,^  instead  of  cumbering  the 
record  with  the  elaborate  powers  now  in  use.     Attempts  by  legis- 

^  Such  forms  exist  iu  Illinois,  Annot.  insignificance  of  appearance  for  a  convey- 

Stat.  ch.  30,  §  12;  Indiana,  1  Kev.  1876,  ance  surrounded   by  the  usual  outworks, 

364,  §  15;  Iowa,  R.  Code  1880,  §  1970;  and  securing  respect  and  checking  attacks 

Maryland,  Code  1860,  p.  143 ;  Mississippi,  by  the  formality  of  its  manner,  the  prolix- 

R.  Code  1880,  §  1236;  R.  Code  1878,  p.  ity  of  its  provisions,  and  the  usual  redun- 

393;   Missouri,  R.  S.  1879,  p.  721;  Ten-  dancy  of  its   language."     4  Kent   Com. 

nessee.   Code   1884,   §  2820;    California,  461.    He  further  says :"  I  apprehend  that 

Civil  Code  1872,  §  2948;    Dakota  Terri-  a  deed  would  be  perfectly  competent,  in 

tory.  Code  1883,  §  1736.  any  part  of  the  United  States,  to  convey 

2  Chancellor   Kent   gives   a   very  brief  the  fee,  if  it  was  to  be  to  the  following 

form  of  a  deed,  and  observes  :  "  But  per-  effect :  I,  A.  B.,  in  consideration   of  one 

sons  usually  attach  so  much  importance  dollar  to  me   paid  by  C.  D.,  do  bargain 

to  the  solemnity  of  forms,  which  bespeak  and  sell  (or,  in  New  York,  grant)  to  C.  D. 

care  and  reflection,  and  they  feel  such  deep  and  his  heirs  (in  New  York,  Virginia,  etc., 

solicrtude  in    matters    that  concern    their  the  words,  and  his  heirs,  may  be  omitted), 

valuable    interests,   to   make    'assurance  the  lot  of  land  [describe  it].     Witness  ray 

double  sure.'  that  generally,  in  important  hand  and  seal,"  etc. 

cases,   the  purchaser  would   rather  be  at  »  See  §§  1722,  1761. 
the  expense  of  exchanging  a  paper  of  such 

39 


§  62.]  FORM   AND   REQUISITES   OF  A   MORTGAGE. 

lation  to  bring  about  simplicity  and  brevity  in  legal  forms  have 
not  always  been  successful ;  but  much  has  been  accomplished  in 
this  direction  in  some  of  the  American  States,  making  a  practical 
return  through  this  means  to  the  simplicity  of  the  ancient  Saxons, 
who  "in  their  deeds  observed  no  set  form,  but  used  honest  and 
perspicuous  words  to  express  the  things  intended  with  all  brevity, 
yet  not  wanting  the  essential  parts  of  the  deed :  as  the  names 
of  the  donor  and  donee  ;  the  consideration  ;  the  certainty  of  the 
thing  given  ;  the  limitation  of  the  estate ;  the  reservation,  and 
the  names  of  the  witnesses."  ^ 

62.  A  deed  of  trust  to  secure  a  debt  is  in  legal  effect  a  mort- 
gage.2  It  is  a  conveyance  made  to  a  person  other  than  the  cred- 
itor, conditioned  to  be  void  if  the  debt  be  paid  at  a  certain  time, 
but  if  not  paid  that  the  grantee  may  sell  the  land  and  apply  the 
proceeds  to  the  extinguishment  of  the  debt,  paying  over  the  sur- 
plus to  the  grantor.3  The  addition  of  the  power  of  sale  does  not 
change  the  character  of  the  instrument  any  more  than  it  does 
when  contained  in  a  mortgage.*  Such  a  deed  has  all  the  essential 
elements  of  a  mortgage;  it  is  a  conveyance  of  land  as  security 
for  a  debt.  It  passes  the  legal  title  to  the  grantee  just  as  a  mort- 
gage does,  except  in  those  states  where  the  natural  ejEfect  of  a 
conveyance  is  controlled  by  statute  ;  ^  and  in  states  where  a  mort- 
gage is  considered  merely  as  a  security,  and  not  a  conveyance,  a 
trust  deed  is  apt  to  be  regarded  in  this  respect  just  like  a  mort- 
gage.*^ Both  instruments  convey  a  defeasible  title  only  ;  and  the 
right  to  redeem  is  the  same  in  one  case  as  it  is  in  the  other.  The 
only  important  difference  between  them  is,  that  in  the  one  case 
the  conveyance  is  directly  to  the  creditor,  while  in  the  other  it  is 
to  a  third  person  for  his  benefit. 

In  Wisconsin,  however,  in  consequence  of  a  statute  abolishing 

1  Sir  Henry  Spellman's  Works,  by  SpragueManuf.  Co.  14  E.  I.  464;  De  Wolf 
Bishop  Gibson,  p.  234.  v.  Sprague  Manuf.  Co.  49  Conn.  283.    See 

2  Eaton   V.   Whiting,   3   Pick.    (Mass.)     §  1769. 


484;  Woodruff  v.  Robb,  19  Ohio,  212 
Sargent  v.  Howe,  21  III.  148  ;  Newman  r 
Samuels,  17  Iowa,  528,  535  ;  Lawrence  v. 
Farmers'  Loan  &  Trust  Co.  13  N.  Y.  200 


3  State  Bank  of  Bay  City  v.  Chapelle, 
40  Mich.  447  ;  Austin  v.  Sprague  Manuf. 
Co.  supra. 

4  Eaton   V.  Whiting,  supra  ;  Newman 


Palmer  v.  Gurnsey,  7  Wend.  (N.  Y.)  248;  v.  Samuels,  supra;  De  Wolf  v.  Sprague 

Turner  v.  Watkins,  31  Ark.  429;  Hurley  Manuf.  Co.  supra. 

V.  Estes,  6  Neb.   386;  Chafee  v.  Fourth  ^  Turner  f.  Watkins,  s(</>ra. 

Nat.   Bank,   71    Me.  514;    Stafford   Nat.  6  As   in  Kansas:   Lenox   v.   Reed,    12 

Bank  v.  Sprague,  17  Fed.  Eep.  784 ;  Union  Kans.  223,  227  ;  in  Nebraska :  §  40.     See, 

Co.  V.  Sprague,  14  R.  I.  452 ;  Austin  v.  however,  §  25,  as  to  Florida. 

40 


THE  FORMAL  PARTS   OF   THE   DEED.  [§  63. 

uses  and  trusts,  except  for  certain  purposes,  a  deed  to  a  trustee 
conditioned  that  if  the  grantor  does  not  pay  a  debt  due  from  him 
•to  a  third  party,  then  the  trustee  shall  advertise  and  sell  the 
lands,  pay  the  debt,  and  return  the  surplus  money  to  the  grantor, 
does  not  constitute  a  mortgage.  The  trustee  is  the  mere  agent 
of  both  parties,  and  such  a  trust  being  prohibited  by  the  statute 
the  legal  title  remains  in  the  grantor.^ 

Again,  there  is  a  well  settled  distinction  between  a  deed  of 
trust  and  a  deed  of  trust  in  the  nature  of  a  mortgage  ;  the  one 
being  for  the  trust  purposes  unconditional  and  indefeasible,  while 
the  other  is  conditioned  and  defeasible,  in  the  same  way  that  a 
mortgage  is.^  The  term  "  deed  of  trust,"  however,  as  used  in  this 
treatise,  has  reference  always  to  a  conveyance  in  the  nature  of  a 
mortgage.  "  A  deed  conveying  land  to  a  trustee  as  mere  collat- 
eral security  for  the  payment  of  a  debt,  with  the  condition  that 
it  shall  become  void  on  the  payment  of  the  debt  when  due,  and 
with  power  to  the  trustee  to  sell  the  land  and  pay  the  debt  in 
case  of  default  on  tlie  part  of  the  debtor,  is  a  deed  of  trust  in  the 
nature  of  a  mortgage.  By  an  absolute  deed  of  trust,  the  grantor 
parts  absolutely  with  the  title,  which  rests  in  the  grantee  uncon 
ditionally,  for  the  purpose  of  the  trust.  The  latter  is  a  convey- 
ance to  a  trustee  for  the  purpose  of  raising  a  fund  to  pay  debts  ; 
while  the  former  is  a  conveyance  in  trust  for  the  purpose  of  secur- 
ing a  debt,  subject  to  condition  of  defeasance."  ^ 

II.   The  Formal  Parts  of  the  Deed. 

63.  Parties  described.  —  It  is  important  that  the  names  of 
the  parties  to  a  deed  should  be  given  accurately  and  fully.  Per- 
sons accustomed  chiefly  to  commercial  transactions  and  forms 
sometimes  neglect  to  observe  this  requirement,  and  use  the  initial 
only  of  the  given  name,  and  thereby  needlessly  introduce  a  new 
element  of  confusion  and  uncertainty  into  the  record  title.  Parol 
evidence  is  admissible  to  show  who  was  really  intended  as  the 
grantee  in  a  deed  when  the  name  is  claimed  to  be  erroneous,  and 

'  Marvin  v.  Titswortli,  10  Wis.  320.  made  for  creditors  gencrjilly,  is  a  mort<;agc 

'^  Hoffman  v.  Mackall,  5  Ohio  St.  124;  witli  some  of  tlic  qualities  of  an  assij^n- 

Union  Co.  v.  Sprague,  14  11. 1.  452  ;  Fox  ment  superadded.      Baldwin  v.   Peet,  22 

V.  Fraser,  92  Ind.  265.  Tex.  718  ;  Jacicson  v.  llarby,  65  Tex.  710. 

In  Texas  it  is  said  that  a  deed  of  trust  In  this  state  the  legal  title  remains  in  the 

convej'ing  property  to  trustees,  made  to  mortgagor.     §  52. 

secure    particular    creditors,   though    ex-  ^  Per  Barilcy,  J.,  in  Hoffman  i;.  Mack- 
pressed  in  terms  sufiicicnt  to  pass  title  if  ail,  supra. 

41 


§  63.]  FORM   AND   REQUISITES   OF   A   MORTGAGE. 

there  is  a  person  of  the  name  used  in  the  deed.^  It  is  not  ab- 
sohitely  essential  to  the  validity  of  a  mortgage  that  a  mortgagee 
be  described  by  name,  if  there  be  such  other  description  as  will* 
distinguish  the  person  intended  from  all  others  ;  ^  as  for  instance 
when  the  mortgage  is  made  to  the  heirs  at  law  of  a  person  named 
who  has  deceased  ;  ^  but  it  would  be  void  if  made  to  the  heirs  of 
a  person  living,  because  it  is  then  uncertain  who  are  intended  to 
have  the  benefit  of  the  mortgage.^ 

But  a  mortgage  "  to  the  trustees  "  of  an  unincorporated  asso- 
ciation or  society  is  good,  although  the  trustees  be  not  named.^ 
It  is  suffixjient  if  they  are  so  clearly  described  as  to  distinguish 
them  from  all  others,  so  that  there  can  be  no  uncertainty  in  the 
grant. 

A  mortgage  to  a  corporation,  by  a  name  to  which  it  was  con- 
templated at  the  time  to  change  the  existing  name  of  the  com- 
pany, is  valid,  if  made  to  the  corporation  intended  and  it  was 
then  existing.  In  a  proceeding  upon  the  mortgage  it  should  be 
averred  that  the  mortgage  was  made  to  the  company  by  the  name 
used,  it  being  then  known  by  that  name,  as  well  as  by  the  name 
it  was  legally  entitled  to.** 

The  designation  of  "junior  "  or  "  second  "  is  no  part  of  a  man's 
name,  and  although  convenient  and  desirable  for  the  purpose  of 
distinguishing  the  party  from  another  person  of  the  same  name, 
it  is  not  essential,  and  the  person  intended  may  be  shown  in  some 
other  way.^  The  description  of  a  person  by  his  occupation  is  an 
addition  of  the  same  character,  though  of  less  importance,  be- 
cause the  terms  used  to  describe  the  occupation  are  so  general 
that  they  serve  but  little  practical  purpose  in  identifying  the 
person. 

When  a  party  to  the  mortgage  is  a  woman,  it  is  important,  if 
she  be  married,  to  give  her  husband's  name,  and  if  she  be  not 
married,  to  state  that  she  is  a  "  single  woman  "  or  a  "  widow." 

1  Thus  a  deed  to  "  Hiram  Gowing  "  ^  gj^aw  v.  Loud,  12  Mass.  447;  and  see 
was  shown  in  this  way  to  be  intended  for  Thomas  v.  Marshfield,  10  Pick.  (Mass.) 
"  Hiram  G.  Gowing,"  and  not  for  his  son,     364,  367. 

whose  name  was  "  Hiram  Gowing."    Pea-  *  Hall  v.  Leonard,  1  Pick.  (Mass.)  27, 

body?;.  Brown,  10  Gray  (Mass.),  45  ;  and  30. 

see  Scanlan  v.  "Wright,  13  Pick.  (Mass.)  °  Lawrence  v.  Fletcher,  8  Met.  (Mass.) 

523,  530.  153,  163. 

As  to  the  name  of  the  grantor  or  mort-  ^  cjty  Bank  of  Kenosha  v.  McClellan, 

gagor,  his  signature  fixes  the  actual  idea-  21  Wis.  112. 

tity  of  the  person.  "  Cobb  v.  Lucas,  15    Pick.  (Mass.)  7  ; 

2  Madden  v.  Flovd,  69  Ala.  221.  Kincaid  v.  Howe,  10  Mass.  203. 

42 


THE   FORMAL   PARTS   OF   THE  DEED.  [§§  64,  65. 

It  is  usual  and  desirable  to  state  the  place  of  residence  of  the 
parties  by  naming  not  merely  the  town  or  city  of  such  residence, 
but  the  county  and  state  as  well. 

64.  Generally,  the  consideration  named  in  a  mortgage  is  the 
actual  amount  of  the  debt  secured  by  it.  But  it  is  not  essential 
that  this  should  be  so.  A  nominal  consideration  named  is  suffi- 
cient, and  in  fact  it  is  not  essential  that  any  consideration  at  all 
should  be  expressed.^  It  is  never  conclusive  as  to  the  real  consid- 
eration.2  The  real  consideration  is  the  debt  or  obligation  which 
the  mortgage  is  given  to  secure,  and  upon  that  depends  the  valid- 
ity of  the  mortgage,  so  far  as  the  consideration  is  concerned.  The 
seal  implies  a  consideration. 

The  amount  of  the  debt  secured  is  in  no  way  fixed  or  con- 
trolled by  the  nominal  consideration.  The  condition  of  the  mort- 
gage describes  the  debt  and  fixes  the  amount  of  it  either  specifi- 
cally or  in  general  terms.^  A  mortgage  to  indemnify  against  a 
liability,  or  to  secure  future  advances,  is  generally  of  the  latter 
description,  but  even  in  these  cases  the  nominal  consideration  is 
immaterial. 

65.  An  accurate  description  of  the  premises  is  of  great  im- 
portance as  affecting  the  value  of  the  security,  and  oftentimes 
affecting  as  well  the  interest  of  the  mortgagor  and  of  persons 
holding  title  under  him.  But  a  description,  however  general  and 
indefinite  it  may  be,  if  by  extrinsic  evidence  it  can  be  made  prac- 
tically certain  what  property  it  was  intended  to  cover,  will  be 
sufficient  to  sustain  the  lien.*  A  description  by  reference  to  other 
deeds  is  sufficient.^  If  a  deed  describe  lands  by  metes  and  bounds, 
a  reference  for  further  description  to  other  deeds  recorded  will 
convey  additional  land  described  in  the  deeds  referred  to,  unless 

1  Eobinson  v.  Williams,  22  N.  Y.  380.  In  Connecticat  it  is  declared  to  be  the 

2  Keyes  V.  Bump  (Vt.),9  Atl.  Rep.  598.  policy  of  the  law  with  regard  to  mort- 
8  Miller  v.  Lockwood,  32  N.  Y.  293.  gages  that  they  shall  give  definite  infor- 
*  §  1642;  Coogan  v.  Burling  Mills,  124  mationas  to  the  property  mortgaged  ;  and 

Mass.  390;  Tucker  y.  Field,  51  Miss.  191  ;  it  is  intimated  that   a  description  which 

and  Bee  Baker  v.  Bank  of  La.  2  La.  Ann.  would  be  sufficient   in    an   absolute  deed 

371;  Whitney  y.  Buckman,  13  Cal.  536;  might   not   be   sufficient   in  a   mortgage. 

De  Leon  v.  Higuera,  15  Cal.  483;  Ilan-  Herman  v.  Deniiug,  44  Conn.  124  ;  North 

cock  V.  Watson,  18  Cal.  137  ;   Began  i-.  v.  Beldeu,  13  Conn.  37G,  380;  l)e  Wolf  v. 

O'Reilly,  32  Cal.  11  ;  Boon  v.  Pierpont,  Sprague  Manuf.  Co.  49   Conn.  282,  316. 

28  N.  J.  Eq.  7 ;  English  v.  Roche,  6  Ind.  It  is  doubtful  if  these  cases  would  bo  law 

62  ;    Blakemore  v.  Taber,  22   Ind.  466  ;  anywhere  else. 
Morse  v.  IJewcy,  3  N.  II.  535  ;  O'Neal  v.         ^  Wallace  v.  Furber,  62  Ind.  103. 
Seixa.t,  4  So.  Rep.  745  ;  Redfields  v.  Red- 
fields  (N.  J.),  13  Atl.  Rep.  600. 

43 


§  65.]  FORM   AND   REQUISITES   OF   A  MORTGAGE. 

Otherwise  controlled.^  If  a  mortgage  describes  a  definite  quantity 
of  land,  another  considerable  tract  of  land,  the  title  to  which  was 
derived  from  another  source,  is  not  covered  by  the  mortgage, 
although  the  description  concludes  with  a  general  reference  to  a 
deed  which  conveyed  both  tracts.^  If  the  mortgage  clearly  and 
unequivocally  describes  more  land  than  is  embraced  in  the  deeds 
referred  to,  although  the  premises  described  are  mentioned  as 
"  the  same  estate  "  mentioned  in  the  deeds,  the  conveyance  is  not 
restricted  by  such  reference  to  the  premises  described  in  the  deeds 
referred  to,  but  will  also  embrace  the  land  described  by  metes 
and  bounds.^  The  lines  of  ascertained  boundaries  generally  con- 
trol, rather  than  a  description  of  the  quantity  of  land,  unless  it 
appears  that  the  averment  or  covenant  of  quantity  was  intended 
to  control.^ 

A  mortgage  of  all  the  lots  the  mortgagor  then  owned  in  a  cer- 
tain town,  whether  he  had  the  legal  or  equitable  title  thereto, 
conveys  all  the  lots  which  can  be  identified  as  belonging  to  him 
by  either  title.^  But  a  mortgage  of  all  the  lands  the  mortgagor 
owns  in  a  certain  town  does  not  include  lands  held  by  him  in 
mortgage,  though  by  absolute  deed  with  a  separate  defeasance 
not  recorded.^ 

A  mortgage  "  of  all  my  estate,"  or  "  of  all  my  lands  wherever 
situated,"  or  "  of  all  my  property,"  is  not  invalid  by  reason  of  the 
generality  of  the  description.'''  But  such  a  mortgage  could  not  be 
made  to  apply  to  after-acquired  lands.^ 

When  the  objection  is  merely  to  the  indefiniteness  of  descrip- 
tion, it  does  not  lie  with  the  mortgagor  to  say  that  he  conveyed 
the  property  by  a  description  so  loose  or  indefinite  that  no  title 
could  pass  upon  a  foreclosure  sale  of  the  property.^  If  nothing 
passes,  it  is  the  misfortune  of  the  mortgagee,  but  the  mortgagor 
is  not  hurt ;  if  anything  does  pass,  the  mortgagee  is  entitled  to 

1  Coogan  V.  Burling  Mills,  124  Mass.  lands  in  a  certain  place  may  not  cover 
390.  lands  which  the  mortgagor  had  previously 

2  Holmes  v.  Abrahams,  31  N.  J.  Eq.  conveyed,  though  the  conveyance  had  not 
415.  been  recorded  at  the  time  of  the  mortgage. 

3  Auburn    Congregational    Church    v.  Crawford  v.  Bonner,  53  Tex.  194. 
"Walker,  124  Mass.  69.  "  Wilson  v.  Boyce,  92  U.  S.  320  ;  Usina 

*  Doyle  V.  Millen  (R.  I.),  8  Atl.  Rep.  v.  Wilder,  58  Ga.  178  ;  Harkey  v.  Cain 

709.  (Tex.),  6  S.W.  Rep.  637. 

6  Starling  v.  Blair,  4  Bibb  (Ky.),  288.  8  Calhoun  v.  Memphis  &  Paducah  R.R. 

See  Easter  v.  Severin,  64  lud.  375.  Co.  2  Flip.  442,  448. 

•*  Mills  V.  Shepard,  30  Conn.  98.  9  Whitney  v.  Buckman,  13  Cal.  536. 

A  mortgage  of  all  "  unappropriated  " 

44 


THE   FORMAL  PARTS   OF   THE  DEED.  [§  66. 

the  benefit  of  the  mortgage  as  it  stands.^  When,  however,  the 
description  is  such  that  property  may  pass  or  be  sokl  under  the 
mortgage  which  the  mortgagor  did  not  inchide,  or  intend  to  in- 
clude, it  is  proper  that  he  should  ask  to  have  it  reformed.  Very 
strong  proof  is  required  to  support  an  allegation  that  by  mistake 
a  mortgage  was  made  to  embrace  lands  that  ought  not  to  have 
been  put  in  ;  and  the  testimony  of  the  mortgagor  that  he  did  not 
intend  the  mortgage  should  cover  a  portion  of  the  premises  de- 
scribed, which  were  in  a  condition  to  be  mortgaged,  and  were 
deliberately  included,  is  wholly  insufficient  to  exclude  such  por- 
tion.2 

If  the  description  of  the  property  in  the  granting  part  of  a 
mortgage  be  inconsistent  with  a  provision  contained  in  the  con- 
dition, the  latter  must  give  way.^ 

QQ.  What  uncertainty  in  description  will  invalidate.  —  The 
description  may  be  so  uncertain  that  no  title  will  vest  in  the  mort- 
gagee by  the  deed,  unless  it  be  reformed ;  *  or  even  so  uncertain 
that  it  cannot  be  reformed.^  A  mortgage  describing  land  by 
township  and  range,  without  stating  in  what  county  or  state  the 
land  was  situated,  was  held  void.^  And  so  was  a  mortgage  de- 
scribing land  as  parts  of  different  sections,  without  stating  the 
township  or  range.'^  But  an  error  in  the  number  of  the  range,  or 
in  the  omission  of  it,  will  not  affect  the  validity  of  a  mortgage, 
if  the  property  be  otherwise  described  with  such  certainty  as  to 
clearly  identify  it.^ 

A  mortgage  of  all  the  property  of  a  mining  company,  particu- 
larly described  as  "  located  at  and  near  the  mouth  of  Alder  Gulch, 
in  section  ten "  of  a  certain  township,  does  not  cover  property 
of  said  company  located  in  other  sections  of  that  township;  and 
a  decree  authorizing  the  sale  of  property  proved  to  be  owned  by 
the  company  in  other  sections  is  a  nullity  as  regards  such  prop- 
erty. The  only  property  that  could  be  sold  is  that  located  in 
section  ten.^ 


1  Tryon  v.  Sutton,  13  Cal.  490.  6  Cochran  v.  Utt,  42  Ind.  267  ;  Murphy 

2  Shepard  v.  Sliepard,  36  Mich.  173.  v.  Hendricks,  27  Ind.  593. 

8  Donnan    v.   Intelligencer   Printing  &  "^  Boyd  v.  Ellis,  1 1  Iowa,  97. 

Puhli-shing  Co.  70  Mo.  168.  8  White  v.  Hermann,  51   111.  243;  Kile 

*  reck  V.  Mallams,  10  N.  Y.  509 ;  Keif-  v.  YellowJicad,  80  111.  208  ;  Thornliill  v. 

fer  V.  Starn,  27  La.  Ann.  282 ;  AVhite  v.  Burtlie,  29  La.  Ann.  639.     As  to  whether 

Hyatt,  40  Ind.  385.  the  meridian  or  county  controls,  see  Sick- 

<•  Lewis  i;.  Owen,  C4  Ind.  446.  mon  v.  Wood,  69  111.  329. 

*  Largcy  v.  Scdnum,  3  Mon.  472. 

45 


§  67.]  FORM  AND   REQUISITES   OF  A  MORTGAGE. 

A  mortgage  of  fifty  acres  of  land  by  description,  the  same 
being  part  of  the  large  farm,  or  the  next  and  adjoining  fifty  acres 
that  is  unincumbered,  provided  the  first  be  incumbered,  is  not 
void  for  uncertainty  as  to  either  tract.  The  whole  farm  in  such 
case  is  subject  to  the  mortgage,  which  is  to  be  satisfied  out  of 
any  unincumbered  tract  nearest  to  that  first  described;  but  the 
mortgage  is  not  defeated  although  the  whole  farm  be  incum- 
bered.^ 

A  mortgage  of  a  certain  number  of  acres  out  of  a  large  tract, 
the  portion  mortgaged  not  being  described  or  located,  has  been 
held  to  pass  such  an  undivided  joint  interest  in  the  whole  tract  as 
the  quantity  mortgaged  bears  to  the  quantity  contained  in  the 
whole  tract.2 

A  mortgage  which  does  not  name  the  town,  county,  or  state  in 
which  the  land  is  situated  may  nevertheless  be  rendered  certain 
in  the  description  of  the  premises  by  a  reference  to  another  deed, 
which  contains  a  full  and  accurate  description ;  ^  or  to  the  land 
of  the  adjacent  owners,*  or  by  extrinsic  evidence.^  A  mistake 
in  the  number  of  a  lot  may  be  rendered  immaterial  by  the  boun- 
daries, which  will  control  when  fixed  and  certain,  as  for  instance 
when  they  are  public  streets.^ 

67.  The  office  of  the  habendum  is  to  define  the  estate  con- 
veyed ;  to  explain  how  long  the  grantee  is  to  hold  it,  and  whether 
in  an  absolute  or  qualified  manner.  To  create  an  absolute  and 
unqualified  estate  in  the  grantee,  the  habendum  must  be  to  him 
and  his  heirs.  A  mortgage  to  one,  "  his  executors,  administra- 
tors, and  assigns,"  without  naming  his  heirs,''  or  a  mortgage  to 
an  individual,  "  his  successors  and  assigns  forever,"  without  the 
word  "  heirs,"  ^  conveys  only  a  life  estate  ;  and  the  executor  of  the 

1  Lee  V.  Woodvvorth,  3  N.  J.  Eq.  (2  Gr.)  430 ;  AllendorfF  v.  Gaugengigl  (Mass.),  16 
36  ;  and  see  Kruse  v.  Scripps,  1 1  111.  98  ;     N.  East.  Rep.  283. 

Gray  v.  Stiver,  24  Ind.  174.  In  the  latter  case  a  married  woman  in 

2  Brown  v.  Maury  (Tenn.),  3  S.  W.  a  mortgage  of  her  separate  estate  joined 
Rep.  175.  her  husband  in  releasing  her  estate  to  the 

8  Robinson  v.  Brennan,  115  Mass.  582  ;  "grantee,"  though  in  the  dower  and  home- 
Slater  V.  Breese,  36  Mich.  77;  Boon  v.  stead  clause  she  released  to  the  grantee 
Pierpont,  32  N.  J.  Eq.  217.  See,  also,  and  "his  heirs  and  assigns  "  all  right  to 
Harding  v.  Strong,  42  111.  148.  dower  and  homestead  in  the  premises.     It 

*  Ells  V.  Sims,  2  La.  Ann.  251.  was  held  the  mortgage  conveyed  her  gen- 
^  Slater  v.  Breese,  supra.  eral  title  to  the  grantee  for  life  only  j  the 
^  Cooper  V.  Bigly,  13  Mich.  463.  word  "grantee  "  not  including  "heirs  and 
''  Clearwater  v.  Rose,  1  Blackf.  (Ind.)  assigns,"   and   these  words,  used   in  the 

137.  relinquishment  of  dower  and  homestead, 

*  Sedgwick  v.  Lafiin,  10  Allen  (Mass.),     not  relating  back  so  as  to  include,  in  the 

46 


THE  FORMAL  PARTS  OF  THE  DEED.  [§  67. 

mortgagee  cannot  maintain  a  writ  of  entry  to  foreclose  the  moi't- 
gage  because  it  terminated  with  the  mortgagee's  life.  A  power 
of  sale  in  such  a  mortgage,  authorizing  the  mortgagee  upon  de- 
fault to  sell  the  land  and  execute  a  conveyance  in  fee  simple,  if 
not  executed  does  not  operate  to  enlarge  the  estate.  But  a  fee 
simple  may  be  created  without  the  use  of  the  word  "  heirs  "  where 
the  intention  to  create  such  an  estate  is  clear.^  Thus  where  a 
mortgage  was  executed  in  Indiana  upon  lands  in  Ohio,  according 
to  a  form  authorized  by  statute  in  the  former  state,  whereby  the 
words  "  mortgage  and  warrant "  are  declared  to  pass  an  estate  in 
fee  simple,  it  was  held  in  the  latter  state  that  the  mortgage  passed 
the  entire  estate  of  the  mortgagor,  and  upon  foreclosure  the  pur- 
chaser acquired  an  estate  in  fee  simple.^ 

But  a  mortgage  made  to  a  treasurer  of  a  corporation  named, 
with  habendum  "  unto  him  the  said  treasurer  and  his  successors 
in  office,  to  his  and  their  use  and  behoof  forever,"  the  condition 
of  the  mortgage  being  that  the  mortgagor  should  "  pay  to  the 
said  treasurer,  or  his  successors  in  office,"  a  certain  sum,  is  held 
to  pass  an  estate  in  fee,  on  the  ground  that  these  expressions  in 
the  deed  showed  that  the  grantee  took  the  conveyance  simply  as 
trustee  for  the  corporation,  and  that  the  nature  of  the  trust  re- 
quired that  a  fee  should  pass  by  the  deed.^  The  estate  of  the 
trustee  must  be  commensurate  with  the  equitable  estate  of  the 
cestui  que  trust.  A  mortgage  to  trustees  for  bondholders,  from 
which  words  of  inheritance  have  been  inadvertently  omitted,  but 
the  provisions  of  which  require  that  the  trustees  should  have  an 
estate  in  fee  simple  in  order  to  execute  them,  will  be  construed 
as  a  conveyance  in  fee  simple,  and  may  be  reformed  as  against 
subsequent  purchasers  with  notice  ;  and  the  record  of  the  mort- 
gage would  be  notice  that  the  instrument  was  intended  to  pass  a 
fee.*  But  a  mortgage  to  executors,  "  their  successors  and  as- 
signs," containing  the  usual  clause  conveying  all  the  mortgagor's 
estate,  right,  and  title,  when  duly  recorded,  is  notice  to  subsequent 

relinquishment  of  her  general  title  to  the  ^  Gould  v.  Lamb,  11  Met.  (Mass.)  84. 

grantee,  his  heirs  and  assigns.  2  Brown  v.  National  Bank,  44  Ohio  St. 

A  colonial  statute  of  1651  provided  that  269. 
all  deeds,  in  order  to  pass  an  estate  of  in-  3  Brooks  v.  Jones,  11  Met.  (Mass.)  191. 
heritance,  should  contain  a  habendum  to  *  Handolpli  v.  N.  J.  West  Line  li.  11. 
the  grantee,  his  heirs  and  assigns.     This  Co.  28  N.  J.   E(|.  49;  Coc  i;.  N.J.  Mid- 
provision  has  been  continued  in  each  sue-  laud  Ky.  Co.  31  N.  J.  Eq.  105. 
cessive   revision    of    the  statutes   of    the 
state.  47 


§  68.]  FORM  AND  REQUISITES   OF   A  MORTGAGE. 

purchasers,  mortgagees,  and  judgment  creditors,  that  such  mort- 
gage was  intended  to  convey  the  fee.^ 

A  mortgage  giving  the  mortgagee  a  life  estate  only  will  not  be 
reformed  to  convey  a  fee,  as  against  the  rights  of  a  hond  fide  pur- 
chaser of  the  premises,  without  notice  of  any  claim  on  his  part 
of  a  greater  estate  than  the  mortgage  as  recorded  purports  to 
convey.^  Although  mortgages  of  real  estate  are  usually  in  fee, 
constructive  notice  merely  of  the  existence  of  a  mortgage,  with 
no  notice  as  to  the  estate  intended  to  be  conveyed,  is  not  notice 
that  the  mortgage  is  in  fee,  when  in  terms  a  life  estate  only  is 
expressed. 

In  a  mortgage  or  other  conveyance  to  a  corporation  it  is  usual 
to  make  the  habendum  to  it  and  its  "  successors  and  assigns  ; " 
but  neither  of  these  words  is  necessary  in  a  deed  to  a  corporation 
aggregate  to  give  it  all  the  estate  it  can  take  in  the  land  con- 
veyed. There  is  an  implied  condition,  in  every  conveyance  to  a 
corporation,  that  upon  the  civil  death  of  the  corporation  while 
retaining  the  land  it  shall  revert  to  the  original  grantor  and  his 
heirs  .^ 

68.  The  covenants  of  a  mortgage  are  usually  those  of  a  war- 
ranty deed,  and  have  the  same  effect  and  construction.  If,  how- 
ever, a  mortgage  with  covenants  be  given  for  purchase  money  of 
land  conveyed  to  the  mortgagor  by  a  deed  having  like  covenants, 
and  the  mortgagor  is  evicted,  he  may  recover  damages  in  an 
action  for  breach  of  the  covenant,  and  the  vendor  who  holds  the 
mortgage  is  not  allowed  to  set  up  the  covenants  in  the  mortgage 
deed  as  a  defence  by  way  of  rebutter,  especially  when  he  holds 
the  plaintiff's  promissory  notes  secured  by  the  mortgage.^  "  Va- 
rious cases  might  be  readily  supposed,"  says  Mr.  Justice  Dewey, 
"  when  such  a  defence  ought  not  to  prevail ;  as  in  cases  of  large 
payments  advanced  towards  the  purchase  money,  and  a  mortgage 
to  secure  only  a  small  residue,  and  that,  by  the  terms  of  the  con- 
tract, to  be  paid  at  some  remote  future  day.  The  rights  of  the 
defendant  may  be  protected  by  postponing  entry  of  judgment  to 
await  the  set-off  upon  the  mortgage  debt."  ^  In  other  words, 
the  covenants  in  the  mortgage  do  not  estop  the  mortgagee  to  re- 
cover upon  those  in  his  vendor's  deed  to  him.     As  between  these 

1  Bunker  v.  Anderson,  32  N.  J.  Eq.  35.       459;  Hubbard  v.  Norton,  10  Conn.  422; 

2  Wilson  V.  King,  27  N.  J.  Eq.  374.  Haynes  v.  Stevens,  11  N.  H.  28;  Smith  v. 

3  2  Kent  Com.  282,  307.  Cannell,  32  Me.  123. 

*  Sumner  v.  Barnard,  12  Met.  (Mass.)        ^  See  Sumner  v.  Barnard,  supra. 
48      . 


THE   CONDITION.  [§  69. 

parties,  the  mortgagor  for  purchase  money  really  pledges  nothing 
but  the  interest  which  he  obtained  under  his  vendor's  deed,  and 
is  answerable  to  him  for  no  imperfection  in  the  title  existing 
before  the  conveyance.  If  the  mortgage  be  redeemed,  that  is  the 
end  of  it ;  and  if  it  be  foreclosed,  the  title  which  the  grantor 
parted  with  is  restored  to  him  by  foreclosure,  or  he  gets  the  full 
benefit  of  it.  One  having  the  mortgagee's  right  after  foreclosure 
is  not  allowed  to  recover  damages  for  a  breach  of  the  covenant 
which  existed  at  the  time  of  the  conveyance  by  the  mortgagee ; 
for  the  effect  of  such  recovery  would  be,  to  obtain  all  that  he 
parted  with  in  the  conveyance,  and  the  value  of  the  incumbrance, 
which  he  is  relieved  from  removing  by  the  foreclosure.^ 

If  upon  the  foreclosure  of  a  mortgage  not  for  purchase  money 
the  mortgagee  purchase  the  property  for  the  amount  of  the  mort- 
gage debt,  he  cannot  afterwards  maintain  an  action  upon  the 
covenants  of  warranty  contained  in  the  mortgage,  without  first 
having  the  sale  and  satisfaction  of  the  judgment  set  aside.^ 

The  covenants  of  warranty  in  a  mortgage  are  often  of  impor- 
tance where  the  mortgagor  has  no  title,  or  an  imperfect  one,  at 
the  time  of  making  the  mortgage,  but  afterwards  acquires  one ; 
the}'  then  operate  by  way  of  estopel  or  rebutter,  so  that  the  after- 
acquired  title  enures  to  the  benefit  of  the  holder  of  the  mortgage. 
Except  in  this  way  the  ordinary  covenants  are  of  little  use  in  a 
mortgage,  because  the  damages  for  a  breach  of  them  would  only 
entitle  the  holder  of  the  mortgage  to  recover  the  amount  due  him 
on  the  mortgage,  and  this  he  can  more  readily  recover  by  suit  for 
the  mortgnge  debt  upon  the  note  or  bond,  or  upon  the  covenant 
for  the  payment  of  it  sometimes  contained  in  the  mortgage.^ 

III.    The  Condition. 

69.  The  usual  words  of  the  proviso  are,  that  upon  the  pay- 
ment of  the  debt  or  performance  of  the  duty  named,  "  then  this 
deed  shall  be  void."  But  any  equivalent  expression  may  be 
used  ;*  and  in  fact  if  it  appear  from  the  whole  instrument  that  it 

1  Smith  V.  Canncll,  32  Me.  123;  Brown  387;   Kellogg  v.  Wood,  4  Paige  (N.  Y.), 

V.  Staples,  28  Me.  497  ;  IIiii  dy  v.  Nelson,  578. 

27  Me.  52.">;  Gever  v.  Girard,  22  Mo.  1.59;  2  Todd  v.  Johnson,  51  Iowa,  192. 

Connor    v.    Kddy,    25    Mo.    72 ;    Lot  v.  ^  Quoted   with   approval    in    Todd    v. 

ThomiLS,  1   I'enn.  (N.  J.)  407.     Sec,  also,  John.son,  supra. 

Hancock  v.  Carhon,  6  Gray  (Mass.),  39,  *  Adams  y.  Stevens,  49  Me. 362;  Cowles 

61;    Cross   v.  Kobiuson,  21    Conn.   379,  v.  Marble,  37  Mich.  158;  Pearce  v.  Wil- 
son, HI  I'a.  St.  14. 

VOL.  I-                       4  49 


§  70.]  FORM   AND   REQUISITES   OF  A  MORTGAGE. 

was  intended  as  a  security,  although  there  be  no  express  provi- 
sion that  upon  the  fulfihnent  of  the  condition  the  deed  shall  be 
void,  it  is  a  mortgage.^  The  substance  and  not  the  form  of  ex- 
pression is  chiefly  to  be  regarded  ;  and  an  enlarged  and  liberal 
view  is  to  be  taken  of  the  instrument  in  order  to  ascertain  and 
carry  into  effect  the  intention  of  the  parties.^  It  is  not  necessary 
that  the  condition  of  the  mortgage  should  be  so  certain  as  to  pre- 
clude the  necessity  of  extraneous  inquiry  as  to  what  it  really  is, 
and  whether  it  has  been  performed  ;  ^  as  in  the  case  of  a  mort- 
gage to  secure  future  advances  or  to  indemnify  a  suret}^  But 
unless  it  appears  upon  what  event  the  deed  is  to  become  void,  or 
that  it  is  to  become  void  in  some  event,  it  is  not  in  itself  a  mort- 
gaged 

70.  Description  of  the  debt  secured.  —  To  constitute  a  mort- 
gage there  must  necessarily  be  a  debt  which  is  the  subject  of  the 
security.  But  it  is  not  necessary  that  there  should  be  any  per- 
sonal liability  for  the  payment  of  the  debt ;  as  in  the  case  of  a 
mortgage  to  secure  advances  to  be  made  subsequently,  the  par- 
ties may  agree  that  the  mortgagee  shall  advance  the  money,  and 
rely  solely  for  his  security  upon  the  pledge  of  the  real  estate.^ 
Formerly,  mortgages  were  frequently  given  for  the  security  of 
existing  debts  without  mentioning  any  note,  bond,  or  other  per- 
sonal obligation.  Tliere  can  be  no  question  as  to  their  validity, 
not  only  as  against  the  mortgagor,  but  against  all  claiming  sub- 
sequently. Whether  there  can  be  any  action  against  the  mort- 
gagor personally  may  depend  upon  the  particular  circumstances  of 
different  cases.  Where  there  is  a  contract,  express  or  implied,  for 
the  payment  of  the  debt,  this  is  not  merged  in  the  security  cre- 
ated by  the  mortgcige,  and  the  creditor  may  maintain  assumpsit.^ 

Literal  exactness  in  describing  the  indebtedness  is  not  re- 
quired ;  it  is  sufiicient  if  the  description  be  correct  so  far  as  it 
goes,  and  full  enough  to  direct  attention  to  the  sources  of  correct 
and  full  information  in  regard  to  it,  and  the  language  used  is  not 
liable  to  deceive  or  mislead  as  to  the  nature  or  amount  of  it." 

1  Snyder  v.  Bunnell,  64  Ind.  403,  6  §§  343-395 ;   South  Sea  Company  v. 

2  Strel  i>.  Steel,  4  Allen  (Mass.),  417;  Duncomb,  2  Stra.  919;  Hickox  v.  Lowe, 
Lanfuir  v.  Lanfair,  18  Pick.  (Mass.)  299;  10  Cal.  197  ;  Hodgdon  v.  Shannon,  44  N. 
Skinner  v.  Cox,  4  Dev.  (N.  C.)  L.  59.  H.  572. 

3  Youngs  V.  Wilson,  27  N.  Y.  3.51.  6  Yates  v.  Astou,  4   Ad.  &  El.  N.    S. 
*  Goddard  v.  Coe,  55  Me.  385;  Adams     182. 

V.  Stevens,  49  Me.  362;  Freeman's  Bank         ^  Ricketson  v.  Richardson,  19  Cal.  330; 
V.  Vose,  23  Me.  98.  Booth  v.  Barnum,  9  Conn.  286 ;  Sheafe  v. 

60 


THE   CONDITION.  [§71. 

Thus,  the  condition  of  a  mortgage  specified  that  the  mortgagee 
was  an  accommodation  indorser  and  sijjner  for  the  mortcragors  on 
sundry  notes,  drafts,  and  bills  of  exchange,  to  the  amount  of 
'150,000,  which  were  then  maturing,  a  particular  description  of 
which  they  were  not  able  to  give.  The  mortgagors  were  in  a 
failing  condition,  and  at  the  time  the  mortgages  were  given,  it 
was  necessary  to  give  the  security  before  a  more  accurate  descrip- 
tion could  be  made  ;  but  this  description  was  held  to  be  sufficient.^ 
Even  a  mortgage  to  secure  all  existing  debts  of  the  mortgagor  to 
the  mortgagee  is  not  invalid  for  want  of  certainty  in  the  amount 
secured.^ 

The  condition  of  the  mortgage  must  give  reasonable  notice  of 
the  incumbrance  on  the  land  mortgaged  in  order  to  atfect  the 
creditors  of  the  mortgagor  who  have  no  notice  of  the  real  incum- 
brance.^ It  need  not  be  so  complete  as  to  preclude  extraneous 
inquiry  concerning  the  liens  on  the  property ;  but  it  must  with 
reasonable  certainty  show  what  is  the  subject  matter  of  the  mort- 
gage, and  must  so  define  the  incumbrance  that  a  fraudulent  mort- 
gagor may  not  substitute  other  debts  and  shield  himself  from  the 
demands  of  his  creditors.*  Where  a  mortgage  described  the  debt 
as  a  note  of  !3fl,000,  which  was  never  given,  but  the  mortgagor 
Avas  indebted  to  the  mortgagee  for  goods  to  the  amount  of  ^756, 
and  the  latter  had  agreed  to  furnish  additional  goods  up  to  the 
sum  of  81,000,  the  mortgage  so  given  as  security  for  the  whole 
was  held  void  against  an  attaching  creditor.  The  indebtedness 
actually  existing  could  not  be  substituted  for  the  indebtedness 
described.'^  But  this  is  an  extreme  case  and  is  not  to  be  relied 
upon.^ 

71.  The  note  and  mortgage  are  construed  together  as  if  they 
were  parts  of  one  instrument,  when  they  were  made  at  the  same 
time,  and  in  relation  to  the  same  subject,  as  parts  of  one  transac- 
tion constituting  one  con  tract.''     They  explain  each  other  so  far 

Gerry,  18  N.  H.  245;    Gilman  u.  Moody,  tibone  r.  Griswold,  4  Conn.  158;  Biam- 

43  N.  H.  239;  Ilurd  v.  Kobinson,  11  Ohio  hall  v.  Flood,  41   Conn.  68;  Stoughtou  v. 

St.  232;    Gill  V.  Pinney,  12  lb.  38;  Cur-  Tasco,  supra;  Crane  v.  Deming,  7  Coun. 

tis  V.  Flinn,  40  Ark.  70.  387,  39G  ;  Booth  v.  Barnum,  9  Conn.  286, 

1  I^ewis  j;.  De  Forest,  20  Conn.  427.  290. 

2  Michigan  Ins.  Co.  i».  Brown,  11  Mich.  ''  Bramhnll  v.  Flood,  supra. 

265;  Machctte  v.  Wanless,  1  Col.  225.  "^  This  statement  is  quoted  with  nppa- 

8  Bacon  i'.  Brown,  19  Conn.  33 ;  Stough-  rent  approval  in  Clark  i'.  Ilyman,  55  Iowa, 

ton  r.  Pasco,  5  Conn.  442,  440;    Merrills  14,20. 

».  Swift,  18  Conn.  257,  204.  '  §   361;    Chick   v.  Willetts,  2   Kaus. 

*  Uabbard  v.  Savage,  8  Coun.  215;  Pet-  384  ;  Uound  v.  DoiincI,  5  Kaus.  54. 

51 


§  71.]  FORM   AND   REQUISITES   OF   A   MORTGAGE. 

as  the  indebtedness  is  concerned.^  The  mortgage  usually  de- 
scribes the  note,  stating  the  date,  amount,  the  makers  of  it,  and 
the  time  when  it  is  payable.  Such  description  serves  to  identify 
the  note.^  The  mortgage  may  describe  the  debt  as  well,  and  thus 
may  qualify  the  terms  of  the  note.  For  instance,  where  a  note 
was  given  payable  in  five  years  from  date,  with  interest  at  ten  per 
cent.,  and  at  the  same  time  a  mortgage  was  given  to  secure  the 
payment  of  the  note,  in  which  it  was  stipulated  that  the  interest 
should  be  "  payable  annually,"  the  agreement  was  held  to  be  that 
interest  at  ten  per  cent,  should  be  payable  annually,  and  that 
foreclosure  might  be  had  for  the  non-payment  of  the  interest.^ 
And  so  where  the  mortgage  contained  a  stipulation  that  a  general 
execution  should  not  issue  upon  it,  although  a  note  accompanied 
the  mortgage,  it  was  held  that  the  mortgagee  could  not  recover  a 
general  judgment  on  the  note,  his  remedy  being  limited  to  the 
property.^ 

Except  in  this  way,  the  mortgage  notes  constitute  no  part  of 
the  mortgage.  They  are  not  essential  to  its  validity.  They  need 
not  be  produced  in  evidence,  in  order  to  establish  the  mortgage 
title  and  right  to  possession.  The  mortgage  itself  is  a  convey- 
ance of  the  estate,  and  the  recital  in  the  condition  of  the  notes 
secured  is  an  admission  of  their  existence,  and  of  the  existence 
of  the  debt.  For  the  purpose  of  establishing  the  title  or  right  of 
possession,  the  mortgage  alone  without  the  notes  is  evidence  of 
title  and  of  the  mortgage  debt.^ 

But  upon  the  foreclosure  of  a  mortgage  it  is  necessary  to  pro- 
duce the  note  if  there  be  one;  and  if  the  note  produced  corre- 
sponds with  the  description  in  the  mortgage  as  to  date,  amount, 
parties,  rate  of  interest,  and  maturity,  such  correspondence, 
coupled  with  the  possession  of  the  note  by  the  holder  of  the  mort- 
gage, raises  a  presumption  of  identity,  and  throws  upon  the  mort- 
gagor the  burden  of  showing  another  note  of  like  description.^ 
Parol  evidence  is  admissible  to  identify  the  note  intended  to  be 

i  Crafts  w.  Crafts,  13  Gray  (Mass.),  s  Muzzy  v.  Knight,  8  Kans.  456  ;  Meyer 
360  i  Somersworth  Savings  Bank  v.  Rob-  '  v.  Graeber,  19  Kans.  165. 

erts,   38  N.  H.   22 ;    Bassett    v.   Bassett,  *  Kennion  v.  Kelsey,  10  Iowa,  443. 

10  N.  H.  64;  Boody  v.  Davis,  20  N.  H.  &  Powers  v.  Patten,  71  Me.  583,  586; 

140.  Smith   v.   Johns,  3    Gray   (Mass.),   517; 

2  Webb  V.  Stone,  24  N.  H.  282,  287 ;  Mathews  v.  Light,  40  Me.  394. 

Sheafe  v.  Gerry,  18  N.  H.  2-J5,  248 ;  Rob-  6  Jones  i-.  Elliott,  4  La.  Aun.  303. 
ertson  v.  Stark,  15  N.  H.  109,  112. 

52 


THE   CONDITION. 


[§72. 


secured.^  When  no  note  or  bond  accompanies  the  mortgage,  a 
recital  of  indebtedness  in  the  mortgage  is  sufficient  evidence  of 
the  debt  in  a  suit  to  foreclose  it.^ 

72.  Covenant  for  the  payment  of  a  debt.  —  Although  it  is 
essential  that  a  mortgage  should  secure  the  payment  of  some  debt 
or  the  performance  of  some  duty,  yet  it  is  not  essential  that  it 
should  contain  any  covenant  to  that  effect,^  and  it  is  not  neces- 
sary' that  there  should  be  any  collateral  or  personal  security  for 
the  debt  secured.*  In  such  case,  of  course,  the  remedy  of  the 
mortgagee  is  confined  to  the  land  alone.^ 

The  mortgages  commonly  used  in  this  country  refer  to  the  debt 
only  in  the  condition,  and  there  merely  by  way  of  recital  of  the 
event  upon  which  the  deed  is  to  be  void.  It  is  seldom  that  any 
express  promise  is  made  by  the  debtor  in  the  mortgage  to  pay  the 
debt ;  and  no  promise  can  be  implied  from  the  recital  in  the  con- 
dition. It  is  provided  by  statute  in  several  states  that  no  such 
promise  shall  be  implied  in  the  mortgage.^ 

When  there  is  an  express  covenant  in  the  mortgage  for  the 
payment  of  the  debt,  the  mortgagee  may  maintain  an  action  at 
law  upon  it.  He  is  not  confined  to  his  remedy  by  foreclosure 
suit.'     "  It  seems  to  be  generally  admitted  in  the  books,"  says 


1  Melvin  v.  Fellows,  33  N.  H.  401 ; 
Prescott  V.  Hayes,  43  N.  H.  593. 

2  Whitney  v.  Buckman,  13  Cal.  536; 
and  see  Eyster  v.  Gaff,  2  Coll.  228. 

3  See  chapter  ix.  ;  Dougherty  ;?.  MeCol- 
gan,  6  Gill  &  J.  (Md.)  275 ;  Hickox  v. 
Lowe,  10  Cal.  197 

In  mortgages  by  identure  a  clause 
something  like  the  following  is  sometimes 
inserted :  — 

"  And  the  said  party  of  the  first  part, 
for  himself,  his  heirs,  executors,  and  ad- 
ministrators, doth  covenant  and  agree  to 
pay  unto  the  party  of  the  second  part,  his 
executors,  administrators,  or  assigns,  the 
said  sum  of  money  and  interest,  as  above 
mentioned  and  expressed  in  the  condition 
of  the  said  bond." 

*  Mitchell  V.  Burnham,  44  Mc.  28C; 
Smith  V.  People's  Bank.  24  Me.  185; 
Brookings  v.  White,  49  Me.  479. 

6  Weed  V.  Covill,  14  Barb.  (N.  Y.)  242. 

0  See  §  678. 

'  Brown  i-.  Ciuscaden,  43  Iowa,  103. 
The  covenant  was  as  .follows  :  "  And  the 


said  party  of  the  first  part  (the  mortgagor) 
covenants  with  the  said  party  of  the  third 
part  (the  mortgagee),  that  he  will  pay  the 
said  mortgage  money  and  interest  on  the 
days  and  times  aforesaid."  The  court  say 
that  such  a  covenant  is  no  part  of  the  con- 
dition of  the  instrument,  and  in  no  way 
pertains  to  the  conveyance  of  the  land. 
"  It  is  not  a  covenant  securing  the  mort- 
gagee against  the  failure  of  the  title,  or 
warranting  jjossession  or  enjoyment  of  the 
land.  It  is  simply  an  obligation  binding 
the  mortgagor  to  pay  the  money.  We 
know  of  no  rule  of  law  which  will  inval- 
idate such  a  covenant,  when  found  in  a 
mortgage."  In  Newbury  r.  Rutter,  38 
Iowa,  179,  the  mortgagors  recited  that 
'•  we  are  justly  indebted  "  in  a  sum  named, 
and  "  if  from  any  cause  said  property 
shall  fail  to  satisfy  said  debt,  interest,  and 
charges,  we  covenant  and  .agree  to  pay  the 
deficiency  ;  "  and  there  being  no  note  for 
the  debt,  an  action  at  law,  without  first 
foreclosing  the  mortgage,  was  sustained. 


§§  73,  74.]         FORM  AND  REQUISITES   OF  A   MORTGAGE. 

Chancellor  Kent,  "  that  the  mortgagee  may  proceed  at  law  on  his 
bond  or  covenant  at  the  same  time  that  he  is  prosecuting  on  his 
mortgage  in  chancery."  ^  Instead  of  pursuing  both  the  remedy 
against  the  person  and  that  againt  the  thing,  he  may  elect  to 
pursue  either  one,  and  afterwards,  if  he  has  not  obtained  satisfac- 
tion, may  follow  the  other.^ 

73.  Interest  is  the  thing  the  mortgage. is  made  for  when  a 
loan  of  money  has  been  made  upon  it,  and  the  rate  and  time  of 
payment  are  usually  stated  with  care.^  Interest  coupons  are 
sometimes  executed,  payable  at  the  several  times  when  intei-est 
will  be  due  upon  the  mortgage  by  its  terms  during  the  whole 
period  it  has  to  run.  These  are  usually  negotiable  in  form,  and 
though  detached  from  the  mortgage  note  or  bond  are  still  secured 
by  the  mortgage.*  Interest  is  usually  payable  annually  or  semi- 
annually from  the  date  of  the  mortgage.  A  provision  for  the  pay- 
ment of  "  interest  annually  on  the  first  day  of  April  in  each  year  " 
makes  the  first  interest  due  on  the  first  day  of  April  following 
the  date  of  the  mortgage,  though  its  date  be  much  later  in  the 
year.^ 

74.  A  mortgage  debt  made  payable  with  interest,  without 
naming  the  rate,  bears  interest  at  the  rate  fixed  by  law ;  and  the 
law  in  force  at  the  date  of  the  instrument  governs  the  rate.^  If 
the  times  when  the  intereest  shall  be  paid  are  not  specified,  but 
the  language  is  such  that  some  periodical  payment  is  intended,  it 
may  be  proved  by  parol  evidence  that  the  payments  were  to  be 
made  yearh'^,  for  instance,  even  as  against  a  purchaser  of  the  mort- 
gaged premises.''  The  terms  of  the  mortgage  cannot  be  changed 
as  against  a  purchaser,  but  he  is  subject  to  the  agreement  con- 
tained in  the  mortgage,  and  to  such  construction  as  may  be  re- 
quired of  what  is  ambiguous.  The  proof  of  the  periods  at  which 
the  interest  is  payable  does  not  alter  the  instrument,  but  merely 
supplies  what  was  omitted,  and  is  necessary  to  its  pi'oper  inter- 
pretation. 

1  Dunkley  v.  Van  Buren,  3  Johns.  (N.  suits  upon  coupons,  see  Jones  on  Railroad 
Y.)  Ch.  330;  §  1215.                 "  Securities,  §§  317-340. 

2  Vausanty.  Allmon,  23  111.30;  Lichty  ^  Cook  v.  Clark,  3  Hun  (N.  Y.),  247  ; 
V.  McMartin,  11  Kans.  .56.5.  5  Thomp.  &  C.  493 ;  68  N.  Y.  178. 

3  For  the  rates  of  interest  allowed  in  ^  Ackens  v.  Winston,  22  N.  J.  Eq.  444. 
the  several  states,  see  §  633.  ''  Ackens  v.  Winston,  supra.     The  lan- 

*  For  the  law  relating  to  the  construe-  guage  was,  "within  sixty  days  from  the 
tion  of  coupons,  their  negotiability,  their  time  it  becomes  due,  at  any  time  during 
order  of  payment,  overdue  coupons,  and     t^e  ten  years."     Tiiis  is  sufficient  to  put 

a  purchaser  upon  inquiry  as  to  the  periods 
54  of  payment. 


THE   CONDITION.  [§  75. 

When  the  time  of  payment  of  the  mortgage  debt  is  definitely- 
fixed,  and  the  amount  of  it  as  well,  interest  is  allowed  from  the 
date  of  the  default,  although  not  stipulated  for  in  the  mortgage 
or  the  note  accompanying  it.  Interest  follows  in  such  case  as  an 
invariable  legal  incident  of  the  principal  debt.^  But  when  the 
time  of  payment  is  uncertain,  as  for  instance  in  case  of  a  mort- 
gage debt  made  payable  at  the  decease  of  a  third  person,  interest 
can  be  recovered  only  from  the  date  of  a  demand  of  payment.^ 

The  statutes  of  several  states  prescribe  a  rate  of  interest  for 
contracts  in  which  the  parties  have  not  agreed  upon  a  rate,  and 
for  eases  in  which  interest  is  given  by  law,  but  allow  the  parties 
to  agree  in  writing  for  any  rate  of  interest.^  Under  such  a  pro- 
vision the  rate  of  interest  agreed  upon  by  the  parties  continues 
the  same  after  tlie  maturity  of  the  obligation  down  to  the  time 
of  rendering  judgment  upon  it.  The  interest  both  before  and 
after  maturity  is  recoverable  by  virtue  of  the  contract,  as  an  in- 
cident or  part  of  the  debt.^  But  although  the  weight  of  author- 
ity seems  to  favor  this  view,  there  are  numerous  authorities  which 
hold  that  where  the  parties  have  not  by  special  agreement  fixed 
the  rate  at  which  the  interest  shall  run  after  maturity,  the  rate 
fixed  for  cases  where  the  parties  have  not  agreed  upon  a  rate  pre- 
vails. The  interest  after  maturity  is  regarded  as  recoverable,  not 
upon  the  contract  but  upon  the  provisions  of  the  statute.^ 

75.  The  time  of  payment  of  the  debt  secured  should  be 
fixed,  so  that  it  may  be  known  with  certainty  when  a  default 
occurs.  If  no  time  of  payment  be  named,  the  debt  is  payable 
upon  demand,  and  suit  may  be  brought  to  enforce  both  the  debt 
and  the  mortgage  immediately.  When  the  time  of  payment  is 
fixed  by  the  mortgage,  or  the  note  secured  by  it,  the  mortgagor  is 

1  Spencer  f.  Pierce,  5  R.  I.  63.  lin,  L.  R.  5  Cli.  D.  287  ;  Morj^an  v.  Jones, 

-  Gardiner  v.  Woodmansee,  2  R.  I.  558.  8  Ex.  620  ;  Price  v.  Great  Western  Ry. 

8  See  §  633.  Co.  16  M.  &  W.  244. 

*  Brannon   v.  Hursell,   112   Mass.  63;         6  Brewster  v.  Wakefield,  22  IIow.  118; 

Cromwell  v.  County  of  Sac,  96  U.  S.  51  ;  Pearcc  v.  Ilenncssy,  10  R.  I.  223;  Eaton 

Beckwith  v.  Hartford,  Prov.  &  Fishkill  R  v.  Boissonniiult,  67  Me.  540;  Lash  u.  Lam- 

R.  29  Conn,  268  ;   Marietta  Iron  Works  bert,  15  Minn.  416;  Searle  v.  Adams,  3 

V.  Ivottimer,  25  Ohio  St.  621  ;  Etnyrc  v.  Kan.s.  515;  Rilling  i>.  Thompson,  12  Bush 

McDanicI,  28  111.  201  ;  Pruyn  v.  Milwau-  (Ky.),  310;  Langston  v.  S.  C.  R.  R.  Co.  2 

kee,  18  Wi.s.  367  ;  Hand  v.  Armstrong,  18  S.  C.  248;  Virginia  y.  Chesapeake  &  Ohio 

Iowa,  324  ;  Kohler  i;.  Smith,  2  dil.  597  ;  Canal  Co.  32  Md.  501.     See,  for  discussion 

McLanc  v.  Abram*,  2  Nev.  199;  Hopkins  of  some  of  these  cases,  Jones  on  Railroad 

V.  Crittenden,  10  Tex.  189.  Securities,  §  336. 

For  English  cases  sec  Gordillo  v.  Wcgue- 

5r> 


§  76.]  FORM   AND  REQUISITES   OF   A  MORTGAGE. 

not  entitled  to  any  notice  of  it.^  Grace  is  to  be  allowed  in  com- 
puting the  time  of  payment  of  a  mortgage  note,  or  of  any  instal- 
ment of  it,  payable  at  a  day  certain,  in  the  same  manner  as  npon 
a  note  not  secured  by  mortgage.^  It  is  allowed  also  upon  an  in- 
stalment of  interest  falling  due  at  the  same  time  with  the  princi- 
pal or  any  instalment  of  the  principal.  But  on  an  instalment  of 
interest  alone,  falling  due  when  no  part  of  the  principal  becomes 
due,  the  debtor  is  not  entitled  to  days  of  grace.^ 

The  usual  form  of  power  of  sale  mortgage  in  use  in  Massachu- 
setts and  other  New  England  states  provides,^  that  upon  a  sale 
of  the  premises  under  the  power  the  mortgagee  may,  out  of  the 
money  arising  from  the  sale,  "retain  all  sums  then  secured  by 
this  deed,  whether  then  or  thereafter  payable,"  This  provision 
in  effect  makes  the  whole  mortgage  payable  upon  any  default 
which  authorizes  the  exercise  of  the  power  of  sale,  if  he  in  fact 
does  exercise  the  power ;  and  in  the  form  in  common  use  the 
condition  is  for  the  payment  of  the  principal,  instalments,  and 
interest  at  the  times  named,  as  also  the  taxes  and  insurance,  and 
upon  any  breach  of  the  condition  the  mortgagee  may  proceed  to 
foreclose. 

Of  course  in  such  case  the  right  to  receive  payment  of  sums 
not  due  arises  only  upon  a  sale.  And  so  when  a  trustee  in  a 
trust  deed  is  empowered  to  sell  the  property  when  the  first  in- 
stalment falls  due,  and  all  the  indebtedness  is  to  be  considered  as 
matured  upon  the  first  default,  for  the  purpose  of  the  application 
of  the  trust  fund,  the  indebtedness  not  then  due  cannot  be  con- 
sidered as  matured,  so  that  a  personal  judgment  can  be  rendered 
for  it.^ 

76.  A  stipulation  that  the  whole  sum  shall  become  due 
and  payable  upon  any  default  in  the  payment  of  any  part  of 
the  principal  or  interest  is  universally  held  to  be  legal  and  valid. 
It  is  not  objectionable  as  being  in  the  nature  of  a  penalty  or  for- 
feiture.^ 

1  Injij  V.  Cromwell,  4  Md.  31.  v.  Eomain,  31   Md.  574;  Kramer  v.  Reb- 

2  Coffin  V.  Loring,  5  Allen  (Mass.),  man,  9  Iowa,  114;  Robinson  v.  Loomis, 
153.  51   Pa.    St.  78;   Stanclift   v.  Norton,  11 

3  Macloon  v.  Smith,  49  Wis.  200;  Na-  Kans.  218;  First  Nat.  Bank  v.  Peck,  8 
tional  Bank  v.  Kirby,  108  Mass.  497.  Kans.  660  :  Rubens  v.  Prindle,  44  Barb. 

*  §  1778.  (N.  Y.)  336  ;  Ottawa  Northern  Plank  Road 

5  Mason  v.  Barnard,  36  Mo.  384.  Co.  v.  Murray,  15  III.  336  ;  Hale  v.  Gouv- 

6  §  1181;  Steel  v.  Bradficld,  4  Taunt,  erneur,  4  Edw.  (N.  Y.)  207  ;  Noyes  v. 
227;  James  v.  Thomas,  5  B.  &  Ad.  40;  Clark,  7  Paige  (N.  Y.),  179  ;  Ferris  v. 
Mobray  v.  Leckie,  42  Md.  474;  Schooley  Ferris,  28  Barb.  (N.  Y.)  29;  Valentine  v. 

66 


THE   CONDITION.  [§  76. 

In  some  states  such  a  provision  is  so  usual,  that  authority  to 
an  agent  or  officer  to  execute  a  mortgage,  the  terms  and  condi- 
tions of  which  are  not  specified,  would  authorize  him  to  insert 
this  provision  ;  while  in  other  states  special  authority  to  use  this 
provision  is  necessary.  His  general  authority  only  authorizes  the 
use  of  the  terms  and  provisions  ordinarily  inserted,  and  tliere- 
fore  implied  by  the  term  "  mortgage."  But  the  unauthorized  use 
of  this  provision  would  not  invalidate  the  mortgage  in  other  re- 
spects.^ 

If  the  provision  be  that  the  mortgagee  may  upon  default,  or 
after  the  default  has  continued  a  certain  time,  elect  that  the 
whole  amount  of  the  debt  shall  become  payable,  the  mortgagee, 
after  the  happening  of  this  contingency,  cannot  be  compelled  to 
accept  the  interest  or  instalment  due,  and  yield  his  claim  for  the 
whole  amount.^  In  such  case  courts  of  equity  have  no  power  to 
relieve  against  the  default  and  its  consequences.'^  It  is  no  ground 
for  such  relief  that  the  mortgagor  was  unable  to  find  the  holder 
of  the  mortgage  until  the  time  of  payment  had  passed.*  Of 
course  there  would  be  relief  if  the  payment  was  prevented  by 
fraud  on  the  part  of  the  mortgage  creditor. 

It  is  not  essential  that  the  interest  clause,  or  option  clause,  as 
it  is  sometimes  called,  should  be  contained  in  the  note  or  bond  as 
well  as  the  mortgage,  to  make  it  effectual,  inasmuch  as  "both  in- 
struments are  to  be  construed  together.^ 

Van  Wagner,  37  Barb.  (N.  Y.)  60;  Crane  thing  thereinbefore  contained  to  the  con- 

V.  Ward,  Clarke  (N.  Y.),  393.  trary  thereof  in  anywise  notwithstanding, 

The  following  is  a  form  of  the  interest  as  by  the  said  bond  or  obligation,  and  the 

clause  frequently  used  : —  condition  thereof,  reference  being  thereto 

"It   is   hereby    expressly  agreed,  that,  had,  may  more  fully  ajipear." 

should  any  default  be  made  in  the  pay-  i  Jesup  u.  City  Bank  of  Racine,  14  Wis. 

mcnt  of  the  said  interest,  or  of  any  part  331. 

thereof,  on  any  day  whereon  the  same  is  ^  Yov  construction  of  interest  clauses, 

made  payable,  as  above  expressed  ;   and  sec  §§  1179-1186. 

should  the  same  remain  unpaid  and  in  ar-  ^  Malcolm  i\  Allen,  49  N.  Y.  448;  Ru- 

rear  for  the  space  of            days,  then,  and  bens  v.  I'rindle,   44  Barb.    (N.  Y.)  336; 

from   thenceforth, —  tliat  is  to  say,  after  Brodcrick  i'.  Smith,  26  lb.  539;  S.  C.  15 

the   la|)8e   of    the   said            days,  —  the  How.  Pr.  434  ;  Valentine  i>.  Van  Wagner, 

afore-said   principal  sum  of            dollars,  37  Barb.  (N.  Y.)  60;  S.  C.  23  How.  Pr. 

with   all    arrearage   of    interest   thereon,  400;  Hale  i;.  Gouverueur,  4  Edw.  (N.  Y.) 

shall,  at  the  option  of  the  said  party  of  the  207  ;  Ferris  v.  Ferris,  28  Barb.  (N.  Y.  29  ; 

second    part,  liis    executors,   admini>>tra-  <S'.  C.   16  How.  I'r.  102;  Bennett  v.   Sto- 

tors,  or  assigns,  become  and  be  duo  and  vonson,  53  N.  Y.  508. 

payable  iinmcdiately  thereafter,  although  ■♦  Dwight  v.  Webster,  32   Barb.  47  ;  5. 

the  period  aliove  limiti-d  for  the  payment  C.  19  Mow.  Pr.  349. 

thereof  may  not  then  Lave  expired,  any-  ''  Hchoounnikcr  v,  Taylor,  14  Wis.  313. 

57 


§§  77,  78.]        FORM   AND   REQUISITES   OF   A   MORTGAGE. 

77.  Payment  of  taxes.  —  The  mortgage  usually  provides  by 
way  of  covenant  or  condition  that  the  mortgagor  shall  pay  all 
taxes  and  assessments  levied  upon  the  premises.^  The  payment 
of  the  taxes  thus  becomes  as  obligatory  upon  the  debtor  as  the 
payment  of  the  mortgage  debt ;  and  upon  his  failure  to  pay  them, 
the  mortgagee  may  pay  them,  and  have  the  amount  included  in 
any  judgment  that  he  may  afterwards  obtain  upon  the  mortgage. 
Sometimes  the  mortgage  provides  that  such  taxes,  when  paid  by 
the  mortgagee,  shall  become  a  part  of  the  mortgage  debt ;  but 
without  such  provision,  the  amount  so  paid  in  fact  becomes  a 
lien  under  the  mortgage.^  A  provision  that  the  mortgagee  may 
retain  from  the  proceeds  of  a  sale  under  the  mortgage  all  charges 
and  expenses  incurred  by  reason  of  any  failure  of  the  mortgagor 
to  perform  the  condition  and  covenants  of  the  mortgage,  includes 
payments  for  taxes  and  the  like. 

A  stipulation  in  a  mortgage  that,  upon  a  failure  to  pay  the 
taxes  levied  upon  the  premises,  the  principal  debt  shall  become 
immediately  due  and  payable,  is  valid.  It  is  similar  to  the  pro- 
vision very  common  in  mortgages,  and  generally  sustained,  that 
the  principal  shall  become  due  on  a  failure  to  pay  the  interest 
promptly.^ 

This  covenant  cannot  be  enforced  after  the  debt  is  discharged. 
It  expires  with  the  mortgage.  The  effect  upon  the  covenant  is 
the  same  whether  the  mortgagor  voluntarily  pays  the  mortgage 
debt,  or  whether  it  is  paid  by  the  mortgagee's  buying  in  the 
mortgaged  premises  at  a  foreclosure  sale.  If,  therefore,  the 
mortgagee  purchase  at  the  sale  for  less  than  the  debt,  and  the 
deficiency  bef  paid  by  the  mortgagor,  he  cannot  afterwards  be 
compelled  to  pay  to  the  mortgagee  the  amount  the  latter  has 
been  obliged  to  pay  to  redeem  the  premises  from  sales  for  taxes 
assessed  while  the  mortgage  was  in  force.  The  covenant  to  pay 
taxes,  being  part  and  parcel  of  the  mortgage,  expires  with  it.* 

78.  Insurance. —  It  is  usually  a  condition  of  the  mortgage, 
also,  that  the  mortgagor  shall  keep  the  buildings  upon  the  mort- 
gaged premises  insured  against  fire  in    a   certain    sum    for   the 

1  It  is  in  Maryland  provided  by  statute  should  be  a  lien  on  the  land  ;  but  the  court 
that  there  may  be  such  a  covenant.  Pub.  declare  that  without  the  statute  the  mort- 
Gen.  Laws  1860,  art.  64,  §  4.  gagee  would  probably  have  this  right,  in 

2  See  §§  358,  636,  1134,  1597,  and  also  order  to  keep  his  security  perfect.  And 
Stanclifi  v.  Norton,  11  Kans.  218.  see  Sharp  v.  Barker,  11  Kans.  381. 

This  decision  had  reference  to  a  statute         ^  Stanclift  v.  Norton,  sitpi-a. 
then  in  force  declaring  that  taxes  so  paid        *  Hitchcock  v.  Merrick,  18  Wis.  357. 

58 


SPECIAL   STIPULATIONS.  [§  79. 

benefit  of  the  mortgagee,  at  such  insurance  office  as  he  may  ap- 
prove.^ A  breach  of  this  condition,  or  of  the  condition  to  pay 
taxes  assessed  upon  the  premises,  is  as  effectual  in  giving  the 
mortgagee  a  right  to  enforce  his  mortgage  as  is  a  breach  of  the 
condition  to  pay  an  instalment  of  interest  or  principal,  or  the 
whole  principal  debt. 

IV.  Special  Stipulations. 

79.  Special  provisions  of  various  kinds,  to  suit  the  conven- 
ience of  the  parties,  may  be  inserted  in  the  mortgage.  Among 
those  most  frequently  used  is  a  provision  that  upon  making  cer- 
tain payments  the  mortgagor  shall  be  entitled  to  have  certain 
portions  of  the  mortgaged  premises  released  from  the  operation 
of  the  mortgage  ;  or  a  provision  that  the  mortgagor  may  pay  the 
whole  or  a  part  of  the  debt,  at  his  option,  before  the  time  fixed 
for  the  payment  of  it.  A  provision  in  a  mortgage,  reserving  to 
the  mortgagor  "  the  right  to  pay  all  or  any  part  of  said  indebt- 
edness, at  any  time  during  the  present  year,  in  current  paper 
funds,"  does  not  restrict  him  to  a  single  payment  of  the  entire 
amount  due,  but  authorizes  partial  payments  at  different  times 
during  the  year  ;  and,  the  mortgage  having  been  made  in  Ala- 
bama, during  the  rebellion,  payments  were  authorized  in  treasury 
notes  of  the  Confederate  States,  notwithstanding  their  great  de- 
preciation,^ 

A  stipulation  for  partial  releases  of  lots  embraced  in  the  mort- 
gage upon  the  payment  of  stipulated  sums,  "provided  that  the 
covenants  and  conditions  of  said  mortgage  shall  be  faithfully  kept 
and  performed  "  by  the  mortgagor,  can  be  enforced  only  upon 
strict  performance  of  the  conditions,  and  making  all  payments  of 
principal  and  interest  as  they  become  due.  Such  a  covenant  run- 
ning only  to  the  mortgagor,  without  mention  of  his  assigns,  is 
personal  in  character,  and  cannot  be  enforced  by  a  purchaser 
from  him."^  A  stipulation  that  in  case  the  mortgagor  should  be 
able  to  sell  the  premises  or  mortgage  them  to  another,  so  as  to 
pay  off  the  mortgage  debt,  the  mortgagee  should  reconvey  to 
him,  so  as  to  enable  him  to  carry  out  the  transaction,  does  not 
confer  upon  him  a  power  of  sale,  for  he  had  that  already,  but 
operates  as  a  covenant  to  reconvey  for  the  purpose  named.^     A 

1  Sec  chapter  XVIII.,  on  iNsunANCE.  rele.iso   of   portions  of   the  property,  soo 

2  Stalworth  v.  Blum,  41  Ala.  319.  Brij,'ham  v.  Avery,  48  Vt.  002. 

8  Pierce  v.  Kiiceiand,  10  Wis.  072.  ♦  Coding  v.  Taylor,  10  III.  457. 

For  couslruciion  of  other  provisions  for  59 


§  80.]  FORM   AND   REQUISITES   OF   A   MORTGAGE. 

reservation  by  a  mortgagor  of  "  the  privilege  of  selling  said  land 
at  any  time,  and  to  appropriate  the  proceeds  first  to  the  payment 
of  the  mortgage  debt,"  enables  him  to  contract  for  a  sale  of  the 
land,  and  to  compel  the  mortgagee  to  credit  the  proceeds  upon 
the  debt.  But  while  the  mortgagor  has  no  power  either  to  con- 
vey the  land,  or  to  receive  the 'proceeds  of  a  sale  of  it,  the  mort- 
gagee is  bound  to  make  the  proper  conveyance,  and  to  receive  and 
credit  tlie  proceeds.^ 

80.  Mortgagor's  possession.  —  The  provision,  now  almost 
universally  inserted  in  mortgages,  that,  until  default  in  the  per- 
formance of  the  condition  of  the  deed,  the  mortgagor  may  hold 
the  premises,  was  formerly  exceptional.^  In  1819,  Chief  Justice 
Parker  said  that  such  a  provision  was  seldom  seen  in  Massachu- 
setts.^ In  another  case  in  this  state  the  same  year,  the  court  say 
that  although  parties  intend  that  the  mortgagor  shall  remain  in 
possession,  yet  they  go  on  making  mortgages  without  any  cove- 
nant respecting  the  possession.*  Evidemie  of  the  intention  of  the 
parties,  or  of  their  agreement  at  the  time  of  making  the  mortgage, 
that  the  mortgagor  should  continue  in  possession  until  he  should 
fail  to  perform  the  condition,  cannot  be  received  to  control  the 
settled  rule  of  law,  that  without  such  provision  the  mortgagee  is 
entitled  to  immediate  possession. 

But  although  the  mortgagor's  right  of  possession  be  not  ex- 
pressly provided  for,  he  is  entitled  to  it,  if  the  condition  of  the 
mortgage  be  such  as  to  imply  his  possession  for  the  purpose  of 
performing  it.^  When  the  mortgagor's  right  of  possession  is  pro- 
vided for,  or  necessarily  implied,  the  mortgagee  cannot  enter  until 
default,  and  cannot,  until  he  has  made  actual  entry,  or  brought 
suit  for  possession,  give  an}'^  one  else  the  right  to  occupy,  and  ex- 
clude the  owner  of  the  equity.^ 

1  Frierson  v.  Blanton,  1  Bax.  (Tenn.)     breach  of  the  condition,  when  there  is  no 
272.  agreement  to  the   contrary,  but  in  such 

2  §  667.  case  he  must  account  for  the  rents   and 
8  Smith  V.  Dyer,  16  Mass.  18,  24.  profits.     Gen.  Stat.  ch.  140,  §  9. 

*  Colman  v.  Packard,  16  Mass.  39,  40.  ^  §§  339  668,  702;  Wales  v.  Mellen,  1 

In  Massachusetts  it  is  provided  that  the  Gray  (Mass.),  512,  and  cases  cited;  Clay 

statutes  relating  to  foreclosure  shall  not  v.  Wren,  .34  Me.  187. 

prevent  the  mortgagee's  entering  on  the  ^  Silloway  j;.  Brown,  12  Allen  (Mass.), 

premises  or  lecovering  possession   before  30. 

60 


EXECUTION   AND   DELIVERY.  [§§  81-83. 

V.  Execution  and  Delivery. 

81.  Sealing  is  a  formality  essential  to  the  execution  of  any 
legal  conveyance  of  real  estate.  In  some  states  it  is  provided  by 
statute  that  a  scroll  may  be  used  in  place  of  a  seal,  but  this  un- 
seemly substitute  for  the  ancient  formality  is  only  another'  for- 
mality none  the  less  requisite.^  A  mortgage  executed  without 
a  seal,  except  in  a  few  states  where  it  is  not  required,  is  not  a 
legal  mortgage.  In  equity  it  amounts  to  a  compact  for  a  mort- 
gage, and  as  such  creates  no  lien  as  against  purchasers  from  the 
mortgagor,  or  as  against  his  creditors,  or  even  against  an  assignee 
under  a  general  assignment  for  the  benefit  of  creditors.^ 

Signing  is  the  act  which  imparts  life  to  the  deed.  Although 
the  most  essential  thing  of  all  in  the  execution  of  the  deed,  it  is 
a  matter  so  much  of  course  that  it  hardly  need  be  mentioned 
among  the  requisites.  A  mortgagor  is  bound  by  a  signature  of 
his  name  made  by  another  person  in  his  presence  and  by  his 
direction.  If  his  name  be  subscribed  by  another  in  his  absence 
he  may  adopt  the  signature  as  his  own.^  His  acknowledgment  of 
the  deed  is  a  sufficient  recognition  of  it.^ 

82.  Witnesses.  —  The  statutes  of  several  states  provide  that 
mortgages  and  other  conveyances  of  real  estate  shall  be  attested 
by  witnesses,  two  being  required  in  some  states,  one  in  others, 
and  in  still  others  none  at  all ;  ^  but  this  requirement,  like  that 
for  the  acknowledgment  of  deeds,  has  reference  chiefly  to  the 
recording  of  them,  and  does  not  affect  the  validity  of  the  instru- 
ments as  between  the  parties  if  not  observed.®  Although  a  mort- 
gage defectively  executed  in  this  respect  is  not  a  legal  mortgage, 
it  may  be  enforced  in  equity.''' 

83.  An  acknowledgment  is  essential  in  order  to  admit  a  deed 

^  See  §  531.  much  more  questionable  import."    4  Cora. 

Chancellor  Kent  says  :  "  Whether  land  453. 

should  be  conveyed  by  writing  signed  by  ^  Erwin    i;.    Shuey,   8    Ohio   St.    509 ; 

the   grantor  only,  or  by  writing  signed,  Bloom  v.  Noggle,  4  lb.  45. 

scaled,  and  delivered  by  the  grantor,  may  3  Fouch  v.  Wilson,  59  Ind.  93.     As  to 

be  a  proper  subject  for  municipal  regula-'  what  is  a  sufficient  signing,  see  Zunu  v. 

tiou;  but  to  abolish  the  use  of  seals  by  lialler,  71  Ind.  13G. 

the  Bub.stituteof  tim  flourish  of  a  pen,  and  *  Bartittt  i^.  Drake,  100  Mass.  174. 

yet  continue  to  call  the  instrument  which  ^  See  §  632. 

ha.s  such  a  substitute  a  deed   or  writing  6  Gardner  c.  Moore,  51  Ga.  2G8 ;  Baker 

scaled  and  delivered,  within  liie  purview  v.  Clark,  'yj.  Midi.  "22. 

of  the  common  or  the  statute  law  of  the  '  Lake  v.  i)oud,  10  Ohio,  415. 
land,  Bcenut  to  bo  a  misnomer,  and  is  of 

61 


§  83  a.]  FORM   AND   REQUISITES   OF  A  MORTGAGE. 

to  record,  but  is  not  otherwise  necessary  as  between  the  parties. 
This  subject  being  fully  treated  of  elsewhere,  it  is  introduced  here 
with  special  reference  to  stating  that  before  the  deed  is  acknowl- 
edged the  execution  of  it  must  be  complete  in  every  other  respect.^ 
The  acknowledgment  is  the  final  act  before  the  delivery  of  the 
deed, -and  must  be  made  of  a  completed  deed.  There  can  be  no 
valid  acknowledgment  of  a  mortgage  until  all  material  parts  of 
the  instrument  are  written  in,  such  for  instance  as  the  name  of 
the  grantee,  and  the  amount  of  the  lien.^ 

Tills  rule  applies  with  particular  force  to  acknowledgments 
made  by  married  women,  where  the  law  protects  them  by  requir- 
ing a  separate  examination  by  the  magistrate  who  takes  the  ac- 
knowledgment.^ In  a  case  where  a  wife  so  acknowledged  an 
instrument  intended  to  be  a  mortgage  of  her  separate  lands,  while 
there  were  blanks  for  the  insertion  of  the  mortgagee's  name  and 
the  sum  borrowed,  it  was  urged  that  she  should  be  estopped  from 
denying  that  she  had  signed  and  acknowledged  the  mortgage. 
But  Mr.  Justice  Nelson  said :  "  The  answer  to  this  is,  that  to  per- 
mit an  estoppel  to  operate  against  her  would  be  a  virtual  repeal 
of  the  statute  that  extends  to  her  this  protection,  and  also  a 
denial  of  the  disability  of  the  common  law  that  forbids  the  con- 
veyance of  her  real  estate  by  procuration.  It  would  introduce 
into  law  an  entirely  new  system  of  conveyances  of  the  real  prop- 
erty of  feme  coverts.  Instead  of  the  transaction  being  a  real  one 
in  conformity  with  established  law,  conveyances  by  signing  and 
acknowledging  blank  sheets  of  paper  would  be  the  only  formal- 
ities requisite.  .  .  .  The  diflBculty  here  is  not  in  the  form  of  the 
acknowledgment,  but  that  it  applied  to  a  nonentity,  and  was, 
therefore,  nugatory.  The  truth  is,  that  the  acknowledgment  in 
this  case  might  as  well  have  been  taken  and  made  on  a  separate 
piece  of  paper,  and  at  some  subsequent  period  attached  by  the 
officer,  or  some  other  person,  to  a  deed  that  had  never  been  before 
the  feme  covert.^'' 

83  a.  A  homestead  right  can  be  barred  only  by  complying 
strictly  with  the  statute  prescribing  the  mode  of  alienation.  If 
the  statute  provides  that  the  homestead  release  shall  be  made  by 
the  joint  deed  of  the  husband  and  wife,  the  wife  cannot  release 
her  homestead  right   by  her  separate   deed.*      Under  a  statute 

1  See  §  533.  3  Drury  v.  Foster,  supra.    Followed  in 

2  Drury  v.  Foster,  2  Wall.  24.  McQuie  v.  Peay,  58  Mo.  56, 

*  Dickiusou  v.  McLane,  57  N.  H.  31 ; 

62 


EXECUTION   AND   DELIVERY.  [§  84. 

which  provides  that  the  homestead  release  shall  be  by  joint  con- 
sent of  husband  and  wife,  if  the  husband  executes  a  mortgage 
and  signs  his  wife's  name  to  it,  and  procures  a  fraudulent  aci^nowl- 
edgnient  of  it  in  her  name,  the  wife  cannot  subsequently  ratify 
the  mortgage  by  executing  a  separate  release.^ 

84.  A  delivery  and  acceptance  of  the  mortgage  are  essen- 
tial to  its  validity.  If  not  delivered  directly  to  tlie  mortgagee 
or  his  agent,  but  to  a  third  person  not  authorized  to  act  for  him, 
it  is  essential  to  show  the  subsequent  acceptance  of  it  by  the 
mortgagee,  or  else  to  show  notice  to  him  of  the  existence  of  the 
mortgage,  and  such  additional  circumstances  as  will  afford  a  rea- 
sonable presumption  of  his  acceptance  of  it.  Such  presumption, 
as  against  others  who  may  acquire  an  interest  in  the  property, 
does  not  arise  merely  from  the  fact  that  the  mortgage  would  be 
beneficial  to  him.^  Until  there  be  something  more  to  show  the 
grantee's  acceptance,  the  presumption  of  it  only  exists  for  his 
benefit  as  against  the  grantor,  his  heirs,  devisees,  and  ordinary 
creditors.^  The  possession  of  the  deed  by  the  mortgagee  is  pre- 
sumptive evidence  of  his  accejitance  of  it.*  Proceedings  by  him 
to  enforce  the  title,  or  his  release  of  it,  are  conclusive  of  his  ac- 
ceptance.° 

Without  delivery  there  is  no  mortgage.^  It  takes  effect  only 
from  the  time  of  its  delivery.'^  That  a  mortgage  has  been  re- 
corded raises  no  presumption  of  its  delivery  to  the  mortgagee 
against  his  denial  of  it.  An  actual  delivery  is  not  necessary,  but 
there  must  be  some  act  which  in  legal  contemplation  is  equivalent 
to  this.^  A  subsequent  attempt  by  the  mortgagee  to  enforce  the 
mortgage  may  be  relied  upon  to  show  an  acceptance  as  between 
the  parties.'^ 

Poole    V.    Geirard,    6    Cal.    71  ;    Ott    v.  Moody  i'.  Drydcu  (Iowa),  34  N.  W.  Rep. 

Spragiie,  27   Kans.   620.     In  the  latter  210. 

case  it  was  said  that  it  might  be  that  a         ^  jjgH  ^^  Farmers'  Bauk  of  Ky.  supra. 
husband  and   wife,  by    two   separate    in-         *  Chandler  v.  Temple,  4  Cii^h.  (Mass.) 

strumcnts,  could  alienate  the  homestead  285;  Wolverton  v.  Collins,  34  Iowa,  238. 
when  it  was  intended  by  both  that  such         ^  Ely    v.    Stannnrd,     44    Conn.    528; 

instruinenis  should  operate  together  as  a  Crocker  v.  Lowenthal,  83  111.  579. 
single  instrument.  "^  Croft  i'.  Bunster,  9  Wis.  503;  Free- 

1  Howell  V.  McCrie,  14  Pac.  Rep.  257.  man  v.   Peay,  23  Ark.  439  ;   lioadley  v. 

2  Bell  V.  Farmers'  Bunk  of  Ky.  1 1  Bush,  Iladhiv,  48  Ind.  452  ;  Houfes  v.  Schultze, 
(Ky.),  34  ;  Tuttle  v.  Turner,  28  Tex.  759 ;  2  Bradw.  (III.)  19G.     See  §  539. 

Evani  V.  White,  53  Ind.  1  ;  Freenuin  v.  "^  Millikcn  v.  Ham,  30  Iiid.  If.C. 
Peay,  23  Atk.  439;  Ruckmnn  v.  Huck-  *  Foley  v.  Howard,  8  Iowa,  5G. 
man  (C.  C.  N.  J.  1881),  C  Fed.  Rep.  225;         o  Aldrich  v.  Willis,  55  Cal.  81, 

G3 


§  85.]  FORM   AND   REQUISITES   OF   A   MORTGAGE. 

Delivery  may  be  made  to  an  agent.  When  the  mortgage  is  to 
a  corporation,  a  delivery  to  any  officer  or  attorney  who  customarily 
acts  for  it  in  such  matters  is  sufficient.^  An  agent  authorized  to 
sell  land  is  authorized  to  accept  delivery  of  a  mortgage  in  part 
payment  of  the  purchase  money,  unless  it  clearly  appears  that  it 
was  delivered  to  him  for  some  other  purpose.^  A  delivery  of  a 
trust  deed  to  the  cestui  que  trust  is  a  sufficient  delivery  to  the 
trustee.  His  acting  under  the  trust  by  advertising  the  property 
for  sale  is  an  acceptance  of  the  trust  by  him,  although  he  may  not 
have  had  possession  of  the  deed.^ 

The  fact  of  delivery  may  be  shown  by  other  writings  of  the 
parties,  in  which  reference  is  made  to  the  mortgage  as  an  existing 
security  ;  or  by  their  subsequent  acts  with  reference  to  it.^ 

If  it  appear  that  a  note  and  mortgage  have  been  executed  and 
left  where  the  mortgagee  could  readily  obtain  wrongful  possession 
of  them  and  negotiate  them,  the  maker's  negligence  might  pre- 
vent his  setting  up  the  defence  that  they  have  no  legal  existence.^ 
If  a  mortgage  be  so  disposed  of  as  to  evince  clearly  the  intention 
of  the  parties  that  it  should  take  effect  as  such,  there  is  a  suffi- 
cient deli  very  .*" 

85.  A  subsequent  acceptance  by  the  mortgagee  of  a  mort- 
gage delivered  to  the  recording  officer,  or  to  an  unauthorized  third 
person,  gives  effect  to  it  from  the  time  of  the  first  delivery,  as 
between  the  parties  to  it ;  but  as  to  persons  who  have  acquired 
title  to  the  property,  or  an  interest  in  it,  or  lien  upon  it,  through 
or  under  the  mortgagor  before  the  time  of  the  actual  acceptance 
of  the  deed  by  the  mortgagee,  the  subsequent  acceptance  gives 
effect  to  the  deed  only  from  the  time  of  such  acceptance."  In 
the  mean  time  an  attachment  of  the  property  as  belonging  to  the 
grantor,^  or  a  judgment  lien  upon  his  property,  will  prevail.^ 
The  acceptance  cannot  relate  back  so  as  to  defeat  the  intervening 
lien.io 

When  a  mortgage  has  been  executed  and  tendered  in  compli- 

1  Patterson  v.  Ball,  19  Wis.  243.  «  Nazro  v.  Ware  (Minn.),  38  N.  W.  Rep. 

2  Alierly   v.   Vilas,   21    Wis.   88.     See     359. 

§  539.  ^  §§  540,  541 ;  Moody  v.  Dryden  (Iowa), 

3  Crocker  v  Lowerthal,  83  111.  579.  34  N.  W.  Rep.  210. 

*  Truman  v.  McCollum,  20  Wis.  360;  8  Belli;.  Farmers'  Bank  of  Ky.  11  Bu&h 

Renken  v.  Bellmer,  55  Cul.  466.  (Ky.),  34. 

5  See  Tisher  v.  Beckwith,  30  Wis.  55 ;  ^  Woodbury  v.  Fisher,  20  lud.  387. 

5.  C.  11  Am.  Rep.  546.  ^°  Goodsell  v.  Stinson,  7  Blackf.  (Ind.) 


437. 


64 


EXECUTION   AND   DELIVERY.  [§  86. 

ance  with  an  agreement  of  a  debtor  to  make  a  mortgage,  and  the 
creditor  refuses  to  accept  the  mortgage  as  a  compliance  with  the 
agreement,  and  directs  his  agent  to  procui-e  a  mortgage  that  will 
meet  the  terms  of  the  agreement,  the  creditor  cannot  afterwards 
accept  the  mortgage  without  the  debtor's  consent.^ 

It  is  sufficient  proof  of  the  delivery  of  a  mortgage  that  it  was 
filed  for  record  by  the  mortgagor,  and  was  afterwards  foujid  in  the 
mortgagee's  possession.-  The  subsequent  acceptance  of  it  ratities 
the  act  and  gives  it  effect  from  the  time  it  was  filed  for  record.^ 

86.  A  mortgage  made  for  the  purpose  of  being  sold  is  not 
a  lien  in  the  mortgagee's  hands  as  against  subsequent  purchasers 
or  lien  creditors,  except  from  the  time  the  advances  are  actually 
made  upon  it,  either  by  the  mortgagee  or  his  assignee.  An  en- 
gagement on  the  part  of  the  mortgagee,  or  another,  to  advance 
the  money  in  the  future,  would  be  a  consideration  for  the  making 
of  it  sufficient  to  support  it  against  other  liens  from  the  time  of 
its  delivery  and  record.  An  assignee  with  notice  that  the  mort- 
gage  was  originally  given  without  consideration,  for  the  purpose 
of  raising  money  by  a  subsequent  sale,  is  put  upon  inquiry  as  to 
whether  there  were  any  liens  intervening  between  its  date  and 
his  purchase.  The  fact  that  the  mortgagor  negotiates  the  sale  of 
the  mortgage  is  a  circumstance  that  should  put  the  purchaser 
upon  inquiry.'^ 

Where  a  mortgage  is  made  for  the  purpose  of  raising  money 
for  the  mortgagor,  and  is  recorded  without  any  delivery  to  the 
nominal  mortgagee,  and  before  it  is  assigned  and  delivered  to  one 
who  subsequently  buys  it  another  person  acquires  a  lien  upon 
the  mortgaged  premises,  the  latter  has  priority.  The  mortgage 
in  such  case  has  life  and  validity  only  from  the  time  of  its  assign- 
ment and  delivery  to  the  assignee  for  value;  and  it  can  have  no 
retroactive  operation  so  as  to  prejudice  others  who  have  acquired 
rights  in  the  mean  time.  It  is  immaterial  in  tliis  respect  that 
the  assignee,  before  taking  the  assignment,  required  and  obtained 
from  the  mortgagor  an  affidavit  that  the  mortgagee  advanced  the 
whole  sum  of  principal  secured  by  the  mortgage  without  abate- 
ment, and  that  there  was  no  offset,  or  defence  to  it.^ 

A  mortgage  made  to  a  person  who  is  entirely  ignorant  of  the 
transaction,  and  never  ratified  it  or  claimed  any  interest  in  it,  the 

1  Aflams  V.  Johnson,  41  Miss.  258.  »  Carnull  v.  Duval,  su/ira. 

2  Habkill  V.  Sevier,  25  Ark.  152;  Car-         *  Miilli-on's  Kstnto,  68  I'a.  St.  212. 
nail  V.  Duvul,  22  Ark.  13C.  t.  Seliufer  v.  RaiUy,  50  N.  Y.  61. 

VOL.    I.  5  (J5 


§§  87,  88.]        FORM   AND   REQUISITES   OF  A   MORTGAGE. 

money  loaned  being  advanced  by  a  person  who  at  the  time  had 
no  authority  to  act  for  the  nominal  mortgagee,  is  fictitious  and 
void  in  law,  and  equity  will  not  decree  a  foreclosure  of  the  mort- 
gage though  the  person  who  advanced  the  money  acted  in  good 
faith.i 

87.  A  delivery  in  escro-w  is  suflBcient,  and  the  fact  that  the 
depositar.y  was  at  the  time  an  agent  of  the  mortgagee,  or  where 
the  mortgagee  is  a  corporation  the  fact  that  he  was  then  a  direc- 
tor of  it,  does  not  prevent  his  holding  in  escrow. ^ 

A  mortgage  and  note  placed  in  the  hands  of  a  third  person,  to 
be  delivered  to  the  mortgagee  upon  the  happening  of  a  certain 
event,  and  delivered  by  him  without  authority,  without  waiting 
for  such  event,  are  invalid,  and  cannot  be  enforced  even  by  a  bond 
fide  holder  for  value.^  There  is  in  such  case  no  delivery  of  the 
note  and  mortgage,  and  they  have  never  had  a  legal  existence. 
A  promissory  note,  although  it  be  negotiable,  can  have  no  legal 
inception  without  a  delivery  of  it,  and  the  rules  of  commercial 
paper  do  not  apply  in  such  case  ;  these  can  operate  only  after  the 
paper  has  a  valid  existence.  As  in  the  case  of  a  forged  note,  or 
of  one  purloined  from  the  maker,  the  inquiry  goes  back  of  all 
considerations  of  negotiability,  and  the  effect  of  that,  to  the  exist- 
ence of  the  paper  as  a  legal  obligation.  A  mortgage  without 
consideration,  deposited  to  await  the  performance  of  conditions 
which  would  make  a  consideration  for  it,  cannot  be  made  opera- 
tive by  a  fraudulent  delivery  before  the  performance  of  the  con- 
ditions, and  without  the  mortgagor's  consent.  The  njortgage  in 
such  case  never  becomes  operative  at  all.  It  is  void  from  the 
beginning.* 

88.  Acceptance  of  cestui  que  trust  presumed.  —  In  the  ex- 
ecution of  a  trust  deed  to  secure  a  debt  it  is  not  necessary  that  the 
cestui  que  trust  should  sign  it,  or  in  any  way  assent  to  it  in  writ- 
ing.^ The  deed  passes  the  legal  title  as  soon  as  it  is  executed  by 
the  grantor  and  trustee,  and  can  be  avoided  only  by  the  dissent, 
express  or  implied,  of  the  creditor. 

1  Shirley  i;.Burch(Oreg.),  18  Pac.  Rep.  As  to  the  right  of  the  mortgngor  to 
351.  withdraw   a   deed   left  as  an  escrow,  he- 

2  Andrews  v.  Thayer,  30  Wis.  228.  fore    acceptance    by   the    mortgagee,   see 

3  Chipmiin  v.  Tucker,  38  Wis.  43,  and  McDonald  v.  HufT  (Cal.),  18  Pac.  Rep. 
cases  cited;  S.  C.  20  Am.  R.  1.  243. 

*  Powell  V.  Conant,  33  Mich.  396.     See         ^  Skipwith   v.    Cunningham,   8   Leigh 
Bnrson  v.  Huntington,  21  Mich.  415;  An-     (Va.),  271. 
drews  v.  Thayer,  30  Wis.  228. 
66 


FILLING   BLANKS,  MAKING    ALTERATIONS,  AND   REFORMING.    [§§  89,  90. 

89.  The  date.  —  A  mortgage  is  not  invalid,  altbongh  it  is  not 
dated,  or  has  a  false  date,  or  an  impossible  one,  as,  for  instance, 
February  30th,  provided  the  real  day  of  its  date  or  delivery  can 
be  proved.  The  date,  being  no  part  of  the  substance  of  the  deed, 
may  be  contradicted.  The  true  date  or  time  of  execution  may 
be  shown  by  parol  evidence  in  contradiction  of  the  date  as  it 
appears  by  the  deed  or  by  record. ^  It  is  said  that  there  is  a  pre- 
sumption that  a  mortgage  was  executed  and  delivered  on  the  day 
of  its  date,  arising  from  the  due  execution,  acknowledgment,  and 
record  of  it.^  The  date  of  the  acknowledgment,  together  with 
other  circumstances  appearing  upon  the  face  of  the  deed,  may  be 
sufficient  to  rebut  this  inference.'^  If  the  date  of  the  mortgage  be 
later  than  that  of  the  acknowledgment,  it  may  be  shown  that  the 
date  of  the  acknowledgment  is  erroneous,  and  that  the  mortgage 
was  not  acknowledged  until  after  it  was  executed.*  The  date 
may  be  implied  from  the  date  of  the  note  secured.^ 

VI.   Filling  Blanks,  3Iaking  Alterations,  and  Reforming. 

90.  The  filling  of  blanks  after  execution.  —  A  blank  form  of 
mortgage  signed  and  acknowledged,  and  afterwards  filled  up  in 
the  signer's  absence  by  another  person  without  written  authority, 
so  as  to  make  it  a  mortgage  on  land  owned  by  the  person  signing 
the  paper,  is  not  a  deed  in  writing  valid  to  pass  an  estate  in  land 
under  the  statute  of  frauds.^  The  ancient  doctrine  of  the  common 
law,  as  stated  in  Sheppard's  Touchstone,^  is,  that  "  Every  deed 
well  made  must  be  written  ;  i.  e.  the  agreement  must  be  jdl  writ- 
ten before  the  sealing  and  delivery  of  it;  for  if  a  man  seal  and 
deliver  an  empty  piece  of  paper  or  parchment,  albeit  he  do  there- 
withal give  commandment  that  an  obligation  or  other  matter  shall 
be  written  in  it,  and  this  be  done  accordingly,  yet  this  is  no  good 
deed."  This  remains  the  law  in  England,^  and  is  generally  sup- 
ported by  the  authorities  in  this  country.^ 

1  Parke  v.  Nceley,  90  Pa.  St.  52.  6  Ayrcs  v.  Probasco,  14  Kans.  175,  juul 

2  Lyon  I'.  Mcllvaine,  24  Iowa,  9 ;  Sav-     cases  cited. 
ery  v.  Browning,  18  Iowa,  246;  Parke  v.         ^  Paj,'e  54. 

Nceley,  su/ira.  8  Hibhlcwhite  v.  M'Morine,  6  M.  &  W. 

*  Parke  r.  Neelcy,  «u;)ra.  200;    Davidson  v.  Cooper,  11   M.  &   W. 

*  Hoit  V.  KuBsell,  56  N.  H.  559.  778,  793.     These  cases  distinctly  overrule 
'  Woolsey  i;.  Jones  (Altt.),  4  So.  Rep.  Texira  v.  Evans,  cited  and  stated  liy  VVil- 

190.  son,  J.,  in  Master  i\  Miller,  1  Auslr.  225, 

'  The  doctrine  that  written  autiiority     blanks  in  a  deed  after  execution  is   do- 
is  rcquibiie  for  the  filling   up  of  material     clared  in  :  — 

67" 


§90.] 


FORM   AND   REQUISITES   OF  A   MORTGAGE. 


"The  filling  of  tlie  blanlcs,"  said    Mr.  Justice  Chapman  in  a 
case  in  which  this  rule  of  the  common  law  was  asserted  by  the 

as  follows  :  Evans  wanted  to  borrow  £400,  on  the  bond  ;  Texira  lent  £200  on  it,  and 

or  so  much  of  it  as  his  credit  should  be  the  agent  accordingly  filled  up  the  blanks 

able  to  raise;    for   this   purpose  he  exe-  with  that  sum  and  Texira's  name,  and  de- 

cuted  a  bond,  with  blanks  for  the  name  livered  the  bond  to  him.     On  non  est  fac- 

and  sum,  and  sent  an  agent  to  raise  money  turn,  Lord  Mansfield  held  it  a  good  deed. 


Arkansas  :  Cross  v.  State  Bank,  5  Ark. 
525. 
•  California:  Upton  v.  Archer, 41  Cal. 85. 

Georgia:  Ingram?;.  Little,  14  Ga.  173. 

Illinois :  People  v.  Organ,  27  111.  27  ; 
Chase  v.  Palmer,  29  111.  306  ;  Whitaker 
V.  Miller,  83  111.  381  ;  Wilson  v.  South 
Park  Commissioners,  70  111.  46 ;  McNab 
V.  Young,  81  111.  11. 

Indiana :  Richmond  Manuf.  Co.  v.  Da- 
vis, 7  Blackf.  (Ind.)  412. 

Kansas  :  Ay  res  v.  Probasco,  14  Kans.  175. 

Kentucky :  Cummins  v.  Cassily,  5  B. 
Men.  74. 

Maine  :  South  Berwick  v.  Huntress,  53 
Me.  89,  where  many  cases  are  cited. 

Maryland:  Byers  v.  McClanahan,  6 
Gill  &  J.  250. 

Massachusetts  :  Burns  v.  Lynde,  6  Al- 
len, 305. 

Mississippi :  Williams  v.  Crutcher,  5 
How.  71. 

North  Carolina:  Graham  v.  Holt,  3 
Ired.  L.  300. 

OMo :  Ayres  v.  Harness,  1  Ohio,  368. 

Oregon:  Shirley  v.  Burch,  IS  Pac.  liep. 
351. 

Tennessee  :  Gilbert  v.  Anthony,  1  Yerg. 
69  ;  Mosby  v.  Arkansas,  4  Sneed,  324. 

Virginia :  Preston  v.  Hull,  23  Gratt. 
600. 

But  the  authority  of  Texira  v.  Evans 
has  been  adopted  by  some  authorities  in 
this  country :  Ex  parte  Kerwin,  8  Cow. 
(N.  Y.)  118;  Chauncey  r.  Arnold,  24  N. 
Y.  330,  where  the  earlier  cases  in  New 
York  are  cited  ;  and  although  the  doctrine 
of  Texira  v.  Evans  is  spoken  of  by  Mr. 
Justice  Smith  as  the  settled  doctrine  in 
that  state,  yet  Mr.  Justice  Denio  speaks 
with  apparent  approval  of  the  English 
cases  overruling  the  "  looser  doctrine  "  of 
that  case.  In  the  case  before  the  court, 
the  question  whether  the  mortgagee's 
name  could  be  fill-ed  in  by  oue  acting  for 

68 


the  mortgaj^or  under  parol  auihority,  was 
left  undecided;  for  in  that  case  the  name 
of  the  lender  was  not  filled  iu  at  all ;  and 
it  was  held  that  the  mortgage  was  ineffec- 
tual as  security  in  the  hands  of  one  who 
had  advanced  money  upon  it  iu  that  con- 
dition. See,  also  Campbell  v.  Smith,  8 
Hun  (N.  Y),  6;  71  N.  Y.  26. 

The  authority  of  Texira  v.  Evans  has 
also  been  followed  in  South  Carolina: 
Duncan  v.  Hodges,  4  McCord  (S.  C), 
239;  Gourdin  v.  Commander,  6  Rich. 
497. 

It  was  followed  in  the  earlier  cases  in 
Pennsylvania:  Wiley  v.  Moor,  17  S.  &  R. 
438;  but  in  Wallace  v.  Harinstad,  15  Pa. 
St.  462,  Chief  Justice  Gibson  said  that 
Texira  v.  Evans  could  only  he  sustained 
on  the  ground  that  the  obligor  had  es- 
topped himself  by  an  act  in  puis  ;  which  is 
in  effect  to  wholly  discard  the  doctrine  of 
the  case. 

There  is  a  dictum  by  Mr.  Justice  Nel- 
son, of  the  Supreme  Court  of  the  United 
States,  followed  by  AVagner,  J.,  in  Mis- 
souri, that  a  person  competent  to  convey 
real  estate  may  sign  a  deed  in  blank  and 
authorize  an  agent  to  fill  it  up;  but  it  was 
held  in  both  cases  that  a  married  woman 
could  not  make  such  a  conveyance  of  her 
separate  estate,  having  no  authority  tc 
delegate  such  powers.  Drury  v.  Foster,  i 
Wall.  24 ;  McQuie  v.  Peay,  58  Mo.  56. 

It  is  followed,  also,  in  "Wisconsin  :  Van 
Etta  V.  Evanson,  28  Wis.  33;  VHet  v. 
Camp,  13  Wis.  198. 

In  Van  Etta  v.  Evanson,  supra,  where 
it  was  held  that  the  name  of  the  mort- 
gagee might  be  filled  in  by  an  agent  after 
the  execution  of  the  mortgage,  the  ground 
was  taken  that  the  fact  of  the  delivery  of 
the  paper  to  the  agent  sufficiently  showed 
the  intention  that  he  should  supply  the 
name  of  the  person  who  might  take  the 
mortgage. 


FILLING   BLANKS,  MAKING   ALTERATIONS,  AND   REFORMING.    [§  91. 

Supreme  Court  of  Massachusetts,^  "  created  the  substantial  parts 
of  the  instrument  itself ;  as  much  so  as  the  signing  and  sealing. 
If  such  an  act  can  be  done  under  a  parol  agreement,  in  the 
absence  of  the  grantor,  its  effect  must  be  to  overthrow  the  doc- 
trine that  an  authority  to  make  a  deed  must  be  given  by  deed. 
We  do  not  think  such  a  change  of  the  ancient  common  law  has 
been  made  in  this  commonwealth,  or  that  the  policy  of  our  legis- 
lation favors  it,  or  that  sound  policy  would  dictate  such  a  change. 
Our  statutes,  which  provide  for  the  conveyance  of  real  estate  by 
deed  acknowledged  and  recorded,  and  for  the  acknowledgment 
and  recoi'ding  of  powers  of  attorney  for  making  deeds,  are  evi- 
dently based  on  the  ancient  doctrines  of  the  common  law  respect- 
ing the  execution  of  deeds  ;  and  a  valuable  and  important  purpose 
which  these  doctrines  still  serve  is,  to  guard  against  mistakes 
which  are  likely  to  arise  out  of  verbal  arrangements,  from  misun- 
derstanding and  defect  of  memory,  even  where  there  is  no  fraud. 
...  If  this  method  of  executing  deeds  is  sanctioned,  it  will  follow 
that,  though  the  defendant  has  a  regularly  executed  deed,  yet  it 
remains  to  be  settled  by  parol  evidence  whether  he  ought  to  have 
been  the  grantee,  what  land  should  have  been  described,  whether 
the  deed  should  have  been  absolute  or  conditional,  and,  if  condi- 
tional, what  the  terms  of  the  condition  should  have  been.  To 
leave  titles  to  real  estate  subject  to  such  disputes  would  subject 
them  to  great  and  needless  insecurity." 

91.  Written  authority  is  essential  for  filling  any  blank 
which  materially  affects  the  meaning  and  operation  of  a  deed. 
If  any  such  blank  be  filled  after  execution  by  another  person  hav- 
ing only  verbal  authority,  unless  the  instrument  be  redelivered 
and  acknowledged  anew,  it  is  void.  Such  authority  to  another  to 
fill  up  an  instrument  or  any  material  part  of  it  after  its  execution 
is  sufficient  in  case  of  a  simple  contract,  but  not  for  filling  up  a 
sealed  instrument.  The  stream  can  never  rise  higher  than  its 
source.  Authority  to  make  an  instrument  under  seal,  or  to  affix 
a  seal  to  it,  must  be  given  by  an  instrument  of  equal  authority.^ 

J  Biirns  V.  Lynde,  6  Allen  (Mass.),  305.  declared.     Upon  tlio  point  under  consid- 

2  Upton  V.  Archer,  41  Cal.  85.  eration  Mr.  Justice  Staples  said  :    "  If  tho 

In  a  case  recently  before  the  Court  of  name  of  the  obligee  may  be  in.sertcd,  why 

Api.fids  in  Virginia  (Preston  v.  Hull,  23  may  not  the  sum  also;  and  if  these  may 

Gnitt.  COO),  where   the   filling  in  of  the  he  supplied,  why  not  the  nioro  formal  parts 

name  of  an  obligee  in  a  bond,  after  the  of  tho  deed  ?     If  we  once  depart  from  tie 

execution  of  it,  was  held  to  render  it  in-  rule,  how  is  the  line  to  be  drawn  consis- 

vttlid,  the  doctrine  of  the  text  was  fully  tcnily  with  the  preservation  of  any  rule  at 

69 


§§  92,  93.]        FORM   AND   REQUISITES   OF  A   MORTGAGE. 

The  name  of  the  grantee  or  mortgagee  cannot  be  properly  filled 
in  after  execution  of  the  instrument.  Such  name  may,  however, 
be  filled  in  by  the  officer  taking  the  acknowledgment  of  the  deed, 
before  the  delivery  of  it  to  the  grantee.^ 

Where  the  mortgagor  after  the  execution  of  the  deed  by  his 
wife,  without  her  knowledge,  inserts  the  description  of  additional 
property,  the  mortgage  is  a  valid  lien  upon  the  property  originally 
covered  by  it;  and  though  it  would  ordinarily  be  valid  as  to  the 
additional  property  against  the  husband,  it  is  not  so  when  the 
additional  property  is  a  homestead,  for  the  conveyance  of  which 
it  is  necessary  that  husband  and  wife  should  join.^ 

92.  The  mortgagor  may  be  estopped  from  taking  advan- 
tage of  the  irregular  execution  through  the  filling  of  blanks  by 
some  one  not  authorized  in  writing,  by  his  acts  in  relation  to  the 
transaction.  But  the  mere  fact  that  he  has  enjoyed  the  benefit 
of  the  money  obtained  upon  it,  or  a  portion  of  the  money,  is  not 
by  itself  a  sufficient  ground  upon  which  to  found  an  equitable  es- 
toppel. Thus  where  a  deed  was  so  filled  up  and  delivered  to  the 
grantee,  who  was  ignorant  of  any  irregularity  in  the  execution  of 
it,  and  the  grantors  being  fully  advised  of  the  delivery  of  the 
deed  permitted  the  grantee  to  enter  into  possession  and  make 
improvements,  and  became  his  tenants  and  paid  him  rent,  they 
were  not  allowed  to  claim  that  the  deed  was  void  by  reason  of 
such  irregularity.^  Objection  that  a  deed  was  executed  in  blank, 
and  the  name  of  the  grantee  inserted  after  delivery,  can  only  be 
taken  by  the  grantor,  or  by  some  one  claiming  through  him,  or  in 
his  right.^ 

93.  A  mortgagee  invoking  the  aid  of  estoppel  must  show 
that  he  has  been  vigilant  and  careful  in  the  protection  of  his  own 
rights  and  interests.  No  protection  will  be  given  him  against  his 
own  negligence  and  folly .^     To  avail  himself  of  the  acts  or  ad- 

alll  If  we  say  that  the  name  or  snm  may  ^  Knnggs  v.  Mastin,  9  Kans.  532. 
be  inserted  by  the  agent,  will  it  not  lead  *  McNab  v.  Young,  supra. 
us  inevitably  to  the  doctrine  that  the  en-  ^  Ay  res  v.  Probasco,  14  Kans.  175,  190, 
tire  deed  maybe  executed  by  the  agent  197.  Mr.  Justice  Valentine  said  :"  Where 
also  ?  We  shall  be  carried  on  step  by  step,  a  person  negligently  or  knowingly  puts  it 
if  we  mean  to  be  consistent,  until  we  have  within  the  power  of  some  other  person  to 
destroyed  all  the  well  settled  distinctions  swindle  and  defraud  him,  and  he  is  there- 
between sealed  and  unsealed  instruments. '*  by  swindled  and  defrauded,  he  is  generally 
i  McNab  V.  Young,  81  111.  11.  allowed  to  suffer  the  consequences  of  his 
"  Van  Horn  v.  Bell,  11  Iowa,  465.  See  own  negligence  and  folly."  In  the  case 
White  V.  Owen,  30  Gratt.  (Va.)  43  ;  Jen-  before  the  court,  the  mortgagee,  through 
kinsr.  Simmons  (Kans.),  15  Pac.Eep.  522.  his   agent,  knew  that  the  mortgage  was 

70 


FILLING   BLANKS,   MAKING   ALTERATIONS,    AND   REFORMING.        [§  94. 

missions  of  the  mortgagor,  he  must  have  been  ignorant  of  the 
irreguhirity  in  the  execution  of  the  mortgage,  and  must  have 
taken  it  with  good  reason  to  suppose  it  was  properly  executed. 

Moreover,  the  subsequent  acts  of  the  mortgagor  are  no  admis- 
sion or  ratification  of  the  giving  of  the  mortgage,  unless  the  facts 
of  the  transaction  be  known  to  him.^  He  cannot  ratify  a  thing 
that  he  does  not  know  the  existence  of,  and  cannot  be  estopped 
by  acts  he  never  performed. 

94.  A  material  alteration  of  a  mortgage  made  without  the 
consent  of  the  mortgagor  by  the  holder  of  it,  or  by  any  one  after 
delivery,  and  while  in  the  possession  or  custody  of  the  rightful 
owner  of  it,  has  the  effect  of  destroying  and  annulling  the  instru- 
ment as  between  the  parties  to  it.^  An  alteration  by  a  mere 
stranger  without  tlie  knowledge  or  consent  of  the  holder,  and 
while  it  is  out  of  his  custody,  does  not  have  this  effect. ^  This 
principle  was  applied  to  making  void  a  mortgage  altered  under 
the  following  circumstances:  A  married  woman,  being  the  owner 
of  a  house  and  lot,  known  as  lot  H,  executed  a  mortgage  to  se- 
cure her  husband's  debt,  in  consideration  of  the  extension  of  the 
time  of  payment.  The  mortgage,  however,  did  not  describe  her 
property,  but  described  a  lot  known  as  lot  26.  After  the  delivery 
of  the  deed  the  error  was  discovered,  and  the  mortsfasee's  attor- 
ney  took  the  mortgage  to  the  husband  and  his  attorney  for  cor- 
rection. The  words,  "  being  the  same  property  conveyed  to  the 
party  of  the  first  part,"  etc.,  describing  the  deed  to  the  mort- 
gagor of  lot  H,  were  added  to  the  description  contained  in  the 
mortg.ige,  by  the  husband's  attorney,  in  the  presence  of  the  attor- 
ney of  the  mortgagee,  without  consulting  the  wife  in  regard  to 
the  alteration,  and  she  had  no  knowledge  of  tlie  change  until  suit 

executed  in  blank  and  afterwards  filled  up  to  be  filled  up  as  it  was  in  fact  filled  up, 
in  the  absence  of  the  wife,  whose  land  it  or  ever  afterward  knew  that  the  same  was 
was  intended  to  mortgage,  inasmuch  as  so  filled  up,  or  ever  knew  that  it  was  de- 
the  dceil  was  filled  up  in  the  agent's  pre?-  livered  to  Probasco  as  the  mortgagee,  or 
ence.  When  the  mortgage  so  executed  ever  performed  an  act  which  could  he  con- 
was  offered  to  him  he  should  have  said  :  sirued  into  a  ratification  of  the  instru- 
"  I  know  tliat  mortga;,'e  is  void  as  a  mort-  ment." 

gage  of  Mrs.  Ayres  ;  I  will,  tlierefore,  not  '^  Marcy  v.  Duniaj),  5  Lans.  (N.  Y.)  365  ; 

receive  it.     You  must  furnish  me  a  better  Waring  y.  Smyih,  2  IJarh.  Ch.  1 1"J  ;  Meyer 

mortgage  if  you  want  the  money."  r.  llnneke,  55  N.  Y.  412  ;  Kusscll  v.  licod 

'  In    the    same  case,  in    illustration    of  (Minn.),  .31  N.  W.  Rep.  452. 

this  point,  the  same  justice  .said  :  "There  **  Marcy  v.  Dunlap,  supni,  per  Johnson, 

is  no  evidence  showing  that  Mrs.  Ayres  J.,  and  cases  cited. 
ever  beforehand  authorized  said  mortgage 

71 


§§  95,  96.]         FORM   AND   REQUISITES   OF  A   MORTGAGE. 

was  brought  to  reform  and  foreclose  the  mortgage.     It  was  held 
that  the  suit  could  not  be  maintained  for  either  purpose.^ 

95.  An  alteration  of  an  instrument  which  does  not  change 
its  legal  effect  does  not  in  law  amount  to  an  alteration,  and  of 
course  does  not  invalidate  it  either  at  law  or  in  equity.^  An 
alteration  which  does  change  the  legal  effect  of  the  deed  may  at 
any  time  be  made  by  consent  of  both  parties  to  it ;  thus  it  has 
been  held,  that  authority  given  in  a  mortgage  to  the  recorder  to 
insert  a  portion  of  the  description  omitted,  when  it  could  be  ob- 
tained, is  equivalent  to  a  power  of  attorney  to  make  such  addi- 
tion, and  that  a  subsequent  incumbrancer  could  not  object  to  the 
exercise  of  this  power.^  It  would  seem,  nevertheless,  that  the 
description  given  in  the  mortgage  to  warrant  such  a  filling  up 
must  be  sufficient  to  indicate  the  property  with  such  certainty 
that  the  lien  upon  it  would  exist  without  such  further  description. 

A  mortgage  is  not  rendered  invalid  by  the  grantee's  fraudu- 
lently adding  the  name  of  the  mortgagor's  wife  in  release  of 
dower.*  It  is  valid  as  against  the  husband  without  the  wife's 
signatui-e.  The  title  to  the  property  passes  and  vests  in  the 
grantee  by  the  execution  of  the  deed,  and  the  subsequent  altera- 
tion or  destruction  of  the  instrument  does  not  affect  this  title. 

96.  The  terms  of  a  mortgage  cannot  be  varied  by  any 
verbal  agreement  or  understanding  of  the  parties  anterior  to  the 

1  Marcy  y.  Dunlap,5Laws,  (N.  Y.)365.  if  it  only  makes  clear  what  was  the  evi- 

2  Goodenow  V.  Curtis,  33  Mich.  505.  dent  intention  of  the  parties,  the  law  will 
As  to  burden  of  proof  to  show  whether  an  presume  that  it  was  made  in  good  faith, 
interlineation  was   made   before  or  after  and  before  execution." 

execution,  see  Cox  v.  Palmer,  1  McCrary,  3  Harshey  v.  Blackmarr,  20  Iowa,  161. 

341,  where  McCrary,  J.,  said  :  "  If  the  in-  The  description  was  as  follows  :  — 

terlineation  is  in  itself  suspicious,  as,  if  it  "  We,  J.  L.  Blackmarr  and  Belinda  (his 

appears   to  be   contrary   to  the  probable  wife),  sell  and  convey  unto  John  Harshey, 

meaning  of  the  instrument  as  it  stood  be-  etc.,  the  following  described  premises,  in 

fore  tlie  insertion  of  the  interlined  words  ;  Marshall   County,  Iowa,   to   wit  :  ei<^hty 

or  if  it  is    in  a  handwriting  different  from  acres  of  land,  bought  of  Rev.  James  M. 

the  body  of  the  instrument,  or  appears  to  Holland,  lying  ten  miles  southward  from 

have  been  written  with  different  ink,  —  in  Marsballtown,  in  Marshall  County,  Iowa  ; 

all  such  cases,  if  the  court  considers  the  in-  and  so  soon  as  the  numbers  of  the  above 

terlineation  suspicious  on  its  face,  the  pre-  land  are  obtained,  we  agree  that  tliey  shall 

sumption  will  be  that  it  was  an  unauthor-  be  inserted  in  this  deed,  as  our  own  vol- 

ized  alteration   after  execution.     On  the  untary  act,  and  the  recorder  of  Marshall 

other  hand,  if  the  interlineation  appears  in  County  is  instructed  to  do  the  same  for 

the  same  handwriting  with  the  original  in-  us." 

strument,  and  bears  no  evidence  on  its  face  *  Kendall  v.  Kendall,  12  Allen  (Mass.), 

of  having  been  made  subsequent  to  the  ex-  92. 
ecution  of  the  instrument,  and  especially 

72 


FILLING   BLANKS,   MAKING   ALTERATIONS,   AND   REFORMING.    [§  97. 

execution  of  it.  It  cannot  rest  partly  in  writing  and  partly  in 
parol.  No  evidence  of'  the  acts  or  conversation  of  the  parties 
prior  to  the  execution  of  the  mortgage,  or  at  the  time  of  it,  can 
be  admitted  to  contradict  or  vary  the  instrument.^  The  fact 
that  a  mortgagor,  before  the  signing  of  the  mortgage,  objected  to 
the  terms  of  it,  and  desired  to  reserve  a  certain  portion  of  the 
property  included  in  it,  cannot  be  received  to  vary  the  effect  of 
it.^  Even  an  agreement  of  the  parties,  at  the  time  of  the  execu- 
tion of  the  mortgage,  that  it  should  not  be  a  lien  upon  certain 
portions  of  the  property  included  in  it,  would  have  no  effect 
against  the  terms  of  it. 

The  terms  of  the  mortgage  may,  however,  be  varied  by  a  writ- 
ten agreement  executed  at  the  time  of  the  mortgage.  Such  an 
agreement  then  becomes  in  fact  a  part  of  the  mortgage,  and  the 
two  instruments  must  be  construed  together.^ 

97.  Reforming  the  mortgage,  —  Whenever  there  has  been  a 
materiid  omission  or  mistake  in  the  deed,  so  that  it  fails  to  ex- 
press what  the  parties  intended,  a  court  of  equity  may,  as  between 
the  parties,  reform  and  correct  it  in  accordance  with  the  transac- 
tion as  it  was  actually  agreed  upon.*  Thus,  for  instance,  when 
part  of  th6  lands  agreed  to  be  mortgaged  were  omitted  in  the 
mortgage  deed,  it  may  be  so  reformed  as  to  include  them.^  And 
so,  on  the  other  hand,  if  by  mistake  it  include  land  not  belonging 
to  the  grantor,^  or  other  land  of  his  not  intended  to  be  included, 
the  description  may  be  reformed.  A  material  mistake  in  any 
part  of  the  deed,  as,  for  instance,  the  description  of  the  land,'  in 
the  condition,^  or  in  the  estate  conveyed,  the  word  successors  hav- 
ing been  used  instead  of  heirs,  may  be  reformed.^  But  the  court 
will  not  correct  a  mere  error  of  statement  as  to  the  origin  of  the 
mortgagor's  title,  when  the  deed  is  effectual  as  it  stands. ^"^ 

A  mortgage  may  be  reformed  by  inserting  the  name  of  tlie 
mortgagee  when  this  has  been  omitted  by  mistake,  and  it  appears 
upon  the  face  of  the  mortgage  that  the  consideration  moved  from 

^   Quartermous  v.   Kennedj',   29    Ark.  ^  Blo.lgett  v-  Ilobart,  18  Vt.  414  ;  Hunt 

544.  v.  Hunt,  38  Mich.  161. 

2  Patterson  v.  Taylor,  1.5  Flu.  .330.  0  Riihlinf,'  v.  Ilackctt,  1  Nev.  300. 

8  Pitz(;r  V.  BiiriiH,  7  W.  Va.  63.  ■?  Snull  v.  Snell  (III.),  14  N.  E.  l?cp.C84- 

*  AniicrHon  )-.  HauKhman,  7  Mich.  69;  **  Wooden  r.  Hiivilaiid,    18   Conn.  101  ; 

Loomis  V.  Hudson,  18  Iowa,  416;  Men-  Mauatt  i».  Starr  (Iowa),  34  N.  W.  Ho]).  784. 

denhall  r.  Stocked,  47  Md.  4.")3  ;  McMillan  »  McMillan  v.  N.  Y.  Water  I'roof  I'apcr 

V.  N.  Y.  Water  I'roof  Paper  Co.  29  N.  J.  Cr).  supra  ;    V\A\   v.  N.    Y.  Water   I'roof 

Eq.  610.     See,  also,  §  1484.  Taper  Co.  29  N.  J.  Kq.  16. 

^^  Hathaway  v.  Juneau,  15  Wis.  262. 

73 


§  98.]  FORM  AND   REQUISITES   OF   A   MORTGAGE. 

the  complainant,  that  it  was  given  to  secure  a  debt  due  to  him, 
and  tluit  the  omission  of  the  name  was  a  mere  oversiglit.^ 

When  a  mistake  is  clearly  shown,  a  claim  by  the  adverse  party 
of  misapprehension  on  his  part  will  not  be  regarded.^  But  the 
fact  of  mistake  must  be  shown  beyond  a  reasonable  doubt ;  ^  as 
also  what  the  parties  really  intended.*  "The  proof  of  mistake 
must  be  clear  and  certain  before  an  instrument  can  be  reformed  ; 
as  the  object  of  the  reformation  of  an  instrument  is  to  make  it 
express  what  the  minds  of  the  parties  to  it  had  met  upon,  and 
what  they  intended  to  express,  and  supposed  they  had  expressed, 
in  the  writing.  Unless  this  meeting  of  minds,  and  mistake  in 
expressing  it,  is  made  quite  clear  and  certain  by  evidence,  the 
court,  should  it  undertake  to  reform,  might,  under  color  of  refor- 
mation, make  a  contract  for  the  parties  which  both  never  as- 
sented to,  or  intended  to  make."^  The  mistake,  to  be  the  sub- 
ject of  reformation,  must  be  not  merely  the  oversight  of  one  of 
the  parties,  but  such  that  the  deed  fails  to  express  what  was 
intended  and  agreed  upon  by  both  parties.^  The  court  will  not 
reform  a  deed  so  as  to  add  to  it  a  new  condition  not  contem- 
plated by  one  of  the  parties  in  the  execution  of  it ; "  it  will  not 
make  it  include  what  was  intended  by  one  party,  unless  it  appear 
that  the  other  party  at  the  time  had  the  same  intention  ;  or  un- 
less the  other  party  fraudulently  induced  him  to  believe  the 
mortgage  contained  what  he  asks  to  have  it  made  to  include  ;  as 
where  the  mortgagor  by  false  and  fraudulent  representations  in- 
duced the  mortgagee  to  believe,  when  he  loaned  the  money  and 
accepted  the  mortgage,  that  it  covered  more  and  other  land  and 
buildings  than  it  did,  the  mortgage  was  reformed,  and  enforced 
against  the  lands  fraudulently  omitted.^ 

The  right  to  have  a  deed  reformed  may  be  lost  by  laches.^ 
98.  Who  may  obtain  reformation.  —  A  mortgagee  who  has 
sold   the   note  and  mortgage,  and  afterwards  bought  them  back 
again,  has  the  same  right  to  have  a  mistake  corrected  as  he  had 

1  Parlin  v.  Stone,  1  McCrary,  443.  '  Hart  i^.  Hart,  23  Iowa,  599,  where  the 

2  Wooden  v.  Havihind,  18  Conn.  101.  court  refused  to  reform  a  mortgage  for 

3  Hervey  v.  Savery,  48  Iowa,  313  ;  Bod-  support,  so  as  to  require  the  mortgagee  to 
well  V.  Heaton  (Kans.),  18  Pac.  Rep.  901.  live  at  a  particular  place. 

*  Turner  v.  Hart  (D.  C.  Ky.  1880),  1  ^  Dg  Peyster  v.  Hasbrouck,  II   N.  Y. 

Fed.  Rep.  295.  582 ;  and  see  Rider  v.  Powell,  28  N.  Y. 

^  Per  Johnson,  J.,  in  Marcy  v.  Dunlap,  310. 

5  Lans.  (N.  Y.)  365,  370 ;  and  see  Alex-  ^  Paulison  v.  Van  Iderstine,   29  N.  J. 

ander  v.  Caldwell,  55  Ala.  517.  Eq.  594.     See  First  Nat.  Bank  v.  Gough, 

6  Barker  v.  Harlan,  3  Lea  (Tenn.),  505.  61  lud.  147. 

74 


FILLING   BLANKS,   MAKING   ALTERATIONS,   AND   REFORMING.      [§  99. 

before  he  made  the  transfer,  if  he  indorsed  the  note  at  the  time 
of  the  sale.i  He  may  have  the  raistake  corrected  upon  its  dis- 
covery for  the  first  time  after  lie  has  purchased  the  land  under 
a  foreclosure  sale,  and  taken  possession  as  purchaser.^  But  the 
court  will  not  reform  a  description  in  a  mortgage  deed  at  the 
suit  of  another  who  has  become  purchaser  at  a  sale  by  the  mort- 
gagee.^ 

The  party  desiring  a  reform  of  a  deed  should  bring  a  bill  in 
equity  for  the  purpose.  A  mortgagor  cannot  ask  for  this  relief  in 
answer  to  a  bill  to  foreclose  ;  but  he  may  file  a  cross-bill.*  The 
mortgagee  may  ask  for  a  reformation  of  the  mortgage  in  a  bill  to 
foreclose  it.^ 

99.  Against  whoni  it  may  be  had.  —  A  mistake  in  the  de- 
scription of  the  land  may  be  corrected  as  between  the  parties, 
but  courts  of  equity  can  grant  no  relief  as  against  one  who  has 
purchased  the  property  in  good  faith  and  for  a  valuable  considera- 
tion ;  and  consequently  a  bill  which  seeks  to  do  this  is  defective 
when  it  fails  to  allege  that  the  purchaser  took  the  land  with 
notice  of  the  mistake.^  It  is  obvious,  however,  that  a  purchaser 
with  notice  stands  in  no  better  position  than  the  mortgagor  him- 
self.'' As  against  a  purchaser  at  an  execution  sale,  notice  of  the 
mistake  before  or  at  the  sale  is  sufficient.^  The  mortgagor's  as- 
signee in  bankruptcy  is  not  in  the  position  of  a  purchaser  for 
value  without  notice,  and  therefore  the  mortgage  may  be  reformed 
as  against  him.^ 

A  mortgage  cannot  be  reformed  as  against  a  prior  judgment 
creditor  ;  but  if,  having  notice  of  the  proceeding,  and  of  a  decree 
for  the  sale  of  the  property  free  of  incumbrances,  he  omits  to  pro- 
tect his  rights,  and  the  property  is  sold  under  such  deci'ee,  he 
cannot  afterwards  assert  his  rights  as  against  the  purchaser.^'' 

1  Kennard  v.  George,  44  N.  H.  440.  Ford  v.  Daniels   (Midi.),  38  N.  W.  Rep. 

2  Davenport  v.  Sovil,  6  Ohio  St.  459.     708. 

See  Firbt]  Nat.  Bank  v.  Gough,]  61    lud.  '  Gale  v.  Morris,  29  N.J.  Eq.  222  ;  Rut- 

147.  ger.s  v.   Kingsland,  7  N.  J.  Eq.  (3  Ilalat.) 

3  Haley  v.  Baglcy,  37  Mo.  363.  178,  658  ;  Fielder  i'.  Vainer,  45  Ala.  429  ; 
*  French  v.  Griffin,  18  N.  J.  Eq  279.  lliihling  v.  Hackctt,  1  Nev.  360;  Strang 
^  Alexander  v.  Rea,  50  Ala.  450;  Mil-  v.  Beaeh,  11  Oliio  St.  283;  Hunt  v.  Hunt, 

ler  V.  Kulb,  47  Ind.  220  ;  §  1464.  38  Miili.  161.     See,  however,  Goodniiin  v. 

6  Sickmon  f.  Wood,  69  111.329;  Reeves  Ramlall,  44  Conn.  321  ;  Maiiatt  i;.  Starr 

V.   Vinackc,   1    MeCrary,   213;   EiiHter   v.  (Iowa),  34  N.  W.  Hep.  784. 

Severin,  64  Ind.  375  ;  Munford  v.  Miller,  »  Williiiins  v.  llaieh,  38  Ala.  338. 

7  Bradw.  (III.)  62  ;  MrLontli   v.  Hurt,  51  «  Schul/.c  r.  Bolting,  8  Biss.  174 

Tex.  115;  Fitch  v.  Boycr,  51  Tex.  336;  i'^  Fowler  v.  Hart,  U  How.  G73. 

75 


§§  100.]  FORM   AND   REQUISITES   OF  A   MORTGAGE, 

A  mistake  in  the  mortgage  of  a  married  woman  in  a  matter  of 
description  merely  may  be  reformed.^  A  homestead  waiver  is 
not  affected  by  a  reformation  of  the  description  of  the  land.^  A 
mortgage  may  be  reformed  as  against  a  junior  mortgagee  whose 
mortgage  was  taken  without  notice  of  such  a  mistake,  as  security 
for  an  antecedent  debt,  without  the  surrender  of  any  old  security, 
and  without  any  new  consideration  moving  from  him,^  in  a  state 
where  such  a  purchaser  is  not  considered  a  purchaser  for  value.* 
The  mistake  may  be  corrected,  too,  against  a  subsequent  judg- 
ment creditor ;  ^  but  not  against  a  purchaser  of  a  subsequent 
judgment,  who  has  invested  his  money  in  the  purchase  of  the 
judgment  upon  the  faith  of  the  apparent  lien  upon  the  land.^ 
The  equity  of  the  mortgagee  is  regarded  as  stronger  than  that 
of  the  judgment  creditor,  who  has  not,  probably,  parted  with 
his  money  on  the  faith  of  the  apparent  facts.  But  when  the 
judgment  has  been  sold  and  assigned  to  one  ignorant  of  the  mis- 
take in  the  mortgage,  and  who  has  expended  his  money  upon  the 
faith  of  the  rights  of  the  parties  as  they  appear  in  the  respective 
securities,  it  is  not  considered  that  there  is  any  superior  equity 
in  the  mortgagee." 

A  mortgage  as  between  the  parties  to  it  may  be  reformed  by 
affixing  a  seal  to  it ;  but  such  reformation  would  give  no  validity 
to  a  sale  made  by  virtue  of  a  power  contained  in  it.  The  sale 
would  be  a  nullity  for  want  of  any  authority  in  the  mortgagee  to 
make  it,  and  the  reformation  could  give  no  validity  to  a  trans- 
action originally  void.^ 

100.  On  proof  of  the  loss  of  a  mortgage  deed  without  record 
of  it  having  been  made,  the  court  may,  under  ordinary  circum- 
stances, decree  the  making  of  a  new  mortgage.^  This  may  be 
the  only  adequate  remedy,  and  without  it  the  mortgagee  may  be 
exposed  to  the  total  loss  of  his  security.  The  loss  of  deeds  is  a 
familiar  ground  of  equitable  relief. 

1  Carper  v.  Hunger,  62  Ind.  481  ;  ^  Flanders  v.  O'Brien,  46  Ind.  284 ; 
Hamar  v-  Medsker,  60  Ind.  413.     But  see     Wainwright  v.  Flanders,  supra. 

Petisch  V.  Hambach,  48  Wis.  443.  ^  Flanders  v.  O'Brien,  supra. 

2  Snell  V.  Snell  (111.),  14  N.  E.  Eep.  The  rule  is  otherwise,  however,  in  Ohio. 
684.  Van  Thorniley  v.  Peters,  26  Ohio  St.  471  ; 

3  Busenbarke  v.  Eamey,  53  Ind.  499.  White  v.  Uenman,  1  Ohio  St.  110;  S.  C. 

4  See  §  458.  16  Ohio,  59  ;  Hood  v.  Brown,  2  Ohio,  266. 
6  Sample  v.  Rowe,  24  Ind.  208  ;  White         ^  Springfield  Sav.  Bank  v.  Springfield 

V.  Wilson,  6  Blackf.  (Ind.)  448 ;  Brewster     Cong.  Soc.  127  Mass.  516. 

V.   Clamfit,   33   Ark.   72 ;  Wainwright  v.         ^  Lawrence  v.  Lawrence,  42  N.  H.  109, 

Flanders,  64  Ind.  306.  and  cases  cited. 

76 


FILLING   BLANKS,   MAKING   ALTERATIONS,   AND  REFORMING.      [§  101. 

101.  A  principle  of  construction  applicable  to  mortgages 
is,  that  inasmuch  as  the  mortgagor  is  supposed  to  make  his  own 
selection  of  words  and  terms  in  drawing  the  deed,  whenever  its 
language  is  equivocal  or  ambiguous,  it  is  construed  most  strongly 
against  him,  and  in  such  manner  as  to  make  it  a  valid  and  bind- 
ing security  for  the  mortgagee.^ 

Another  pi'inciple  of  construction  is,  that  the  intention  of  the 
parties  as  gathered  from  the  instrument  is  to  govern,  if  the  in- 
tention bd"  such  that  it  may  be  legally  enforced.  "  There  is  no 
doubt  that  the  intention  is  the  object  to  be  sought  for  in  con- 
struction. And  to  get  at  that,  the  situation  of  the  parties,  and 
the  nature  and  object  of  their  transactions,  may  be  looked  at. 
But  it  must  be  borne  in  mind  that  it  is  not  the  business  of  con- 
struction to  look  outside  of  the  instrument  to  get  at  the  intention 
of  the  parties,  and  then  carry  out  that  intention  whether  the  in- 
strument contains  language  sufficient  to  express  it  or  not ;  but 
the  sole  duty  of  construction  is  to  find  out  what  was  meant  by  the 
language  of  the  instrument."  ^  Where  property  is  exchanged 
by  deeds  and  one  grantee  gives  a  mortgage  upon  that  which  he 
receives,  to  secure  the  difference  in  value,  the  deeds  and  mortgage 
may  be  read  together  and  ■with  reference  to  the  circumstances,  in 
construing  the  intention  of  the  parties  ;  and  their  manifest  intent 
is  not  to  be  derogated  from  by  adhering  to  the  literal  terms  of 
the  papers.  Equity  regards  substance  rather  than  form,  and  en- 
forces the  actual  intent  if  lawful  and  just.^ 

1  Jerome  I'.  Hopkins,  2  Mich.  96,  100;  Co.  v.  Commercial  Bank  of  Racine,  15 
Stuart  V.  Worden,  42  Mich.  154.  Wis.  424,  438. 

2  Paine,  J.,  in  Farmers'  Loan  &  Trust        ^  Stuart  v.  Worden,  supra. 

77 


CHAPTER   III. 


THE   PAKTIES   TO  A  MORTGAGE. 
PART  I. 

WHO    MAY    GIVE    A    MORTGAGE. 


I.  Disability  of  insanity,  103. 
II.  Disability  of  infancy,  104,  105. 
III.  Married  women,  106-118. 


IV.  Tenants  in  common  of  partnership 

real  estate,  119-123. 
V.  Corporations,  124-12S. 
VI.  A  power  to  mortgage,  129,  130. 


102.  Legal  capacity  to  mortgage,  —  In  general,  any  person 
who  lias  a  legal  capacity  to  act  for  himself  may  make  a  mortgage 
of  his  property,  or  may  authorize  any  one  else  to  do  this  in  his 
behalf.  By  statutory  provisions  in  many  states,  guardians  or 
others  acting  for  infants,  insane  or  other  persons  without  legal 
capacity  to  act  for  themselves,  may  be  authorized,  upon  applica- 
tion to  court  showing  sufficient  cause,  to  convey  in  mortgage  the 
real  estate  of  their  wards.  Like  authority  is  sometimes  given  to 
trustees,  executors,  or  administrators,  although  not  having  title 
to  the  proj)erty  themselves,  but  only  authority  over  it  for  certain 
purposes,  and  acting  in  a  representative  capacity  in  respect  to  it, 
to  mortgage  it  for  the  benefit  of  the  parties  in  interest.  A  mort- 
gage made  by  an  executor  or  administrator  without  the  author- 
ity of  a  statute  is  void,  and  the  heirs  in  whom  is  vested  the  es- 
tate are  not  estopped  to  plead  the  invalidity  of  the  mortgnge  by 
reason  of  the  benefit  resulting  to  them  from  the  money  obtained 
upon  it.i  Such  mortgages  depend  upon  the  particular  provisions 
authorizing  them,  which  are  too  various  to  be  given  here.  It 
may  be  remarked,  however,  that  this  statutory  power  must  be 
exercised  strictly  for  the  purposes  for  which  it  is  given,  and  all 
the  requirements  of  the  statutes  in  regard  to  obtaining  and  ex- 
ercising the  authority  must  be  strictly  followed.^  But  when  the 
power  to  mortgage  has   been  granted  by  a  court  of   competent 

1  Black  V.  Dressell,  20  Kans.  153.  Wctherill  v.  Harris,  67  Ind.  452;  Merritt 

2  Edwards   v.  Taliafero,  34  Mich.  13;     v.  Simpson,  41  111.391. 

78 


WHO   MAY    GIVE  A   MORTGAGE.  [§  103. 

jurisdiction,  the  parties  to  the  mortgage  are  protected  by  the 
license  without  investigating  the  truth  of  the  facts  upon  whicli  it 
was  granted ;  their  truth  cannot  be  questioned  in  any  collateral 
proceeding.! 

A  corporation,  if  capable  of  holding  real  estate,  has,  like  a  per- 
son, the  power  of  conveying  it  in  mortgage,  unless  it  is  under 
some  disability  imposed  by  statute  or  implied  from  its  duties  to 
the  public.  But  while  a  person  capable  of  making  a  grant  may, 
if  he  choose,  employ  another  to  act  for  him,  a  corporation  must 
alwaj's  act  by  an  agent. 

Disabilities  are  either  natural,  as  in  the  case  of  insane  persons, 
or  legal,  as  in  the  case  of  married  women  and  corporations,  wliile 
the  disability  of  infancy  is  either  the  one  or  the  other,  according 
to  the  circumstances  of  the  case. 

T.  Bisahility  of  Insanity. 
103.  In  general  the  mortgage  of  an  insane  person  is  invalid 
as  against  the  mortgagor,  his  heirs  or  assigns,  unless  it  be  con- 
firmed by  him  when  of  sound  mind,  or  by  his  legally  constituted 
guardian,  or  by  his  heirs  or  devisees.  It  may  be  disaffirmed  with- 
out returning  the  consideration  money  to  the  mortgagee.^  A 
mortgage  made  by  one  who  was  insane  at  intervals  both  before 
and  after  the  execution  of  it,  as  to  its  validity,  depends  upon  the 
question  whether  he  was  sane  at  the  time ;  and  the  fact  of  his 
sanity  must  in  such  case  be  established  by  clear  and  satisfactory 
evideiice.3  If  the  mortgagor  at  the  time  he  executed  the  mort- 
gage comprehended  what  he  was  doing,  and  the  consequences  of 
his  acts,  it  will  be  held  valid,  if  it  be  fair  and  no  undue  advantage 
has  been  taken  of  him,  although  it  may  appear  probable  that 
there  were  times,  previous  to  the  execution  of  the  mortgage,  when 
be  might  not  have  had  sufficient  capacity,  on  account  of  a  disease 
which  would  not  be  uniform  in  its  influence  on  his  mind.*  But 
an  injunction  to  prevent  a  sale  by  a  mortgagee  was  made  perpet- 
ual, where  it  appeared  tiiat  the  mortgagor  was  in  a  condition 
verging  upon  insanity  through  habitual  drunkenness,  and  the 
mortgagee,  who  had  complete  power  over  him,  could  not  show 
that  he  had  given  any  consideration  for  the  mortgage.^ 

1  Griflin  V.  Johnsoi),  .-JT  Mich.  87.  »  Uipley  v.  I5;ibcock,  13  Wis.  425. 

2  lJn;;li;nti  V.  Faycrwciitlier  (Miis.s.),  10         *  D-Ay  v.  Secly,  17  Vt.  542. 

N.   K.    liep.    7.35  ;     Valpcy    v.  Ilea,   130         ^  Van  Horn  o.  Keenau,  28  111.  445. 

Mafls.   384 ;    Cliandlcr    v.    Simmons,    97 

MasH.  .508,  514.  79 


§  104.]  THE   PARTIES   TO  A   MORTGAGE. 

A  mortgage  made  by  one  who  bad  bad  periodical  recurrences  of 
insanity,  and  was  insane  at  tbe  time  be  gave  the  mortgage,  was 
set  aside,  tbougb  be  bad  all  along  managed  bis  own  alTairs  with 
average  correctness,  and  bad  been  treated  by  bis  neigbbors  as 
competent  to  do  business  even  wbile  tbey  considered  bim  of  un- 
sound mind,  and  tbougb  be  was  not  so  manifestly  insane  as  to 
make  tbe  conduct  of  tbe  mortgagee  fraudulent  in  making  tbe 
bargain  wliicb  it  was  meant  to  secure,  notwithstanding  tbe  latter 
bad  been  given  sufficient  warning  to  put  bim  on  bis  guard.^ 

A  mortgage  will  not  be  set  aside  on  account  of  tbe  weakness  of 
tbe  mortgagor's  intellect,  unless  advantage  bas  been  taken  of  such 
weakness  in  procuring  tbe  mortgage.  Tbis  rule  applies  to  tbe 
execution  of  a  deed.^ 

In  some  cases  parties  dealing  in  good  faitb  witb  insane  per- 
sons without  knowledge  of  their  insanity,  will  be  protected  in 
equity  to  tbe  extent  of  tbe  consideration  paid  ;  but  a  mortgage 
made  by  an  insane  person  without  any  consideration  will  not  be 
upheld  even  in  favor  of  an  assignee  of  the  mortgage  who  takes 
it  relying  upon  tbe  record,  without  knowledge  of  the  mortgagor's 
insanity.^ 

II.    Disability  of  Infancy. 

104.  An  infant  who  has  purchased  land,  and  given  back  a 
mortgage  for  the  purchase  money  or  a  part  of  it,  may,  upon  com- 
ing of  age,  avoid  the  transaction  ;  be  niay  relinquish  tbe  prop- 
erty and  reclaim  the  money  paid  on  account  of  it.*  But  if  be 
seeks  to  avoid  the  debt  and  mortgage,  be  must  surrender  and 
reconvey  the  property.  If  be  continue  to  bold  the  estate  and  to 
apply  it  to  bis  own  uses,  be  affirms  tbe  mortgage  and  makes  him- 
self legally  liable  for  its  payment.^  Tbe  contract  being  voidable 
only,  if  be  wishes  to  disaffirm  it,  he  must  do  so  promptly  upon 
coming  of  age.^     If  be  ratifies  tbe  conveyance  to  himself,  he  rati- 

1  Curtis  i\  Brownell,  42  Mich.  165.  Wis.  643  ;  Bigelow  v.  Kinney,  3  Vt.  353  ; 

2  Marmon  v.  Marmon,  47  Iowa,    121;  Hubbard  v,  Cummins,  1  Me.  11;  Young 
7  Eeporter,  302.  v.  McKee,  13  Mich.  552 ;  Henry  v.  Root, 

3  Hull  V.  Louth  (Ind.),  10  N.  E.  Rep.  33  N.   Y.   526,  553 ;    Lynde  v.  Budd,  2 
270.  Paige  (N.  Y.),  191;   Kitchen  v.  Lee,  11 

*  Willis   V.   Twambly,    13    Mass.    204.  lb.  107;  Coutant  v.  Servoss,  3  Barb.  (N. 

By  statute  in  Ohio  a  woman  of  the  age  of  Y.)  128;    Grace  v.  Whitehead,   7   Grant 

eighteen  years  may  execute  a  valid  con-  (U.  C.)  Ch.  591. 
veyance.     R.  S.  1880,  §§  4106,  4107.  Loomer  v.  Wheelwright,  3  Saudf.  (N. 

6  Roberts  v.  Wijxgiu,  1  N.  H.  73;  Rob-  Y.)    Ch.   135;  Featherston  v.  McDonell, 

bins  V.  Eaton,   10  N.  H.  561 ;   Badger  v.  15  U.  C.  C.  P.  162. 
Phinney,  15  Mass.  359  ;  Callis  v.  Day,  38 

80 


WHO   MAY   GIVE   A   MORTGAGE.  [§  105. 

fies  his  mortgage  for  the  purchase  money.  They  constitute  one 
transaction,  and  he  cannot  enjoy  the  one  without  being  bound 
by  the  other.i  He  is  not  allowed,  after  coming  of  age,  to  try  his 
chances  of  gaining  something  by  the  transaction,  and  then,  upon 
finding  that  he  cannot,  to  plead  his  disability.  If  an  action  to 
foreclose  the  mortgage  be  brought  after  his  coming  of  age,  and 
he  allows  a  decide  of  sale  to  be  entered,  he  cannot  then,  upon 
finding  there  is  a  deficiency  instead  of  a  surplus,  escape  liability 
for  it  by  setting  up  his  disability .^ 

105.  Ratification  of  infant's  mortgage,  —  A  mortgage  given 
by  an  infant,  being  as  a  general  rule  voidable  only  and  not  void, 
he  may,  on  coming  of  age,  ratify  it.  This  he  may  do  in  various 
ways.  The  mere  retaining  possession  of  land,  for  which  he  has 
given  a  mortgage  for  the  purchase  money,  is  a  ratification  of  the 
whole  transaction,  and  makes  him  liable  upon  the  mortgage.^ 
So  he  may,  on  coming  of  age,  make  any  other  mortgage  for  his 
benefit  good  and  effectual  by  recognizing  or  confirming  it.  His 
conveyance  of  the  same  land,  after  attaining  his  majority,  subject 
to  the  mortgage,  is  a  suflficient  confirmation  of  it.'*  A  subsequent 
execution  of  a  deed  to  a  third  person,  which  does  not  refer  to  the 
mortgage,  does  not  necessarily  amount  to  a  repudiation  of  the 
mortgage.^  And  so  a  will  made  by  one  after  coming  of  age, 
whereby  he  directed  the  payment  of  "  all  his  just  debts,"  is,  upon 
his  death,  a  sufficient  confirmation  of  a  mortgage  and  bond  exe- 
cuted during  his  infancy  to  secure  the  payment  of  borrowed 
money  .^ 

An  infant's  right  to  avoid  his  mortgage  is  a  personal  privilege 
of  the  infant  only,  and  cannot  be  availed  of  by  others.  Thus  his 
assignee  in  insolvency  is  not  permitted  to  disaffirm  a  mortgage 
made  by  the  insolvent  while  under  age,  and  not  ratified  or  af- 
firmed by  him  after  attaining  his  majority."  An  infant  may 
avoid   his  mortgage  upon  coming  of   age  without  returning  the 

»  Dana  v.  Coombs,  6  Me.  89  ;  Heath  v.  Y.),  191  ;  Phillips  v.  Green,  5  Mon.  (Ky.) 

West,  8  Fosu  (N.  II.)  101.  35.5;  Allen  v  Poole,  .54  Miss.  323.     Or  by 

2  Flynn  r.   Powers,  35  How.    (N.   Y.)  part  payment.    Keegan  v.  Cox,  116  Mass. 

Pr.  279  ;  S.  C.   aff.  30  II).  289  ;  Terry   v.  289. 

MtCliiitock,  41  Mich.  492.  6  Palmcr  v.   Miller,  25   Barb.  (N.  Y.) 

'-*  Cailis  V.  Day,  38  Wis.  643,  and  cases  399. 

cited  ;  and  see  Scliouler's  Dom.  Kel.  518  «  Merchants'  Firo  Ins.  Co.  v.  Grant,  2 

el  seq.  Edw.  (N.  Y.)  Ch.  544. 

«  Story  i;.   Johnson,  2  Y.  &  C.  Exeh.  "  Mansfield  v.  Gordon  (Mass.),  10  N.  E. 

607;    IJoston    IJank    v.    Cliamberlin,    15  Pep.  773. 
Mass.  220;   Lynde  i;.  Budd,  2  Paige  (N. 

vor..  I.                    6  81 


§  106.]  THE  PARTIES  TO  A  MORTGAGE. 

consideration  received.  This  fact  itself  indicates  that  the  riecht  to 
rescind  his  contract  is  a  personal  privilege.  It  is  given  him  for 
his  protection,  and  he  alone  can  exercise  it. 

The  subsequent  ratification  in  all  cases  relates  back  to  the  orig- 
inal execution  of  the  mortgage  as  against  all  persons  except  pur- 
chasers for  a  new  and  valuable  consideration. ^ 

It  has  been  held,  however,  that  a  mortgage  hf  an  infant  which 
was  not  in  any  way  for  his  benefit,  as,  for  instance,  one  made  as 
surety  for  another,  is  not  merely  voidable,  but  void,  and  therefore 
not  subject  to  ratification.  Thus  a  mortgage  given  by  an  infant 
feme  covert,  to  secure  the  debt  of  her  husband,  is  held  to  be  abso- 
lutely void,  and  incapable  of  confirmation. ^ 

Coverture  of  a  female  infant  does  not  remove  the  disability  of 
minority.  If  she  has  given  a  mortgage  of  her  land  during  her 
minority,  her  husband  joining  in  it,  she  may  repudiate  it  on 
coming  of  age,  and  she  is  not  bound  to  return  the  consideration 
received  unless  she  still  has  the  proceeds  of  it  in  her  hands  spe- 
cifically.^ 

An  infant  feme  covert  cannot  relinquish  her  dower  by  joining 
with  her  husband  in  a  mortgage,  but  the  same  is  void  as  to  her.* 

III.  3Iarried  Women. 

106.  At  common  law  a  married  woman  could  not  make  a 
mortgage  even  to  secure  the  payment  of  the  purchase  money  of 
real  estate  conveyed  to  her.  Both  the  mortgage  and  the  note 
were  void.^  She  had  no  power  to  make  contracts.  In  equity, 
however,  she  has  long  occupied  quite  a  different  position  in  regard 
to  her  own  property,  and  her  power  to  contract  in  relation  to  it. 
In  England  the  courts  of  equity  have  extended  her  rights  over 
her  separate  estate  and  her  liability  for  her  contracts,  until  it  is 
now  the  settled  doctrine  that  her  propertj^  is  holden  in  equity  for 
her  engagements,  whether  in  writing   or  not.     Yet  at  law  they 

1  Palmer  v.  Miller,   25  Barb.    (N.   Y.)  Warner,  112  Mass.  271;  Owens  v.  John- 

399.  son,  8  Bax.  (Tenn.)  265. 

■•^  Cronise  v.   Clark,    4   Md.    Cli.    403  ;  In  Maryland,  art.  16,  §  31  of  the  Code 

Chandler  v.  McKinney,  6  Mich.  217.  of  1860  confers  the  power  to  confirm  and 

3  See  Walsh   v.  Younj:,  lloMa^s  396,  make  valid  a  conve}ance   hy   an   infant 

andcas'S  cited;  Dill  v.  Bowen,  54  Ind.  /eme  core?^,  which  might  be  shown,  during 

204.  her  infancy,  to  be  tquitable,  expedient,  or 

*  Glenn  v.  Clark,  53  Md.  580.  projjer,  looking  to  her  benefit ;  but  it  does 

*  Savage?;.  Holyoke,  59  Me.  345;  New-  not  apply   to  any   case   after  such  infant 
begin  v.  Lanyley,  39  Me.  200  ;  Heburn  i-.  lias  attained  full    age.     Glenn  v.  Clark, 


supra. 


82 


WHO   MAY   GIVE   A   MORTGAGE.  [§  107. 

cannot  be  enforced.  Her  obligations  are  not  strictly  debts.  She 
is  not  personally  holden  for  them  ;  but  her  separate  estate  is  sub- 
jected to  their  payment.  The  proceeding  to  enforce  them,  there- 
fore, is  in  the  nature  of  a  proceeding  in  rem. 

In  this  country  the  common  law  rights  and  liabilities  of  mar- 
ried women  have  been  greatly  changed  by  statute.  Liberal  pro- 
vision is  generally  made  in  all  the  states  for  the  holding  of  sepa- 
rate property  b}'^  married  women,  and  for  their  contracting  in 
relation  to  it ;  but  the}^  have  not  generally  gone  to  the  extent  of 
declaring  that  her  entire  separate  estate  shall  be  liable  for  her 
pecuniary  engagements.  Under  these  statutes,  as  a  rule,  she  is 
merely  authorized  to  contract  with  reference  to  her  separate 
property ;  and  she  is  not  allowed  to  do  this,  even,  except  with  the 
concurrence  of  her  husband,  or  with  the  approval  of  some  court.^ 
Her  deed  made  without  such  consent  or  authority  is  invalid,  and 
cannot  be  enforced  even  in  equit3^2  Even  when  given  to  secure 
the  purchase  money  of  the  land,  it  does  not  amount  to  a  declara- 
tion of  trust  in  favor  of  the  vendor.^  Therefore,  a  deed  by  her 
in  the  name  she  bore  before  marriage,  and  not  disclosing  this, 
although  made  with  the  fraudulent  purpose  of  imposing  upon  the 
grantee,  does  not  estop  her  from  setting  up  title  in  the  land  as 
against  the  grantee.*     Her  sole  deed  is  absolutely  void.^ 

107.  The  equity  doctrine  in  England,  adopted  also  in  some 
of  our  states,  is  that  the  separate  property  of  a  married  woman 
is  answerable  for  her  debts  and  engagements  to  the  full  extent  to 
which  it  is  subject  to  her  disposal.  At  a  very  early  period  in 
England  it  was  held  that  a  married  woman,  although  incompetent 
at  law  to  make  a  valid  contract,  would  be  regarded  in  equity  as  a 
feme  sole  in  respect  to  her  separate  estate.^     "  And  the  rule  seems 

1  As,  for  instance,   in    Massachusetts,  merely  does  not  bind  her  estate,  though 

See  Gen.  Stat.  eh.  108,  §  .3  ;  Weed  Sewing  she  signs  and  acknowledges  it     Berrigan 

Machine  Co.  v.  Emerson,  115  Mass.  554;  v.  Fleming,  2  Lea  (Tenn.),  271. 

Concord  Bank  v.  Beliis,  10  Cush.  (Mass.)  2  Elder  v.  Joues,  85  111.  384;  Herdman 

276.     But  now,  under  St.  1874,  ch.  184,  a  v.  Pace,  85  111.  345. 

married  woman  may  contract  "  as  if  she  3  Morrison  i-.  Brown,  83  111.  5G2  ;  Lewis 

were  sole,"  and   therefore  the  considcra-  v.  Graves,  84  111.  205. 

tion  of  her  coniracts  need  not  enure  to  •»  Lowell   v.  Daniels,    2    Gray  (Mass.), 

her  own   benefit.     Major  v.   Holmes,  124  161. 

Mass.  108.  &  Warner  v.  Croucli,  14  Allen  (Mass.), 

To  jjflfls  any  interest  in  lier   property  163. 

Bhe  must  be  a  |)iirty  to  the  granting  part  ''  Gn'gby  v.  Cox,  1  Vcs.  Sen.  517  ;  I'ea- 

of  the  deed.     A  mortgage  which  purports  cock  v.  Monk,  2  lb.  190. 
on   its   face   to   be   that   of   her  husband 

83 


§  107.] 


THE   PARTIES    TO   A    MORTGAGE. 


to  have  been  universally  recognized,  where  a  married  woman  made 
an  express  contract  respecting  such  an  estate,  of  which  she  was 
entitled  to  the  beneficial  use,  that  she  and  the  party  with  whom 
she  contracted  might  have  the  aid  of  a  court  of  equity  to  make 
the  contract  effectual."  ^  Lord  Thurlow  ^  carried  the  doctrine 
farther,  and  declared  he  had  "  no  doubt  about  this  principle,  that 
if  a  court  of  equity  says  a  feme  covert  may  have  a  separate  estate, 
the  court  will  bind  her  to  the  whole  extent,  as  to  making  that 
estate  liable  to  her  own  engagements  ;  as,  for  instance,  for  the 
payment  of  debts."  This  subject  and  tlie  English  authorities 
upon  it  were  fully  examined  by  Lord  Brougham,  who  arrives  at 
the  same  result.^ 


1  Per  Hoar,  J.,  in  Willard  v.  Eastham, 
15  Gray  (Mass.),  328. 

•^  Hulme  V.  Tenant,  1  Bro.  C.  C.  16; 
and  see  same  case  in  White  &  Tudor's 
Lead.  Cas.  in  Eq.  (Am.  ed.)  324,  and  the 
authorities  there  collected. 

3  In  Murray  v.  Barlee,  3  Myl.  &  K.  209. 
"  In  all  these  cases,"  he  says,  "  I  take  the 
foundation  of  the  doctrine  to  be  this : 
The  wife  has  a  separate  estate,  subject 
to  her  own  control  and  exempt  from  all 
other  interference  or  authority.  If  she 
cannot  affect  it,  no  one  can ;  and  the  very 
object  of  the  settlement  which  vests  it  in 
her  exclusively  is  to  enable  her  to  deal 
with  it  as  if  she  were  discovert.  The 
power  to  affect  it  being  unquestionable, 
the  only  doubt  that  can  arise  is  whether 
or  not  she  has  validly  incumbered  it.  At 
first  the  court  seems  to  have  supposed 
that  nothing  could  touch  it  but  some  real 
charge,  as  a  mortgage,  or  an  instrument 
amounting  to  an  execution  of  a  power, 
where  that  view  was  suj)ported  by  the 
nature  of  th*  settlement.  But  afterwards 
her  intention  was  more  regarded,  and  the 
court  only  required  to  be  satisHed  that  she 
intended  to  deal  with  her  separate  prop- 
erty. When  she  appeared  to  have  done 
so,  the  court  held  her  to  have  charged  it, 
and  made  the  trustees  answer  the  demand 
tliUpS  created  against  it.  A  good  deal  of 
tiie  nicety  that  attends  the  doctrine  of 
powers  thus  came  to  be  imparted  to  this 
consideration  of  the  subject.  If  the  wife 
did  any  act  directly  charging  the  separate 
estate,  no  doubt  could  exist ;  just  as  an 

84 


instrument  expressing  to  be  in  execution 
of  a  power  was  always  of  course  consid- 
ered as  made  in  execution  of  it.  But  so, 
if  by  any  reference  to  the  estate  it  could 
be  gathered  that  such  was  her  intent,  the 
same  conclusion  followed.  Thus,  if  she 
only  executed  a  bond,  or  made  a  note,  or 
accepted  a  bill,  because  those  acts  would 
have  been  nugatory  if  done  by  a  feme  co- 
vert,-without  any  reference  to  her  separate 
estate,  it  was  held,  in  the  cases  I  have 
above  cited,  that  she  must  have  intended 
to  have  designed  a  charge  on  that  estate, 
since  in  no  other  way  could  the  instru- 
ment thus  made  by  her  have  any  validity 
or  operation  ;  in  the  same  manner  as  an 
instrument,  which  can  mean  nothing  if  it 
means  not  to  execute  a  power,  has  been 
held  to  be  made  in  execution  of  that 
power,  though  no  direct  reference  is  made 
to  the  power.  Such  is  the  principle.  But 
doubts  have  been  in  one  or  two  instances 
expressed  as  to  the  effect  of  any  dealing 
whereby  a  general  engagement  only  is 
raised,  that  is,  where  she  becomes  indebted 
witiiout  executing  any  written  instrument 
at  all.  I  own  I  can  perceive  no  reason 
for  drawing  any  such  distinction.  If,  in 
respect  of  her  separate  estate,  the  wife  is 
in  equity  taken  as  a  feme  sole,  and  can 
charge  it  by  instruments  absolutely  void 
at  law,  can  there  be  any  reason  for  hold- 
ing that  her  liability,  or  more  properly 
her  power  of  affecting  the  separate  estate, 
shall  only  be  exercised  by  a  written  instru- 
ment 1  Are  we  entitled  to  invent  a  rule, 
to  add  a  new  chapter  to  the  statute  of 


WHO   MAY    GIVE    A   MORTGAGE.  [§§  108,  109. 

108.  Equity  enforces  her  contract  on  her  general  property, 
because  her  contract  not  being  a  personal  liability  there  is  no 
remedy  at  law.  Lord  Cottenham,^  agreeing  in  the  doctrine  estab- 
lished, was  of  opinion  that  in  the  reason  of  it  there  is  nothing 
which  has  any  resemblance  to  the  execution  of  a  power.  "  What 
it  is,  it  is  not  easy  to  define.  It  has  sometimes  been  treated  as  a 
disposing  of  the  particular  estate  ;  but  the  contract  is  silent  as  to 
the  particular  estate,  for  a  promissory  note  is  merely  a  contract  to 
pay,  not  saying  out  of  what  it  is  to  be  paid,  or  by  what  means  it 
is  to  be  paid;  and  it  is  not  correct,  according  to  legal  principles, 
to  say  that  a  contract  to  pay  is  to  be  construed  into  a  contract 
to  pay  out  of  a  particular  property,  so  as  to  constitute  a  lien  on 
that  property.  Equity  lays  hold  of  the  separate  property,  but 
not  by  virtue  of  anything  expressed  in  the  contract ;  and  it  is 
not  very  consistent  with  correct  principles  to  add  to  the  contract 
that  which  the  party  has  not  thought  fit  to  introduce  into  it. 
The  view  taken  of  the  matter  by  Lord  Thurlow,  in  Hulme  v. 
Tenant,  is  more  logical.  According  to  that  view,  the  separate 
property  of  a  married  woman  being  a  creature  of  equity,  it  fol- 
lows that  if  she  has  a  power  to  deal  with  it,  she  has  the  other 
power  incident  to  property  in  general,  namely,  the  power  of  con- 
tracting debts  to  be  paid  out  of  it ;  and  inasmuch  as  her  creditors 
have  not  the  means  at  law  of  compelling  payment  of  those  debts, 
a  court  of  equity  takes  upon  itself  to  give  effect  to  them,  not  as 
personal  liabilities,  but  by  laying  hold  of  the  separate  property, 
as  the  only  means  by  which  they  can  be  satisfied." 

109.  The  American  courts  do  not  carry  the  doctrine  to  this 
extent,  but  as  a  general  rule  hold  that  her  separate  estate  is  not 
chargeable  with  her  debts  or  obligaticms  not  relating  to  her  sepa- 
rate estate,  unless  she  specially  makes  them  a  charge  upon  it  by 
some  instrument  in  writing.  Her  contracts,  which  do  not  concern 
her  separate  estate  and  are  not  made  upon  its  credit,  remain  void 
as  they  were  at  common  law.  The  statutes  of  the  several  states 
differ  considerably  in  their  effect  u{)on  her  power  to  make  con- 
tracts, and  to  charge  herself  and  her  real  estate  with  them  ;  but, 
as  a  general  rule,  equity,  while  holding  it  not  to  be  answerable 

frauds,  and  to  require  writing  where  that  maintenance  not  touch  tlic  estate,  and  yet 

act  requires  none?     Is  there  any  equity,  inoney  furnished  to  squander  away  at  phiy 

reachiuK  written  dealings  with  the  prop-  be  a  charge  on  it,  if  foriilied  by  a  scrap 

crty,  which  extends  not  also  to  dealing  in  of  writing?     No  such  distiucliou  can  be 

other  ways,   as  by  sale   and    delivery  of  taken  ujion  any  conceivable  jjrinciple." 
goods?     Shall  neceBsary  supplies  for  her         '  Owens  u.  Dickenson,  Cr.  &  Thil.  48. 

85 


§  110.] 


THE   PARTIES    TO   A   MORTGAGE. 


for  any  implied  undertaking  of  hers,  will  enforce  upon  it  her 
mortgage  or  other  express  contract,  although  it  be  not  made  for 
her  benefit,  but  for  the  sole  benefit  of  another.^  In  a  case  in  the 
Supreme  Court  of  Massachusetts, ^  Mr.  Justice  Hoar,  after  a  care- 
ful review  of  the  authorities,  said  :  "  Our  conclusion  is,  that  when 
by  the  contract  the  debt  is  made  expressl}?^  a  charge  upon  the 
separate  estate,  or  is  expressly  contracted  upon  its  credit,  or  when 
the  consideration  goes  to  the  benefit  of  sach  estate,  or  to  enhance 
its  value,  then  equity  will  decree  that  it  shall  be  paid  from  such 
estate  or  its  income,  to  the  extent  to  which  the  power  of  disposal 
by  the  married  woman  may  go.  But  when  she  is  a  mere  sui-ety, 
or  makes  the  contract  for  the  accommodation  of  another,  without 
consideration  received  by  her,  the  contract  being  void  at  law, 
equity  will  not  enforce  it  against  her  estate,  unless  an  express 
instrument  makes  the  debt  a  charge  upon  it." 

110.  A  married  ■woman  can  bind  herself  personally  only  by 
such  obligations  as  have  reference  to  her  separate  property.  She 
is  not  bound,  therefore,  by  a  note  given  by  her  alone  or  jointly 
with  her  husband  for  a  debt  of  the  husband.^     The  fact  that  the 


i  Massachusetts  :  Hebnrn  v.  Warner, 
112  Mass.  271  ;  Willard  v.  Eastham,  15 
Gray,  328  ;  Rogers  l\  Ward,  8  Allen,  387. 
Illinois  :  Young  v.  Graff,  28  111.  20.  New 
York:  Yale  v.  Dederer,  18  N.  Y.  265;  5. 
C.  22  N.  Y.  450 ;  Owen  v.  Cawley,  36  N. 
Y.  600;  Knowles  v.  McCamly,  10  Paige, 
342;  Gardner  v.  Gardner,  7  lb.  112; 
Jaques  v.  Methodist  Epis.  Ch.  17  Johns. 
.548;  Curtis  v.  Engel,  2  Sandf.  287  ;  Cru- 
ger  V.  Cruger,  5  Barb.  225,  227  ;  Ballin  v. 
Diliaye,  37  N.  Y.  35  ;  White  v.  McNett, 
33  N.  Y.  371  ;  White  v.  Story,  43  Barb. 
124;  LedJie  v.  Vrooman,  41  lb.  109. 

The  earlier  cases  in  New  York  approx- 
imate to  the  Englishjrule,  but  the  case  of 
Yale  V.  Dederer  took  the  ground  stated 
in  the  text,  and  has  been  followed  since. 
See  §  111,  notes  4  and  5. 

Special  attention  is  called  to  the  case 
of  Yale  V.  Dederer  for  a  full  and  careful 
examination  of  the  subject;  also  to  Corn 
Exchange  Ins.  Co.  v.  Babcock,  42  N.  Y. 
613,  where  the  English  and  American 
cases  are  reviewed. 

2  Willard  v.  Eastham,  15  Gray  (Mass.), 
328,  335.     In  this  case   a  note  had  been 

86 


given  by  a  married  woman  to  her  brother 
to  establish  him  in  business  ;  but  no  mort- 
gage or  other  charge  upon  her  separate 
estate  was  given.  Upon  a  bill  in  equity  to 
charge  it  upon  her  estate,  it  was  held  that 
she  was  not  liable,  and  the  bill  was  dis- 
missed. But  in  the  later  case  of  Heburn 
V.  Warner,  supra,  where  a  married  woman, 
to  enable  her  sou  to  borrow  money,  gave 
her  note,  secured  by  mortgage  of  her  sep- 
arate estate,  it  was  held  that,  while  she 
was  not  liable  upon  the  note,  and  the 
mortgage  was  void  at  law,  yet  in  equity 
the  mortgage  should  be  enforced.  And 
see  Nourse  v.  Henshaw,  123  Mass.  96. 

3  Yale  V.  Dederer,  supra ;  White  v.  Mc- 
Nett, supra;  Ledlie  v.  Vrooman,  supra; 
Burns  v.  Lynde,  6  Allen  (Mass.),  305, 
313  ;  Athol  Machine  Co.  v.  Fuller,  107 
Mass.  437;  Willard  v.  Eastham,  supra; 
Heburn  v.  Warner,  supra ;  Nourse  v.  Hen- 
shaw, 123  Mass.  96  ;  Brookings  v.  White, 
49  Me.  479  ;  Rowell  v.  Jewett,  69  Me. 
293;  Conway  v.  Wilson  (N.  J.),  11  Atl. 
Rep.  607  ;  Bank  v.  Underwood  (Conn.), 
4  Atl.  Rep.  248. 


WHO   MAY    GIVE   A   MORTGAGE.  [§  110. 

note  is  secured  by  a  mortgage  on  her  real  estate  does  not  make 
the  note  such  an  obligation  respecting  her  separate  estate  as  to 
render  her  liable  upon  it,i  although  the  mortgage  itself  be  in 
equity  a  valid  and  binding  lien  upon  her  separate  property .^ 

Where  a  married  woman  is  empowered  by  statute  to  bargain, 
sell,  and  convey  her  real  estate  or  personal  property,  and  enter 
into  contracts  in  reference  to  it,  she  may  deal  with  the  property 
itself,  by  sale  or  otherwise,  and  assume  obligations  in  connection 
therewith,  as,  for  instance,  for  buildings  upon  her  land  ;  and  she 
may  bind  herself  to  pay  money  for  property  purchased,  as  the 
property  will  become  hers  by  the  purchase,  and  the  obligation  to 
pay  is  in  reference  to  her  separate  property.^  But  this  is  the 
limit  of  her  power.  She  cannot  contract  as  surety  for  her  hus- 
band or  for  any  one  else.  The  chai'acter  of  a  note  or  other  con- 
tract made  by  her  is  not  affected  as  a  contract  applying  to  her 
separate  property  by  reason  that  it  is  secured  by  a  mortgage  on 
her  land.  The  mortgage  is  collateral  to  the  note  ;  the  one  is  the 
principal,  the  other  the  incident ;  when  the  note  is  void  the  mort- 
gage is  void  also,  and  cannot  be  foreclosed  at  law.*  "  In  an  ac- 
tion brought  by  a  mortgagee  against  his  mortgagor,  on  a  mort- 
gage given  to  secure  the  payment  of  a  note,  the  defendant  may 
show  the  same  matters  of  defence  which  he  might  show  in  de- 
fence of  an  action  on  the  note ; "  ^  excepting  only  that  he  cannot 
plead  the  statute  of  limitations.^ 

But  a  married  woman  may,  with  the  proper  assent  of  her  hus- 
band, convey  her  separate  real  estate,  and  if  there  be  a  valid  con- 
sideration for  the  conveyance,  it  is  as  effectual  as  it  would  be  if 
she  were  not  married.  She  may,  therefore,  convey  her  real  estate 
in  mortgage  to  secure  a  valid  debt,  as,  for  instance,  a  valid  note 
of  her  husband.  Her  mortgage  is  then  binding,  because  it  is  a 
contract  entered  into  by  her  in  relation  to  her  separate  property, 
and  to  secure  a  valid  and  existing  debt.^  A  statutory  provision 
that  the  separate  property  of  a  married  woman  shall  not  be  liable 
for  the  debts  of  the  husband  does  not  affect  her  power  to  mortgage 
her  land  to  secure  the  payment  of  her  husband's  debt.^ 

1  WilliamH  y.  Ilayward,  117  Mass.  532.         ''  INIr.    Justice    Metcalf,    in    Vinton    v. 

2  Tliaclier  v.  Chiircliill,  118  Mass.  108.        Kin^,  4  Allen  (Mass.),  502. 

8  Il.burn    I).    Warner,    112   Mass.  271,  «  Thayer   v.    Maiui,     10    Pick.    (Mass.) 

and  cases  citi-il.  535. 

*  IJriKliaiii  i;.  Potter,  14  firay  (Mass.),  ^  Newhart  i-.  Peters,  80  N.  C    166. 

522;  Denny    i-.    Dana,   2   Cush.    (Muas.)  »  Ilitz  t;.  Jeuks,  8  Snp.  Ct.  Uf|).  143. 
160. 

87 


§  111.]  THE   PARTIES   TO   A   MORTGAGE. 

It  does  not  matter  that  she  has  also  signed  her  husband's  note 
as  surety.  To  a  suggestion  in  such  a  case  that  the  mortgage  was 
void,  because  it  was  made  to  secure  a  note  signed  by  a  married 
woman  as  surety,  Chief  Justice  Bigelow  said :  ^  "  This  might  be 
a  very  sound  argument  if  the  note  was  signed  by  the  married 
woman  alone.  In  such  case,  the  note  being  void,  the  demandant 
would  not  be  entitled  to  judgment  for  possession.  But  the  note 
is  not  void.  It  is  a  valid  contract  binding  on  the  other  promisors. 
It  is,  therefore,  the  ordinary  case  of  the  conveyance  of  real  estate 
by  a  valid  deed  to  secure  the  payment  of  debt  due  to  the  grantee." 
But  when  her  mortgage  is  made  to  secure  her  own  note  given 
for  the  accommodation  of  her  husband  or  any  one  else,  the 
note  being  void,  the  security  incident  to  it  is  void  also.  She  can 
take  the  defence  of  invalidity  in  the  same  way  that  any  mort- 
gagor may  defend  on  the  ground  of  want  of  consideration,  or  of 
duress.     Her  defence  at  law  to  the  note  extends  to  the  mortgage. 

111.  The  foregoing  examination  of  the  question,  how  far  a 
married  w^oman  can  bind  herself  individually  by  her  contracts,  is 
applicable  to  the  .question  of  her  liability  for  a  deficiency  ^ 
arising  upon  the  foreclosure  of  a  mortgage  upon  her  estate.  It 
has  been  noticed  that  while  in  equity  the  lien  upon  her  estate 
may  be  valid,  her  note  or  other  personal  obligation  secured  may 
be  wholly  void.^  Of  course  in  such  case,  when  the  remedy  has 
been  exhausted  against  the  mortgaged  estate,  there  is  no  further 
remed}'  against  her.'*  If,  for  instance,  she  borrow  money  upon  a 
mortgage  of  her  real  estate  for  the  accommodation  of  her  hus- 
band, and  it  is  paid  to  him,  she  is  under  no  liability  for  any  defi- 
ciency after  the  application  of  the  property  to  the  repayment  of 
the  loan.^ 

1  Bartlett  v.  Bartlett,  4  Allen  (Mass.),     price  of  real  estate  conveyed  to  her  was 
440.  valid  in  equity,  though  the  note  or  bond 

2  See  §  1718.  given  in  connection  with  it  was  not.  Since 

3  Heburn  v.  Warner,  112  Mas^.  271.  the  above  statute  she  can  bind  herself  for 
*  Kidd  V.  Conway,   65   Barb.    (N.  Y.)     any  matter  pertaining  to  her  separate  es- 

158;  Nourse  v.  Henshaw,  123  Mass.  96.  tate. 

Prior  to  the  statute  of  1860,  ch.  90,  it  5  White    v.    McNett,    33   N.   Y.   371; 

was   held   in  New  York  that   a  married  Payne  v.  Burnham,  62  N.  Y.  69,  reversing 

woman  could  not  bind  herself  personally  2  Hun,  143 ;  Manhattan  Brass  &  Manuf. 

for  the  price  of  real  estate  bought  by  her  Co.  v.  Thompson,  58  N.  Y.  80. 

and  conveyed  to  her;  Knapp  v.  Smith,  27  In  New  York,  by  Laws  1882,  ch.  172, 

N.  Y.  277,  279  ;  nor  for  the  rent  reserved  §  7,  it  is  provided  that  a  married  woman 

upon  a  lease  to  her,  though  the  lease  it-  may  be  sued  in  any  court,  and  a  judgment 

self  was  otherwise  valid,  and   the  lessor  recorded    against    her    may  be    enforced 

might   reenter.     So  a  mortgage  for   the  against  her  sole  and  separate  estate  in  the 

88 


WHO   MAY    GIVE   A   MORTGAGE.  [§  112. 

A  married  woman  may  bind  herself  personally  for  a  loan  made 
to  her  upon  her  mortgage  of  her  real  estate,  if  the  loan  be  for  the 
benefit  of  her  separate  estate.^  That  the  loan  is  for  the  benefit 
of  her  separate  estate  may  appear  by  the  mortgage,  or  may  be 
shown  by  evidence.^ 

112.  In  some  states  a  wife's  separate  property  is  in  equity 
held  liable  generally  for  her  debts.^  As  to  her  separate  prop- 
erty she  is  regarded  as  a  feme  sole,  and  is  allowed  to  make  any 
contract  in  relation  to  it  she  may  choose  ;  and  if  she  executes  a 
note  secured  by  a  moi-tgage  upon  her  separate  pi'operty,  her  prom- 
ise to  pay  is  construed  as  relating  not  only  to  the  mortgaged 
premises,  but  to  her  separate  property  generall3^*  It  is  regarded 
as  right  that  her  property  should  pay  her  pecuniary  engagements, 
whether  they  are  made  for  her  own  benefit  or  not,  and  whether 
they  are  charged  upon  particular  property  or  not.  Neither  does 
it  matter  whether  her  engagements  be  express  or  implied  ;  whether 
they  be  in  writing  or  by  parol  merely.  Having  the  power  to  con- 
tract debts,  and  to  bind  her  separate  property  for  their  payment, 
she  is  regarded  as  intending  that  her  obligations  shall  be  enforced 
according  to  their  purport. 

In  other  states  the  capacity  of  married  women  to  make  con- 
tracts has  been  enlarged  by  statute,  so  that  in  effect  she  is  ena- 
bled to  bind  herself  and  her  property  as  if  she  were  sole.^ 

same  manner  as  if   she  were  sole.     The  Pentz   v.   Simonson,    13  N.   J.   Eq.   232, 

effect  of  this  statute  is  to  give  a  legal  rem-  Pennsylvania:  Glass  v.  Warwick,  40  Pa. 

edy  against  her  property  generally  for  her  St.  140.     Indiana:  Cnmmings  v.  Sharpe, 

debts,  and  not  merely  a  remedy  in  equity  21  Ind.  331.     Nebraska:  Webb  v.  Ilosel- 

against  her  estate  expressly  charged  with  ton,   4   Neb.   308.      Kansas :    Deering   v. 

the  payment  of  a  debt  for  which  she  was  Boyle,  8  Ivans.  52.5,  where  the  cases  are 

not   personally   liable.      Corn    Exchange  fully    examined.      Kentucky:    Smith    v. 

Ins.  Co.  L'.  Babcock,  42  N.  Y.  613;  First  Wilson,  2  Met.  235;  Johnston  !-.  Fergu- 

Nat.  Bank  v.  Garlinghouse,  53  Barb.  (N.  son,  lb.  503  ;  Sharp  v.  Proctor,  5  Bush, 

Y.)  615;    Andrews  v.    Mouilaws,  8  Hun  396;  Ilobson  ?;.  Hobson,  8  lb  665.     Cali- 

(N.  Y.),  65.  fornia  :  Alexander  v.  Bouton,  55  Cal.  15. 

1  Payne  v.  Burnham,  62  N  Y.  69.  *  Alexander  v.  Bouton,  siifira ;  Mar- 
Otherwise  in  Pennsylvania.  Sawtelle's  low  r.  Barlew,  53  Cal.  456  A  married 
Appeal,  84  Pa.  St.  306.  woman,  except  in  relation  to  her  separate 

^  Corn  Exchange  Ins.  Co.  i'.   Babcock,  property,  i.s,  in  California,  under  a  disabil- 

supra.  ity  to  contra(;t. 

»  1  Bishop    on    Mar.    Women,   §   873;  '  As  in  Massachusetts:  P.  S.  1882,  ch. 

Schouler's  Dom.  Relations,  230.     Wiscon-  147,  §  1 ;  Noiirsc  v.  Hcnshaw,  123  Mass.  96. 

sin:  Todd  v.  Lee,  15  Wis.  365 ;  Heath  ;-.  Indiana:  provided  her  husband  join  with 

Van   Colt,    9    Wis.    516.      New  Jersey:  licr ;   I    K.    S.   1876,  p.  550;    Layman  v. 

Johnson    v.   Cummins,  16  N.  J.   Kq.   97;  Shiiit/,,  60  Ind.  541.547;  Brick  i'.  Scott, 

Whcaton  v.  Phillips,    12   N.  J.  Kq.  221  ;  47  hid.  299.     Michigan:  Frickco  i'.  Don- 

89 


§  113.] 


THE   PARTIES   TO   A   MORTGAGE. 


113.  In  some  states  a  married  woman  may  make  a  valid  mort- 
gage of  her  separate  property  to  secure  the  payment  of  the 
debt  of  her  husband  or  of  any  Qther  person,  in  tlie  same  manner 
as  if  she  were  unmarried.^     Any  consideration  which  would  be 


ner,  35  Mich.  151.  Minnesota  :  Laws  1869, 
ch.  56,  §  2 ;  Northwestern  Mut.  Life  Ins. 
Co.  V.  Allis,  23  Minn.  337.  Georgia  :  Act 
of  1866;  Hawkins  v.  Taylor,  61  Ga.  171  ; 
Tift  V.  Mayo,  61  Ga.  246  ;  Harrold  v. 
Westbrook,  2  S.  E.  Rep.  695,  In  Louis- 
iana a  married  woman  cannot  mortgage 
her  separate  estate  without  judicial  au- 
thority. Stuffier  V.  Puckett,  30  La.  Ann. 
811.  California:  Civil  Code,  §§  158,  162. 
In  this  state  property  acquired  after  mar- 
riage by  either  husband  or  wife,  or  by  both, 
otherwise  than  by  gift,  bequest,  devise, 
or  descent,  is  called  community  property, 
of  which  the  husband  has  the  manage- 
ment and  control  with  absolute  power  of 
disposition,  except  by  will.  Civil  Code, 
§§  164,  172.  If  real  estate  be  purchased 
with  such  property,  and  the  title  be  taken 
in  the  name  of  the  wife,  a  mortgage  of  it 
by  her  creates  no  lien.  Yet  her  mortgage 
is  not  void  in  the  extreme  sense ;  and  if 
the  husband  afterwards  dies,  and  the  wife 
inherits  the  property,  the  mortgage  be- 
comes a  lien  on  the  interest  thus  inherited 
by  her,  subject  to  the  payment  of  the  debts 
of  the  estate.  Parry  v.  Kelley,  52  Cal. 
334.  It  is  also  provided  that  "  the  earn- 
ings and  accumulations  "  of  the  wife  liv- 
ing separate  from  her  husband  are  her 
separate  property.  Civ.  Code,  §  169.  But 
the  fact  that  a  note  and  mortgage  were 
given  by  a  wife  while  living  apart  from 
her  husband  does  not  of  itself  prove  that 
the  lands  mortgaged  were  her  separate 
property.  McComb  v.  Spangler,  12  Pac. 
Rep.  347. 

1  §§  109,  110  ;  Steppus  v.  Beall,  22 
Wall.  329  ;  Parsons  v.  Denis,  2  McCrary, 
359.  Pennsylvania:  Gable's  App.  7  All. 
Rep.  52.  Missouri :  Rosenheim  v.  Hart- 
sock,  2  S.  W.  Rep.  473.  New  Jersey  : 
Campbell  v.  Tompkins,  32  N.  J.  Eq.  1 70 ; 
Conover  v.  Grover,  31  N.  J.  Eq.  539  ;  Too- 
ker  V.  Sloan,  30  N.  J.  Eq.  394 ;  Robbins 
V.  Abrahams,  1  Halst.  Ch.  465 ;  Conway 
V.  Wilson,  11  Atl.  Rep.  607.    Connecticut : 

90 


Bank  v.  Underwood,  4  Atl.  Rep.  248. 
Florida :  Dzialynski  v.  Bank,  2  So.  Rep. 
696.  Arkansas  :  Collins  v.  Wassell,  34 
Ark.  17,33.  California:  Marlow  r.  Bar- 
lew,  53  Cal.  456.  New  York  :  Demarest 
V.  Wynkoop,  3  Johns.  Ch.  129,  144  ;  Fire- 
men's Ins.  Co.  V.  Bay,  4  Barb.  407.  Iowa: 
Iowa  Code,  §  2506  ;  Low  v.  Anderson,  41 
Iowa,  476.  Michigan:  Smith  v.  Osborn, 
33  Mich.  410.  Alabama  :  Short  v.  Battle, 
52  Ala.  456.  Maryland  :  Comegys  v. 
Clarke,  44  Md.  108  ;  Plummer  i;.  Jarman, 
44  Md.  632.  Oregon :  Moore  v.  Fuller,  6 
Oreg.  272. 

But  where  one  in  good  faith,  and  with- 
out notice,  advances  money  on  a  mortgage 
executed  by  a  married  woman  and  her  hus- 
band, on  the  faith  of  representations  of 
the  mortgagors  that  the  money  is  for 
the  sole  benefit  of  the  wife,  he  is  not  af- 
fected by  a  secret  agreement  between  the 
husband  and  the  wife  that  the  money 
should  be  used  by  the  husband  in  his  busi- 
ness. Ward  V.  Berkshire  Life  Ins.  Co. 
(Ind.)  9  N.  E.  Rep.  361. 

In  Indiana,  under  Acts  1879,  p  160, 
which  provided  that  a  married  woman 
should  not  mortgage  her  separate  prop- 
erty acquired  by  descent,  devise,  or  gift,  as 
security  for  the  debt  of  any  other  person, 
a  mortgage  executed  by  her  to  secure  her 
husband's  debt,  on  land  acquired  by  pur- 
chase, was  not  void  or  voidable.  Gardner 
V.  Case,  13  N.  E.  Rep.  36. 

Under  the  statute  of  1881  (R.  S.  1881, 
§  5119),  a  mortgage  by  a  married  woman 
upon  her  separate  real  estate,  owned  by 
herself  and  husband  by  entireties,  is  void- 
able by  her,  and  in  the  latter  case  as  to 
her  husband  also,  unless  her  conduct  has 
been  such  as  to  work  an  equitable  estop- 
pel ;  and  in  a  suit  to  foreclose  such  a  mort- 
gage, an  answer  averring  that  the  land, 
which  they  owned  as  tenants  by  entireties, 
was  first  conveyed  to  a  trustee,  and  then 
to  the  husband  as  part  of  the  same  trans- 
action in  which  the  mortgage  was  made, 


WHO  MAY   GIVE   A   MORTGAGE.  [§  113. 

sufficient  to  support  the  obligation  if  made  by  any  one  else,  as, 
for  instance,  the  granting  of  the  original  loan,  or  a  subsequent 
extension  of  the  time  of  payment  of  the  debt,  is  sufficient  to  sup- 
port her  undertaking.^  Her  mortgage,  given  to  secure  the  pay- 
ment of  the  bond  of  her  husband,  will  not  be  regarded  as  having 
no  validity  or  binding  effect  simply  because  the  consideration  of 
the  bond  is  an  obligation  merely  moral  and  not  enforcible  at  law 
or  in  equity.^  Whatever  conflict  there  may  be  in  the  authorities 
as  to  the  ability  of  a  wife  to  charge  herself  personally  for  any 
debts  not  contracted  for  her  own  benefit,  there  is  a  general  una- 
nimity in  holding  that  a  mortgage  upon  her  property  may  be  en- 
forced against  that,  whether  made  for  her  benefit  or  not. 

The  mortgage  of  a  married  woman  upon  her  pi'operty.  given 
to  secure  a  debt  of  her  husband,  but  taken  by  the  mortgagee  in 
good  faith  and  without  fraud  on  his  part,  will  seldom,  if  ever,  be 
set  aside,  even  on  proof  that  her  husband  procured  her  execution 
of  it  by  fraudulent  representations.*^  A  wife  having  executed  a 
paper  at  the  request  of  her  husband,  without  reading  it  or  inquir- 
ing as  to  the  contents  of  it,  although  it  was  a  mortgage  of  her 
property,  the  mortgagee  having  no  knowledge  of  this  fact,  was 
not  allowed  to  restrain  the  delivery  of  it,  on  the  ground  that  it 
was  procured  by  fraud  or  deceit.*  But  the  court  will  refuse  to 
enforce  a  mortgage,  the  execution  of  which  by  the  wife  was  pro- 
cured by  harshness  and  threats  on  the  part  of  the  husband  so 
excessive  as  to  subjugate  and  control  the  freedom  of  her  will ;  ^ 
or  one  procured  by  the  husband  as  agent  for  his  creditor  upon  a 

for  the  purpose  of  securin<?  his  antecedent  such  a  mortgage  is  given  to  secure  a  debt 

debt,  and  thus  avoiding  the  statute,  of  all  of  the  wife  in  part,  and  in  part  to  secure 

of  which  the  plaintiff  had  knowledge,  is  a  debt  of  the  husband,  the  amount  of  the 

good  on  demurrer.     IMcCormick  Harvest-  husband's  debt  included  in  the  mortgage 

ing  Machine  Co.  y.  Scovell,  13  N.  E.  Rep.  must,  upon  foreclosure  of  the  mortgage, 

58  ;  Dodge  v.  Kinzy,  101  Ind.  102  ;  Crooks  be  deducted  in  computing  the  amount  due. 

V.  Kenuett,   12  N.  E.  Hep.  715;  Bridges  Brown  v.  Provost,  5  S.  E.  Rep.  274. 

V.  Blake,  106  Ind.  332  ;  6  N.  E.  Rep.  833  ;  ^  Low  v.  Anderson,  41  Iowa,  476  ;  Short 

Fawkner  v.  Scottish-American  Mortg.  Co.  v.  Battle,  52  Ala.  456. 

8  N.  E.  Rep.  689;  Vogel  v.  Leichner,  102  ^  Campbell  v.  Tompkins,  32   N.  J.  Eq, 

Ind.  .55;    1  N.  E.  Rep.  5.54;    McLead  v.  170. 

iEtna  L.  Ins.  Co.  107  Ind.  394;  8  N.  E.  ^  Spurgin  v.  Traub,  65  111.  170.     Text 

Rep.  2.'50.  quoted  with  approval  in  Collins  v.  Was- 

In  South  Carolina  a  mortgage  by  a  mar-  sell,  .34  Ark.  17,  33. 

ried  woman  of  her  separate  estate,  to  se-  •*  Comcgys  r.  Clarke,  44  Md.  108 ;  and 

cure  a  debt  of  her  husband,  is  void  under  see  Freeman  v.  Wilson,  51  Miss.  329. 

the  Constitution  and  statutes  of  the  state.  *  Central   Hank  of  Frederick  v.  Cope- 

Auliman  v.  Rusli,  2  S.  E,  l{ep.  402  ;  Ha-  land,  18  Md.  305. 
benicht  v.  Rawls,  24  S.  C.  461.     Where 

91 


§§  113  a,  114.]         THE  PARTIES   TO   A   MORTGAGE. 

false  representation  that  the  consideration  of  it  was  merchandise 
to  be  shipped  to  her  for  her  use  in  her  separate  business.^ 

It  is  provided  by  statute  in  Indiana  that  a  married  woman 
shall  not  mortgage  or  in  any  manner  incumber  her  sepai-ate  prop- 
erty acquired  by  descent,  devise,  or  gift  as  a  security  for  the  debt 
or  liability  of  her  husband  or  any  other  person.^ 

113  a.  The  mortgage  of  a  married  woman  is  not  valid  un- 
less made  for  a  valid  consideration.  Thus,  where  a  married 
woman  executed  a  mortgage,  without  her  husband's  concurrence, 
to  her  mother,  to  secure,  as  was  claimed,  advances  made  to  her  by 
her  father  long  before,  and  the  evidence  showed  that  the  advances 
were  intended  by  her  father  as  a  gift,  and  that  the  real  object  in 
executing  the  mortgage  was  to  protect  the  property  from  her  hus- 
band, it  was  held  that  the  mortgage  was  not  valid,  and  that  a 
court  of  equity  could  not  declare  the  loan  to  be  a  lien  on  the 
wife's  separate  property.^ 

114.  A  wife  who  has  mortgaged  her  separate  property  for 
her  husband's  debt  is  in  the  position  of  a  surety.*  She  is 
entitled  to  all  the  rights  of  a  surety,  and  her  liability  and  the 
mortgage  lien  are  discharged  by  the  extension  of  the  time  of  pay- 
ment without  her  consent,^  if  the  extension  be  a  binding  obliga- 
tion upon  the  mortgagee.^  Her  rights  in  this  respect  are  the 
same  as  if  she  were  sole. 

The  rule  is  otherwise  where  a  married  woman  is  held  to  bind 
her  separate  property  generally  by  her  contract  in  relation  to 
any  part  of  such  property.  Where  this  is  the  case  she  is  bound 
as  principal  when  she  makes  a  mortgage  to  secure  her  husband's 
debt,  and  her  liability  is  not  affected  by  any  understanding  she 
may  have  with  her  husband,  or  by  the  giving  of  additional  secu- 
rity as  collateral  to  the  mortgage.'' 

1  Haskit  V.  Elliott,  58  Ind.  493.  Philbrooksw.  McEwen,  29  Ind.  347  ;  Hub- 

2  Acts  1879,  p.  161,  ch.  67,  §  10.  bard  v.  Ogden,  22  Kans.  363  ;  Carley  v. 

3  Heller  v.  Groves  (N.  J.),  8  Atl.  Rep.     Fox,  38  Mich.  387  ;  Post  v.  Losey  (Ind.), 
652.  12  N.  E.  Rep.  121. 

*  Hawley  v.  Bradford,  9  Paige  (N.  Y.),  ^  Bank  of  Albion   v.  Burns,  46  N.  Y. 

200  ;  Demarest  v.  Wynkoop,  3  Johns.  (N.  170;  Coleman  v.  Van  Rensselaer,  44  How. 

Y.)  Ch.   129;  Vartie   v.  Underwood,  18  (N.  Y.)  Pr.  368 ;  Smith  v.  Townsend,  25 

Barb.  (N.  Y.)  561  ;  Young  v.  Graff,  28  111.  N.  Y.  479 ;  Spear  v.  Ward,  20  Cal.  659  ; 

20;  Bartlett  v.  Bartlett,  4  Allen  (Mass.),  Post  v.  Losey,  supra;    White  &  Tudor 
440  ;  Eaton  v.  Nason,  47  Me.  132  :  Green  .  Lead.  Cas.  in  Eq.  (4th  ed.)  1922,  and  cases 

V.  Scranage,    19   Iowa,   461  ;  Watson   v.  cited. 

Thurber,  11  Mich.  457  ;    Spear  v.  Ward,  ^  Frickee  v.  Donner,  35  Mich.  151. 

20  Cal.  659  ;  Ellis  v.  Kenyon,  25  Ind.  134  ;  ''  Alexander  v.  Bouton,  55  Cal.  15.   See 

92  Hassey  v.  Wilke,  55  Cal.  525. 


WHO   MAY   GIVE   A   MORTGAGE.  [§  115. 

Generally  she  is  entitled  to  have  her  estate  exonerated  out  of 
the  estate  of  her  husband  if  this  be  practicable.^  When  he  has 
mortgaged  or  pledged  his  own  property  for  the  same  debt,  his 
property  should  in  the  first  instance  be  applied  to  satisfy  the 
mortgage.^  The  creditor  having  security  upon  the  husband's  prop- 
erty for  the  payment  of  the  same  debt,  by  releasing  this  discharges 
the  wife's  estate.^  The  husband  being  the  principal  debtor,  if  he 
acquire  the  mortgage  it  will  be  discharged.'^  Although  the  right 
of  redemption  be  limited  to  him,  she  may  nevertheless  redeem, 
unless  it  appear  from  the  instrument  itself,  or  from  extraneous 
evidence,  that  she  intended  to  make  a  gift  of  the  property  to  her 
husband,  and  that  the  conveyance,  therefore,  should  be  absolute.^ 

To  make  the  mortgagee  chargeable  with  the  equitable  rights  of 
the  wife,  as  sui'et}^  for  her  husband,  it  must  appear  that  he  had 
notice  of  this  relation.  Such  notice  cannot  be  inferred  merely 
from  the  fact  that  the  money  was  paid  to  the  husband,  because 
he  may  have  acted  as  his  wife's  agent  in  the  transaction.  But  if 
the  mortgage  be  made  to  secure  a  preexisting  debt  of  the  hus- 
band's, the  creditor  is  affected  with  notice  of  the  wife's  equity  as 
surety,  and  in  his  dealings  with  the  husband  is  bound  by  this 
knowledge.^ 

In  Kentucky,  however,  it  is  held  that  a  married  woman,  who 
mortgMges  her  real  estate  to  secure  debts  of  her  husband,  does 
not  thereby  become  a  surety  of  her  husband,  and  entitled  to  a 
discharge  when  seven  years  shall  have  elapsed  without  suit  after 
the  cause  of  action  has  accrued,  under  a  statute  to  that  effect. 
The  security  takes  the  obligation  out  of  the  statute,  which  is 
interpreted  to  refer  only  to  one  who  becomes  a  surety  of  another 
in  an  ordinary  bond  or  obligation.' 

115.  A  husband  has  no  presumptive  authority  to  consent 
to  an  extension  of  a  mortgage  given  by  his  wife  to  secure  his 

1  Wilcox  V.  Todd,  64  Mo.  388  ;  Sliinn  »  Ayrcs    v.    Husted,    15     Conn.    504; 

1-.  Smith,   "9   N.  C.  310;    Huntingdon  v.  Johns  r.  Reardon,  11  Md.  465. 

Iluniingdon,  2  Bro.  P.  C.  1.  *  Fitch   v.   Cothcal,   2    Sandf.    (N.  Y.) 

*  Wilcox  V.  Todd,  supra;   Loomer  v.  Ch.  29. 

Wheelwri-ht,  3  Sandf.  (N.  Y.)  Ch.  135;  6  Duffy  v.  In.s.  Co.  8  W.  &  S.  (Pa.)  413, 

Sheidlcv.  Weishlee,  16  Pa.  St.  134;  Johns  433;  Demarest  v.  Wynkoop,  3  Jolins.  (N. 

V.  Reardon,  11  Md.  465  ;  Weeks  v.  Haas,  Y.)  Ch.  129. 

3  W.  &  S.   (Pa.)   .520;  Kniyht  u.  White-  "^  Loonier  r.  Wheelwright,  si/pra  ,•  Gahn 
head,  26  Miss.  245 ;  Wright  i'.  AuHlin,  56  v.  Neimcewicz,  si//<7u  ;  Kniglit  v.  White- 
Barb.  (N.  Y.)   13  ;    Gahn  v.  Neimcewicz,  head,  supra. 
3  Paige  (N.   Y.),  614;  S.   C.   11  Wend.  ''  Hob.son  i-.  Hohson,  8  Bush  (Ivy.),  665. 


312. 


93 


§  116.]  THE   PARTIES   TO   A   MORTGAGE. 

debt.  The  holder  of  such  a  mortgage  is  chargeable  with  notice 
of  her  ownership,  and  that  she  stands  in  the  relation  of  surety  to 
the  husband.  The  lien  is  therefore  discharged  by  an  extension  of 
the  time  of  payment  without  her  concurrence.^ 

A  husband  has  no  implied  authority  to  employ  counsel  to  rep- 
resent his  wife,  and  to  bind  her  in  litigation  respecting  her  sep- 
arate estate.^ 

116.  A  married  woman  may  make  a  valid  contract  to  as- 
sume a  mortgage  in  a  conveyance  to  her  of  lands  so  incumbered, 
and  may  render  herself  liable  for  a  deficiency.^  Such  a  contract 
is  not  an  undertaking  to  pay  the  debt  of  another,  but  to  pay  her 
own  debt  for  the  benefit  of  her  own  estate.  Having  the  capacity 
to  make  contracts  for  the  acquisition  of  land,  she  must  have  the 
capacity  of  binding  herself  for  the  payment  of  the  price  of  it. 
It  is  as  much  within  her  capacity  to  make  an  agreement  to  as- 
sume the  payment  of  an  existing  mortgage  as  it  is  to  give  a  new 
mortgage  and  note  for  a  part  of  the  purchase  money.  She  is 
bound  by  a  vendor's  implied  lien  for  the  purchase  money  of  land 
conveyed  to  her  ;  *  and  by  a  vendor's  lien  reserved  in  his  deed  or 
by  contract.^ 

A  mortgage  given  by  her  in  part  payment  of  the  purchase  price 
of  land  at  the  time  of  the  conveyance  to  her,  although  it  imposes 
no  personal  liability  upon  her,  is  nevertheless  valid  and  may  be 
enforced  in  equity  upon  the  land  by  foreclosure  sale.^  The  con- 
veyance and  mortgage,  read  together  as  parts  of  one  instrument, 
in  legal  effect  create  in  the  grantee  an  estate  upon  condition ;  and, 
without  reference  to  statutes  removing  the  wife's  common  law  dis- 
abilities, a  court  of  equity  would  treat  her  as  the  trustee  of  the 
grantor,  and  would  subject  the  land  to  the  payment  of  the  pur- 

1  Bank  of  Albion  v.  Burns,  2  Lans.  (N.  property  not  being  worth  the  amount  of 
Y.)  52 ;  Smith  v.  Towusend,  25  N.  Y.  479.     the  mortgage  covenant  —  could  not  be  for 

2  Mason  v.  Johnson,  47  Md.  347.  the  benefit  of  her  separate  estate.    Brown 
8  Huyler  v.  Atwood,  26  N.  J.  Eq.  504;     v.  Hermann,  14  Abb.  (N.  Y.)  Pr.  394. 

Perkins  v.  Elliott,  23  lb.   526,  533 ;  Car-  *  §  193 ;  Haskell  v.  Scott,  56  Ind.  564  ; 

penter  v.  Mitchell,  54  111,  126;  Ballin  u.  Cox  v.  Wood,  20  Ind.  54;  Tuompson  v. 

Dillaye,  35  How.  (N.  Y.)  Pr.  216;  S.  C.  Scott,  1  Bradw.  (111.)  641. 

37  N.  Y.  35 ;  Flynn  v.  Powers,  35  How.  &  §  231. 

(N.  Y.)  Pr.  279  :  S.  C.  36  lb.  289  ;  Vroo-  «  Marks  v.  Cowles,  53  Ala.  499,  over- 
man V.  Turner,  8  Hun  (N.  Y.),  78;  S.  C.  ruling  Cowles  v.  Marks,  47  Ala.  612,  and 
69  N.  Y.  280.  See  §  753.  in  part  Haygood  v.  Marlowe,  51  Ala.  478. 
An  earlier  case  in  the  Supreme  Court  And  see  Kieser  v.  Baldwin,  62  Ala.  526 ; 
of  New  York  held  that  a  married  woman  Prout  v.  Hoge,  57  Ala.  28  ;  Smith  v.  Car- 
was  not  liable  in  such  case,  because  a  pur-  son,  56  Ala.  456 ;  Strong  ?;.Waddell,  57  Ala. 
chase  which  turned  out  so  poorly — the  471 ;  Johnson  v.  Ward,  2  So.  Rep.  524. 

94 


WHO   MAY   GIVE   A   MORTGAGE. 


[§  117. 


chase  money .^  If  the  husband  assented  to  the  transaction,  a  court 
of  equity  would  compel  him  and  the  wife  to  execute  a  valid  mort- 
gage to  secure  the  payment  of  the  purchase  money .^ 

117.  In  Alabama  a  married  woman  cannot  bind  either  herself 
or  her  statutory  estate  by  a  mortgage  made  to  secure  debts  con- 
tracted by  her  husband.'^  Formerly  she  was  incapable  of  incum- 
bering such  estate  even  to  secure  her  own  debt,  although  her 
husband  joined  in  the  conveyance.  Her  mortgage  was  an  absolute 
nullity.*      The  statutes  creating  the  wife's  statutory  separate  es- 


1  Patterson  v.  Robinson,  25  Pa.  St.  81 ; 
Eamborger  v.  Ingraham,  38  Pa.  St.  146. 

2  Leach  v.  Noyes,  45  N.  H.  364.  The 
statute  of  Alabama  does  not  diminish  the 
capacity  of  the  wife  to  take  and  receive 
property  as  recognized  at  common  law. 
The  statute  relates  to  her  common  law 
incapacity  to  hold  and  transmit  property, 
and  I'artly  removes  this.  At  common  law 
the  right  to  disaffirm  a  conveyance  to  her- 
self during  coverture  did  not  pertain  to 
her,  for  the  same  reason  that  power  to 
contract  was  denied  her.  Disaffirmance 
during  coverture  was  within  the  power 
of  the  husband  only,  and  not  within  his 
power  after  he  had  once  assented  to  the 
transaction.  In  Marks  v.  Cowles,  the  lius- 
band  having  assented  to  the  purchase,  the 
court  decide  that  the  husband,  as  trustee 
of  the  wife,  having  under  the  statute  power 
to  invest,  with  her  concurrence,  the  pro- 
ceeds of  her  statutory  estate  in  the  pur- 
chase of  lands,  the  investment  being  a 
judicious  one  and  such  as  a  court  of 
equity  might  have  directed,  the  transac- 
tion of  wliich  the  mortgage  was  a  part 
siiould  be  sustained.  For  present  statute 
see  §  117,  n.  3. 

^  l)a\idson  v.  Lanier,  51  Ala.  318; 
Wilkinson  r.  Cheatham,  45  Ala.  337; 
Cuwies  V.  Marks,  47  Ala.  612;  Nortliing- 
ton  V.  Faber,  52  Ala.  45  ;  Fry  v.  Hanmur, 
.50  Ala.  52;  Riley  r.  Pierce,  50  Ala.  93; 
Coleman  i-.  Smith,  55  Ala.  368.  But  in 
case  the  land  has  been  paid  lor  by  money 
drawn  from  the  husband's  firm,  a  mort- 
gage by  her  of  the  land  to  secure  a  debt 
of  the  firm  will  not  be  set  aside.  Mathews 
V.  Sheldon,  53  Ala.  136. 

Under  Code  1807,  §§  2371,  2372,  2376, 


all  property  of  the  wife,  held  by  her  previ- 
ous to  the  marriage,  or  which  she  may  be- 
come entitled  to  after  the  marriage,  in  any 
manner,  is  the  separate  estate  of  the  wife, 
and  is  not  subject  to  the  liabilities  of  the 
husband.  This  provision  is  continued  by 
Code  1886,  §  2341.  The  earlier  Code  pro- 
vided that  property  thus  belonging  to  the 
wife  vests  in  the  husband  as  her  trustee, 
who  has  the  right  to  manage  and  control 
the  same,  and  is  not  required  to  account 
witli  the  wife,  her  heirs,  or  legal  represen- 
tatives, for  the  rents,  income,  and  profits 
thereof.  The  Code  of  1886,  §§  2346,  2348, 
2349,  however  declares  that  the  wife  has 
full  legal  capacity  to  contract  in  writing 
as  if  she  were  sole,  with  the  assent  or 
concurrence  of  the  husband  expressed  in 
writing;  but  she  cannot  directly  or  indi- 
rectly become  a  surety  for  her  husband. 
The  wife,  except  in  certain  cases  specified, 
cannot  alienate  her  land  without  the  con- 
currence of  her  husband.  For  construc- 
tion of  the  earlier  statute  see  Marks  v. 
Cowles,  53  Ala.  499;  Smith  v.  Carson,  56 
Ala  456  ;  Strong  v.  VVaddcli,  56  Ala.  471 ; 
Ravisies  v.  Stoddart,  32  Ala.  599;  O'Con- 
nor V.  Chatnbeilain,  59  Ala.  431  ;  Gilbert 
I'.  Dupree,  63  Ala.  331. 

A  mairieil  woman  may  be  relieved  of 
her  disabilities  as  to  lier  statutory  and 
other  separate  estate  on  petition  to  a 
court  of  competent  jurisdiction.  Code 
1876,  §  2731.  Where  she  is  regularly  in- 
vested i)y  the  court  with  the  right  to  buy, 
sell,  and  mortgage  her  jjroperty,  she  may 
exercise  each  of  these  powers  in  her  own 
discretion,  just  as  if  she  were  a  ftme  sole. 
Robinson  v.  Walker,  1  So.  Rcj).  347. 

*  Conner   v.    Williams,    57    Ala.    131  ; 

96 


§  118.]  THE   PARTIES   TO   A   MORTGAGE. 

tate  define  the  debts  to  which  it  may  be  subjected,  and  the  rem- 
edy by  which  the  liability  for  such  debts  may  be  enforced  ;  con- 
sequently, even  a  mortgage  given  by  husband  and  wife,  to  secure 
the  payment  of  any  such  debt,  could  not  be  enforced.^ 

A  mortgage  of  a  married  woman's  statutory  separate  estate, 
executed  by  herself  and  husband  to  secure  the  payment  of  their 
joint  promissory  note,  is  not  binding  upon  her  or  her  estate.  The 
consideration  of  the  note  may  be  shown  by  parol  to  have  been  the 
indebtedness  of  the  husband.^  But  if  the  contract  of  purchase 
was  made  by  the  husband  alone,  though  the  conveyance  was 
taken  in'  the  name  of  his  wife,  and  the  vendor  had  no  notice  of 
the  wife's  claim  to  the  money,  his  equity  under  the  mortgage  is 
regarded  as  superior  to  hers.^ 

A  distinction  is  taken  between  the  statutory  real  estate  of  a 
married  woman  and  that  which  is  her  equitable  separate  estate  ; 
and  such  an  equitable  separate  estate  may  be  created  when  the 
gift,  or  devise,  or  conveyance  to  her,  clearly  and  certainly  shows 
an  intent  to  exclude  the  marital  rights  of  the  husband  under  the 
statute.  Such  separate  estate  not  affected  by  the  statute  she  can 
mortgage  for  her  own  debt  or  the  debt  of  her  husband,  or  of  any 
one  else,  as  if  she  were  a  feme  sole^ 

118.  In  Mississippi  a  married  woman  can  make  contracts 
binding  her  separate  property  only  for  certain  purposes.  In  gen- 
eral, it  may  be  said  that  she  has  no  power  to  borrow  money  by 
mortgaging  her  real  estate  ;  but  if  the  lender  can  show  that  the 
money  was  actually  applied  to  discharge  a  debt  for  which  her 
separate  estate  was  already  bound,  or  to  make  purchases  for 
which  she  might  charge  her  estate,  then  the  lender  may  recover 
upon  the  property  mortgaged.^  She  cannot  bind  the  corpus  of 
her  property  to  pay  her  husband's  debt;^  it  being  provided  by 
statute  that  "  no  conveyance  or  incumbrance  for  the  sepai*ate 
debts  of  the  husband  shall  be  binding  on  the  wife,  beyond  the 
amount  of  her  income."  ''      Although   such  a  mortgage  may  be 


Chapman  v.  Abrahams,  61  Ala.  108;  Mc-  *  Short  v.  Battle,  52  Ala.  456;  Helrae- 

Donald  v.  Mobile   Life  lus.  Co.  56  Ala.  tag  v.  Frank,  61  Ala.  67. 

468  ;    Gans    v.    Williams,    62    Ala.    41  ;  ^  Allen  v.  Lenoir,  53  Miss.  321 ;  Har- 

Thames  v.  Eembert,  63  Ala.  561.  men  v.  Magee,  57  Mis.s.  410. 

1  Gilbert  y.  Dupree,  63  Ala.  331.  ^  Klein   v.    McNamara,   54    Miss.    90; 

2  Stribling  v.   Bank  of   Kentucky,   48  Viser  v.  Scruggs,  49  Mis-s.  705 ;  Freeman 
Ala.  451.  r.  Wilson,  51  Miss.  329  ;   and  see  Dibrell 

3  Haygood  v.  Marlowe,  51  Ala.  478.  v.  Carlisle,  51  Miss.  785;  Erwin  v.  Hill, 

47  Miss.  675. 

96  "  Code  1871,  §  1778. 


WHO   MAY   GIVE   A   MORTGAGE.       [§§  118  a-120. 

operative  on  her  estate  to  that  extent,  it  ceases  to  be  operative 
upon  it  in  any  way  upon  her  death.^  But  during  her  lifetime 
the  mortgagee,  when  entitled  to  possession  after  default,  may 
maintain  ejectment.  The  married  woman  may  maintain  a  bill 
to  redeem,  or  for  an  account  against  the  mortgagee  in  posses- 
sion.^ 

118  a.  The  law  of  the  state  where  the  land  is  situated  gov- 
erns as  to  the  capacity  of  a  married  woman  to  execute  a 
mortgage,  though  it  be  executed  in  another  state.  Thus,  if  a 
married  woman  should  execute  a  mortgage  without  her  husband 
joining  her,  in  a  state  where  such  a  mortgage  would  be  valid, 
conveying  land  in  another  state  where  the  law  required  the  hus- 
band to  join  with  her  in  her  conveyance,  the  mortgage  would 
have  no  effect  in  the  latter  state,  and  could  not  be  enforced.^ 

IV.    Tenants  in   Common  of  Partnership  Real  Estate. 

119.  Generally.  —  Land  conveyed  to  members  of  a  copartner- 
ship as  tenants  in  common,  but  purchased  with  copartnership 
funds  and  used  for  copartnership  purposes,  is  treated  in  equity  as 
copartnership  personal  property.  The  creditors  of  the  copartner- 
ship are  in  such  case  entitled  to  priority  of  payment  out  of  it  in 
preference  to  the  creditors  of  individual  members  of  the  firm.* 
But  if  one  member  of  the  copartnership  mortgages  his  apparent 
interest  as  tenant  in  common  of  such  land  for  a  consideration  paid 
him  at  the  time,  as,  for  instance,  for  a  loan  of  money,  the  mort- 
gagee having  no  notice  of  the  character  of  the  property  in  equity 
as  copartnership  property,  he  is  entitled  to  hold  it  under  his 
mortgage.  He  may  rely  upon  the  legal  effect  of  the  conveyance 
to  his  mortgagor,  and  upon  his  apparent  title  upon  record.  A 
person  taking  a  mortgage  without  notice  that  it  covers  partner- 
ship property  is  a  purchaser,  and  is  subject  to  no  equity  in  favor 
of  the  partnership  or  of  its  creditors.^ 

120.  Notice  of  partnership  equities.  —  A  mortgage  made  by 

1  Reed  i;.  Coleman,  51  Miss.  835.  Sumner,  2  Barb.  (N.  Y.)  Ch.  165  ;  Meily 

2  Steplicnson  v.  Miller,  57  Miss.  48.  v.  Wood,  71  Pa.  St.  488  ;   Ilogle  v.  Lowe, 
»  Swank  v.  Hufnagle  (Ind.),  13  N.  E.     12  Nov.  286;    Tarbel  v.  Bradley,  7  Abb. 

Rep.   105;    .S'.  C.   12  lb.  303;   Brown  v.  (N.  Y.)  N.  C.  273. 

Bank,  44  Ohio  St.  269;  6  N.  E.  Rep.  648.  ^  Hewitt  v.  Rankin,  supra;  Hiscock  v. 

See  §  823.  Phelps,  49  N.   Y.  97  ;    quoted    with   ap- 

*  roiiock's  Di;^.  of  Lawof  Partnership,  proval  in   Seeley  v.  Mitchell  (Ky.),  4  S. 

ch.  6;    Story  on   Partnership,  §§  92,  93;  W.  Rep.  190. 
Ilewiiti;.  Uankin,  41  lowu,  35  ;  Buchan  v. 

vol-  1.                         7  QT 


§  120.]  THE   PARTIES   TO   A   MORTGAGE. 

a  partner  of  his  interest  in  partnership  real  estate,  to  one  who 
knows  it  to  be  such,  is  not  a  morto;age  of  the  partner's  undivided 
interest  in  such  real  estate,  but  of  his  interest  in  the  portion  mort- 
gaged after  the  payment  of  the  firm  debts  upon  a  settlement  of 
the  partnership  accounts.  The  mortgage  is  not  available  until 
the  partnership  debts  have  been  paid  and  the  partnership  ac- 
counts have  been  discharged,  if  the  other  partner  chooses  to  assert 
his  equity,  or  if  subsequent  partnership  mortgagees  assert  their 
priority ;  ^  or  if  creditors  of  the  partnership  attach  the  property 
or  levy  an  execution  upon  it  as  belonging  to  the  partnership.^ 
There  would  in  such  case  be  no  distinction  between  debts  in- 
curred prior  to  the  mortgage  and  those  incurred  subsequently.^ 
Upon  the  bankruptcy  of  the  firm,  the  assignee,  in  behalf  of  the 
creditors,  would  be  entitled  to  the  propert}'^  in  preference. 

If  one  partner,  upon  retiring  from  the  partnership,  conveys  his 
interest  in  the  partnership  real  estate  to  another  person,  who  then 
comes  in  and  forms  a  new  firm,  and  this  new  partner  executes  a 
mortgage  of  such  real  estate  to  secure  tlie  purchase  money,  in  the 
absence  of  any  evidence  that  the  mortgage  was  intended  to  be  a 
mortgage  of  this  partner's  interest  in  the  new  firm,  it  is  proper  to 
regard  it  as  a  mortgage  of  the  same  partnership  interest  in  the  old 
firm  which  was  conveyed  to  the  new  partner,  and  not  of  his  in- 
terest in  the  new  firm.  Such  a  mortgage  is  subject  to  the  pay- 
ment of  the  debts  of  the  old  firm,  but  not  to  the  payment  of  the 
debts  of  the  new  firm.'*  But  the  mortgagee  must  be  in  the  posi- 
tion of  a  bond  fide  purchaser  for  value ;  he  must  have  parted  with 
money  or  goods,  or  something  valuable,  in  reliance  upon  the  secu- 
rity. If  he  has  simply  taken  the  mortgage  to  secure  an  existing 
debt,  or  has  knowledge  of  the  facts  which  make  the  property  in 
equity  assets  of  the  firm,  then  his  mortgage  will  be  postponed  to 
the  equities  of  those  who  have  a  right  to  have  the  property  ap- 
plied as  assets  of  the  copartnership.^  But  a  recital  in  a  deed  to 
three  pej'sons  that  the  conveyance  was  in  the  proportion  of  an 
undivided  half  to  one  of  them,  and  an  undivided  fourth  to  each 
of  the  others,  "  this  being  the  proportional  undivided  interest  of 
each  of  the  above  partners  in  the  firm  and  lands"  of  the  part- 

1  Beecher  v.   Stevens,   43   Conn.    587  ;     v.  Ames,  45  Iowa,  491 ;  Seaman  v.  Huf- 
quoted  with  approval  in  Seeley  v.  Mitch-     faker,  21  Kans.  254. 

ell  (Ky.),  4  S.  W.  Rep.  190.  ^  Lovejoy  v.  Bowers,  supra. 

2  Lovejoy   v.  Bowers,   11    N.    H.   404;         *  Beecher  u.  Stevens,  su/>ra.    See  Phelps 
French  v.  Lovejoy,  12  N.  H.  458 ;  Fargo     v.  McNeely,  66  Mo.  554. 

6  Hiscock  V  Phelps,  49  N.  Y.  97. 
98 


WHO  MAY   GIVE  A   MORTGAGE.  [§  121. 

nership,  was  held  not  necessarily  to  import  notice  to  a  mortgagee 
of  the  interest  of  one  of  the  grantees  of  the  equitable  rights  of  the 
others  as  representing  the  creditors  of  the  firm.^ 

A  mortgage  by  one  partner  of  his  interest  in  a  mill  and  ma- 
chinery in  the  continued  use  and  occupation  of  the  partnership,  to 
secure  such  partner's  individual  debt,  passes  only  what  interest 
such  partner  may  have  after  paying  the  debts  of  the  copartner- 
ship.^ The  continued  use  of  such  property  by  the  partnership  is 
notice  of  the  equitable  rights  of  the  partnership  in  the  property. 

If  the  description  of  the  property  in  the  mortgage  itself  shows 
that  the  property  is  that  of  a  partnership,  as  where  it  is  described 
as  all  the  right,  title,  and  interest  of  a  partner  individually,  and 
as  a  member  of  a  certain  firm  in  all  the  real  estate  and  other 
property  of  the  firm,  the  mortgagee  necessarily  has  notice  of  the 
partnership  equities.  The  existence  of  such  a  mortgage  cannot 
prevent  the  copartners  from  disposing  of  the  real  estate  for  the 
legitimate  purposes  of  the  copartnership,  such  as  adjusting  its 
affairs  with  creditors,  or  with  each  other.  The  recording  of  such 
mortgage  is  without  effect  upon  the  other  members  of  the  co- 
partnership, or  upon  any  one  taking  a  conveyance  made  for  part- 
nership purposes."^ 

121.  A  valid  mortgage  may  be  made  by  one  partner  to 
secuxe  a  partnership  debt  upon  partnership  property.  Where 
a  copartnership  carried  on  business  in  a  store  built  by  the  firm 
upon  land,  the  legal  title  of  which  was  in  A.,  and  one  of  his  co- 
partners, to  secure  a  copartnership  debt,  executed  a  mortgage  of 
the  land  with  the  consent  of  his  copartners,  and  in  the  firm  name 
of  A.  &  Co.,  and  acknowledged  the  execution  of  it  "as  his  free 
act  and  deed  in  behalf  of  said  firm,"  it  was  held  valid  as  against  a 
person  who,  with  actual  notice  of  this,  took  a  subsequent  mort- 
gage of  the  same  property  executed  by  A.^ 

An  exception  to  the  general  rule,  that  an  authority  to  bind 
anotiier  by  an  instrument  under  seal  must  itself  be  created  by 
a  like  instrument,  seems  to  have  been  established  in  the  case  of 
partners ;  they  may  give  each  other  authority  by  parol  to  bind 
each  other  by  instruments  under  seal.^     Some  of  the  cases  cited 

1  Van  Slyck  v.   Skinner,  41  Mich.  186.  »  Turbel   v.   BnulU-y,   7   Abb.  (N.   Y.) 

But  the  ilecision  in   thia  case  Heems  not  N.  C.  273.     See  note  to  this  case  for  de- 

to  bciiiiitc  in  hurmuny  witii  otliur  authuii-  cisioiis  rclntin;^  to  jiaitnersbip  realty, 

ties.  *  WiUoii  v.  Hunter,  U  Wis.  083. 

^  .Ml  ctiiinifs'  Bnnk  v.  Godwin,  5  N.  J.  ^  See  \Vii>ou  r.   Hunter,  supra;  Cady 

Va{.  (I  Hul»t.)  334.  V.  Shepherd,  11  Tick.  (Mubb.)  400;  Swan 

99 


§§  122,  123.]  THE   PARTIES   TO  A  MORTGAGE. 

do  not  refer  to  conveyances  of  real  estate.  But  if  authority  to 
execute  a  personal  contract  under  seal  may  be  implied  from  this 
relation,  the  same  authority  may  as  well  extend  to  conveyances 
of  real  property.  Lord  Kenyon  said,  that  if  the  relation  of  part- 
nership gave  this  authority  in  the  one  case,  it  "  would  extend  to 
the  case  of  mortgages."  ^ 

An  unauthorized  mortgage  of  partnership  property  made  by 
one  partner  using  the  name  of  his  copartner  may  be  ratified  by 
the  latter  by  parol,  or  by  any  act  showing  his  recognition  of  the 
mortgage.^  A  mortgage  of  such  real  estate  by  one  partner  to 
secure  a  copartnership  debt  is  valid  ;  ^  but  it  is  not  valid  if  made 
in  opposition  to  the  will  of  another  partner  with  the  knowledge 
of  the  creditor.*  There  are  authorities,  however,  which  hold  that 
such  a  mortgage,  made  without  the  previous  authority  of  the  other 
partner,  binds  only  the  interest  of  the  partner  executing  it.^ 

122.  On  the  other  hand,  if  a  partner  mortgage  his  separate 
property  to  secure  a  partnership  debt,  he  becomes  a  surety  for 
the  firm,  and  his  separate  creditors,  upon  his  bankruptcy  or  insol- 
vency, have  a  right  to  insist  that  the  partnership  property  be  first 
applied  to  the  payment  of  the  debt  so  secured.^ 

123.  Upon  the  death  of  a  partner  holding  such  an  interest 
in  partnership  real  estate,  his  share  descends  to  his  heirs,  but 
equity  converts  the  legal  title  into  a  trust,  to  be  devoted  to  the 
payment  of  partnership  obligations,  before  it  can  be  taken  as  a 
part  of  his  separate  estate.'  As  against  the  partnership  creditors 
there  can  be  no  dower  in  such  laud.  But  when  such  real  estate 
is  not  required  for  the  payment  of  the  partnership  debts,  or  the 
adjustment  of  accounts  between  the  partners,  it  is  to  be  treated 
as  realty  in  the  settlement  of  the  estate,  and  is  subject  to  dower. 
It  is  then  treated  in  every  way  as  real  estate,  and  does  not  go  to 
the  personal  representatives  of  the  deceased.  It  is  to  be  regarded 
as  real  estate  and  subject  to  all  the  rules  applicable  to  real  estate.^ 
The  conversion  of  such  real  estate  into  personalty,  for  the  pur- 

V.  Stedraan,  4  Met.  (Mass.)  548;  Smith  v.         ''  Wilcox  v.  Wilcox,  13  Allen  (Mass.), 

Kerr,  3  N.  Y.  144.  252;  Buruside  v.  Merrick,  4  Met.  (Mass.) 

i  Harrison  v.  Jackson,  7  T.  R.  203.  537 ;  Dyer  v.  Clark,  5  lb.  662 ;  Howard 

2  Holbrook  v.  Cliamberlin,   116  Mass.  v.  Priest,  lb.  582;  Piatt  v.  Oliver,  3  Mc- 
155.  Lean,  27. 

3  Cooley  V.  Hobart,  8  Iowa,  358.  8  Foster's  Appeal,  74  Pa.  St.  391 ;  Wil- 
*  Bull  V.  Harris,  18  B.  Mou.  (Ky.)  195.  cox  v.  Wilcox,  supra;  Hewitt  v.  Rankin, 
^  Sutlive  V.  Jones,  61  Ga.  676.                     41  Iowa,  35,  and  cases  cited. 

6  Averill   v.  Loucks,  6   Barb.    (N.  Y.) 
470. 

100 


WHO   MAY   GIVE   A   MORTGAGE.  [§  124. 

pose  of  the  settlement  of  the  partnership  affairs,  is  a  device  of 
equity  ;  and  as  soon  as  the  reason  of  the  rule  ceases,  by  the  clos- 
ing of  the  partnership  affairs  without  calling  upon  the  real  estate, 
the  rule  itself  no  longer  applies.^  This  equitable  interference  is 
not  extended  so  as  to  convert  all  real  estate  into  personalty  for 
the  purpose  of  a  division. 

A  mortgage  by  an  individual  partner  of  such  real  estate  is  re- 
lieved of  all  equities  in  favor  of  the  partnership,  so  soon  as  the 
business  of  the  partnership  is  closed,  without  requiring  the  appli- 
cation of  it  to  the  firm  debts.^ 

V.   Corporations. 

124.  A  corporation  has  the  power  to  mortgage  its  real  es- 
tate as  an  incident  to  the  power  to  acquire  and  hold  it,  and  to 
make  contracts  in  regard  to  it,  when  the  power  is  not  expressly 
denied,  and  is  not  inconsistent  with  the  public  obligations  of  the 
corporation.^  A  municipal  corporation  has  also  the  power  to 
mortgage  its  real  estate.*  In  general,  it  may  be  said  that  the 
yws  disponendi  of  corporations  is  at  common  law  unlimited.  This 
right  may  of  course  be  circumscribed  by  statute,^  or  by  the  char- 
ters under  which  corporations  are  organized  ;  and  it  is  the  case 
generally  that  corporations,  to  which  are  given  large  powers  and 
valuable  privileges,  from  the  exercise  of  which  it  is  expected  the 
public  will  derive  advantage,  are  impliedly  restrained  in  their 
power  of  alienation.  Railroad  companies  are  of  this  class  ;  they 
cannot  mortgage  their  franchises  or  property  essential  to  the  con- 
tinued operation  of  the  roads  without  legislative  authority;*'  but 

1  Judge  Story  says,  in  his  work  on  ten  assent  of  a  majority ;  Mass.  Stat,  of 
Partnership,  §  93,  that  this  is  an  open  1870,  ch.  224,  §  15  ;  or  of  two  thirds  of  the 
question.  But  the  authorities  now  seem  stociiholders.  2  R.  S.  of  N.  Y.  p.  499, 
decisive  of  the  law  as  stated  in  the  text.  §  18.     Such  a  statute  is  for  their  protec- 

2  Hewitt  V.  Rankin,  41  Iowa,  35.  See,  tion  against  the  improvident  acts  of  the 
also,  Shearer  i;.  Shearer,  98  Mass.  107,  for  ofticers,  and  is  not  enacted  because  mort- 
an  able  opinion  by  Mr.  Justice  Wells.  gaging  corporate  property  is  improper  in 

^  Jones  V.  Guaranty  &  Indemnity  Co.  itself.     Therefore   a  defect   in  the  assent 

101  U.  S.  622;  Fisher's  App.  (I'a )  14  Atl.  to  invalidate  the  mortgage  must   be  ma- 

Kep.  225 ;  Filch  v.  Lewiston  Steam-Mill  terial.     Greenpoint  Sugar  Co.  v.  Whitin, 

Co.  (.Me.)  12  Atl.  Rej).  732;  Aurora  Agr.  69    N.    Y.    328.     See,    also,  Carpenter   v. 

&  Ilort.  Soc.  V.  Paddock,  80  111.  263  ;  and  Blackhawk  Gold  Mining  Co.  05  N.  Y.  43  ; 

see  Aiigfll  &  Ames  on  Corp.  153;  Curtis  Moran- y.  Strauss,  6  Ben.  249. 

f.  Leavitt,  15  N.  Y.  9  ;  Thompson  v.  Lam-  ^  Atkinson  v.  Marietta  &  Cinn.  R.  R. 

bert,  44  Iowa,  239.  Co.  15  Ohio  St.  21;    Coe  v.   Columbus, 

♦  Vanarsdall  y.  Watson,  65  Ind.  176.  Piqua   &   Ind.    R.    R.   Co.    10   Ohio   St. 

*  One,  for  instance,  requiring  the  writ-  372;  Commonwealth  v.  Smith,  10  Allen 

101 


§  125.]  THE  PARTIES   TO   A   MORTGAGE. 

an  unauthorized  mortgage,  or  one  defectively  executed,  or  secur- 
ing bonds  not  properly  drawn,  may  be  subsequently  confirmed  by 
the  legislature.-^ 

A  mortgage  by  a  corporation  de  facto  is  good  until  the  state 
has  interposed  and  declared  its  exercise  of  corporate  powers  a 
usurpation.  Until  this  is  done  it  is  assumed  that  the  corporation 
de  facto  rightfully  possessed  and  exercised  corporate  powers.'^ 

The  right  of  a  railroad  company  to  construct  a  road  being 
given  because  of  the  benefit  to  the  public  arising  from  the  use  of 
the  road,  a  power  conferred  upon  it  to  mortgage  its  property  is 
construed  to  confer  upon  the  mortgagee,  or  a  purchaser  under 
the  mortgage,  all  needful  authority  to  use  the  road  in  a  proper 
and  beneficial  manner,  but  no  authority  to  take  up  and  sell  the 
material  of  which  the  road  is  made.^ 

125.  Lands  not  necessary  for  the  business  of  a  railroad.  — 
But  this  limitation  of  the  power  of  a  railroad  corporation  to  mort- 
gage its  real  estate  does  not  apply  to  lands  not  acquired  to  enable 
it  to  carry  on  the  business  which  it  was  chartered  to  do  for  the 
benefit  of  the  public,  and  not  needed  or  used  for  that  purpose. 
The  alienation  of  such  lands  in  nowise  impairs  or  affects  the  use- 
fulness of  the  company  as  a  railroad  corporation,  or  its  ability  to 
exercise  any  of  its  corporate  franchises.  Mr.  Justice  Foster,  of 
Massachusetts,^  in  a  case  involving  this  point,  said:  "The  re- 
cent cases  in  which  railroad  mortgages  have  been  adjudged  in- 
valid by  this  court  do  not  countenance  any  doubt  of  the  power  of 
a  railroad  company  to  sell  and  convey  whatever  property  it  may 
hold,  not  acquired  under  the  delegated  right  of  eminent  domain, 
or  so  connected  with  the  franchise  to  operate  and  maintain  a  rail- 
road that  the  alienation  would  tend  to  disable  the  corporation 
from  performing  the  public  duties  imposed  upon  it,  in  considera- 
tion of  which  its  chartered  privileges  have  been  conferred."  If  a 
mortgage  by  a  railroad  company  includes  lands  which  it  can  mort- 
gage without  distinct  legislative  authority,  and  also  lands  which 
it  cannot  convey  without   such  authority,  the  mortgage  will  bd 

(Mass.),  448.     The  power  of  such  com-  Co.  8  Gray  (Mass.),  575;  Shaw  v.  Nor- 

panies  to  mortgage   their  property   was  folk  County  R.  R.  Co.  5  lb.  162. 

regarded  as  neces^sarily  implied  in  Kelly  2  Duggan   v.   Colorado   Mortgage,   &c. 

V.  Ala.  &  Cin.  R.  R.  Co.  58  Ala.  489.  Co.  (Colo.)  17  Pac.  Rep.  105. 

This  subject  is  barely  mentioned  in  this  ^  Palmer  i;.  Forbes,  23  111.  301. 

treatise,  because  it  is  fully  treated  in  the  *  Hendee  r.Pinkerton,  14  Allen  (Mass.), 

author's  work  on  Railroad  Securities.  381. 

1  Chapin  v.  Vermont  &  Mass.  R.  R. 

102 


WUO   MAY   GIVE   A   MORTGAGE.  [§§  126,  127. 

upheld  as  to  the  former,  but  will  be  inoperative  and  void  as  to  the 
latter.i 

126.  A  religious  corporation  has  in  general,  under  our  laws, 
the  same  right  to  mortgage  and  create  liens  upon  its  real  estate 
that  any  corporation  has.  Having  the  power  to  hold  and  enjoy 
real  estate,  unless  there  be  an  express  prohibition,  it  has  the 
power  to  mortgage  it.^ 

127.  The  pov^rer  to  mortgage  resides  primarily  in  the  body 
corporate,  or  otherwise  in  the  stockholders.  They  may  author- 
ize the  execution  of  the  deed  by  any  agents  they  may  by  special 
vote,  or  general  by-law,  constitute  for  that  purpose.  The  direc- 
tors of  a  corporation,  without  authority  either  expressly  or  im- 
pliedly derived  from  the  stockholders,  have  no  right  to  execute  a 
mortgage,  or  to  authorize  any  one  to  do  so.  But  even  if  the  direc- 
tors exceed  their  authority  in  borrowing  money  for  the  corpora- 
tion, and  executing  a  mortgage  to  secure  the  repayment  of  it,  the 
corporation  cannot,  after  enjoying  the  benefit  of  the  loan,  and 
acquiescing  in  the  transaction,  question  their  authority.  The 
stockholders  may  restrain  the  directors,  or  other  officers,  in  any 
attempt  to  transcend  their  powers;  but  if  they  remain  silent, 
permitting  them  to  execute  mortgages  upon  their  property,  and 
receiving  the  benefits  of  the  loan,  they  are  estopped  to  say  that 
the  officers  were  not  authrized  to  do  these  acts.*^  A  corporation 
ratifies  a  mortgage  made  by  its  directors  by  issuing  bonds  under 
it,  and  paying  interest  upon  them.*  The  ratification  may  be 
through  any  acts  which  show  that  the  corporation  accepts  the 
acts  of  its  officers  or  agents ;  ^  such  as  receiving  and  using  the 
proceeds  of  such  mortgage.^ 

A  by-law  of  a  corporation  providing  that  in  the  management 
of  its  affairs  the  directors  shall  have  all  the  powers  which  the 
corporation  itself  possesses   invests    them  with  power  to  borrow 

1  Hendeey.Pinkerton,  14  Allen  (Mass.),  certain  restrictions  of  this  kind  will  be 
381;  Jones  on  Railroad  Securities,  §  12.        found  in    our  own  statutes."     Per  Chris- 

2  Methodist   Epis.    Church    v.    Shulze,     tiancy,  J. 

61   Ind.  511  ;  Madison  Av.  Ch.  i'.  Oliver         ^  Hotel  Co.  v.  Wade,  97  U.  S.  13;  Au- 

St.  Ch.  41  N.  Y.  Superior  Ct.  369  ;  Wal-  rora  Apr.  &  Ilort.  Soc.  v.  Paddock,  80  111. 

rath  w.  Campbell,  28  Mich.  111.     "  It  was  203;    Ottawa  Northern   Plank   Road  Co. 

usual   in  Ent,'Iand    to   restrain    both    the  r.  Murray,  1.5  111.  330;    Bradley  v.  Bal- 

power  of  acquisition   and   the    power  of  lard,  55  111.  413. 

Bale  of  ecclesiastical  corporations,  and  a         *  McCurdy's  Appeal,  65  Pa,  St.  290. 

similar  policy  has  been  adopted  in  some         ^  Ilolhrook  v.   Chamberlin,    116  Mass. 

of  the   American    states   in    reference    to  155,  and  cases  cited. 

the  real  estate  of  such  corporations ;  and         *  Cooke  v.  Watson,  30  N.  J.  Eq.  345. 

103 


§  128.]  THE   PARTIES  TO   A   MORTGAGE. 

money,  issue  bonds,,  and  convey  in  mortgage  the  lands  of  the 
corporation  as  security.^  Whether  the  directors  of  a  corporation, 
in  the  absence  of  any  restriction  by  charter  or  by-law,  may,  with- 
out further  authority  in  behalf  of  the  corporation,  mortgage  its 
property  to  secure  debts  they  are  authorized  to  incur,^  is  left  un- 
certain by  the  authorities;  though  in  general  the  directors  are 
regarded  as  having  by  implication  all  the  power  of  the  corpora- 
tion in  this  regard. 

128.  Use  of  corporate  seal.  —  A  corporation  cannot  make  a 
valid  mortgage  of  its  real  estate  except  by  an  instrument  under 
its  corporate  seal.^  But  an  impression  of  the  seal  of  a  corpora- 
tion stamped  upon  and  into  the  substance  of  the  paper  upon 
which  the  instrument  is  written  is  a  good  seal,  although  no  wax, 
wafer,  or  other  adhesive  substance  be  used.^  This  is  so  held  in 
states  where  the  distinction  between  sealed  and  unsealed  instru- 
ments is  inflexibly  preserved.  But  where  a  scroll  is  not  treated 
as  a  seal,  a  fac-simile  of  the  seal  of  a  corporation  printed  with  ink 
on  the  paper  is  not  a  valid  seal.^  "  No  definition  of  a  seal  has 
ever  been  made,"  says  Mr.  Justice  Foster,^  "  and  none  can  be 


1  Hendee  v.  Pinkerton,  14  Allen  (Mass.), 
381  ;  Saltmarsh  v.  Spaulding  (Mass.),  17 
N.  E.  Rep.  316. 

2  Jones  on  Railroad  Securities,  §  84  ; 
Hendee  v.  Pinkerton,  supra,  per  Foster, 
J.;  Bank  of  Middlebury  v.  Rutland  & 
Wash.  R.  R.  Co.  30  Vt.  159,  169;  Miller 
V.  Rutland  &  Washington  R.  R.  Co.  36 
Vt.  4.52,  474  ;  Sargent  v.  Webster,  13  Met. 
(Mass.)  497,  .503  ;  Burrill  v.  Nahant  Bank, 
2  Met.  (Mass.)  163  ;  Augusta  Bank  v. 
Hamblet,  35  Me.  491 ;  Hoyt  v.  Thomp- 
son, 19  N.  Y.  207.  See  Forbes  v.  San 
Rafael  Turnpike  Co.  50  Cal.  340,  where 
the  power  of  the  directors  was  limited. 

A  statute  requiring  a  vote  of  the  stock- 
holders of  a  corporation  to  authorize  a 
conveyance  of  its  real  estate,  does  not 
apply  to  a  conveyance  made  by  a  foreign 
corporation.  Saltmarsh  r.  Spauldiug, 
supra. 

3  In  re  St.  Helen  Mill  Co.  3  Sawyer, 
88  ;  Eagle  Woolen  Mills  Co.  v.  Monteith, 
2  Oreg.  277,  285  ;  Koehler  v.  Black  River 
Falls  Iron  Co.  2  Black,  715. 

*  Hendee  v,  Pinkerton,  supra.  "  After 
our  own  courts  have  allowed  wafers  in- 

104 


stead  of  wax,  and  paper,  with  gum  or 
mucilage,  instead  of  wafers,  there  seems 
little  reason  why  we  should  hesitate  also 
to  allow  the  sufiSciency  of  an  impression 
of  a  corporate  seal  on  the  paper  itself. 
The  extent  to  which  this  practice  has 
prevailed  among  corporations  ;  the  fact 
that  the  seals  of  all  our  own  courts  have 
been  from  an  early  period  of  the  same 
description  ;  the  sanction  of  numerous 
decisions  in  other  states,  and  in  the  fed- 
eral courts  ;  the  convenience  and  unob- 
jectionable character  of  the  usage, —  are 
arguments  in  its  favor  too  powerful  to  be 
resisted,  in  the  absence  of  any  decisive  au- 
thority to  the  contrary."  Per  Foster,  J. 
And  see  article  1  Am.  Law  Rev.  638,  by 
Geo.  S.  Hale,  Esq. 

5  Bates  V.  Boston  &  N.  Y.  Cent.  R.  R. 
Co.  10  Allen  (Mass.),  251. 

6  Hendee  v.  Pinkerton,  supra. 

Ranch  v.  Oil  Co.  8  W.Va.  36  :  a  deed  of 
trust  reciting  a  corporation  as  the  gran- 
tor, but  having  the  following  attestation  : 
"Witness  the  signature  and  seal  of  Wil- 
liam Scott,  president  of  said  Blennerhas- 
selt  Oil  Co.,  and  who  is  legally  authorized 


WHO  MAY   GIVE   A   MORTGAGE.  [§  129. 

suggested,  liberal  enough  to  include  the  method  adopted  in  that 
case,  which  would  not  destroy  the  distinction  uniformly  adhered 
to  in  the  usage  and  judicial  decisions  of  this  state.  If  we  should 
pronounce  every  scroll  a  seal,  we  should  speedily  be  called  upon 
to  take  the  next  step  of  pronouncing  every  flourish  to  be  a  scroll, 
and  nothing  would  remain  of  the  ancient  formality  of  sealing." 

VI.    A  Power  to  Mortgage. 

129.  As  a  general  rule,  a  power  to  sell  and  convey  real 
estate  does  not  confer  a  power  to  mortgage,  and  a  mortgage 
executed  under  a  power  of  attorne}^  authorizing  the  attorney  to 
sell  and  convey  only,  is  void.^  A  devise  of  so  much  of  the  testa- 
tor's estate  as  may  be  sufficient  for  the  maintenance  of  the  dev- 
isee during  his  life,  "  he  having  full  power  to  sell  and  convey 
any  and  all  of  my  real  estate,  at  any  time,  if  necessary  to  secure 
such  maintenance,"  does  not  give  to  the  devisee  the  right  to  mort- 
gage the  estate  in  fee.^  The  power  should  expressly  declare  the 
intention  that  the  agent  should  have  authority  to  mortgage  the 
property.  A  general  power  may  be  sufficient  if  it  appears  that 
the  principal  intended  his  agent  should  have  authority  to  raise 
money  on  mortgage,  and  the  nature  of  the  business  intrusted  to 
him  is  such  as  to  make  it  proper  for  him  to  exercise  this  power.^ 
A  power  to  lease  on  mortgage  real  estate  for  the  purpose  of  pro- 
curing money  thereon,  in  case  the  attorney  cannot  sell  the  prop- 
by  the  board  of  directors  of  said  company  loaned  may  be  repudiated  by  tlie  princi- 
to  make  ihis  grant,  this  date  aforewrit-  pal.  Cleveland  Ins.  Co.  v.  Reed,  1  Biss. 
ten.     William  Scott  (seal);"   the  corpo-     180,183. 

rate  seal  not  being  used,  was  held  not  to  ^  Hoyt  v.  Jaques,  129  Mass.  286,  per 
be  the  deed  of  the  corporation.  Morton,  J.     "  The  two  transactions  of  a 

1  De  Bouchout  v.  Goldsmid,  5  Ves.  211 ;  sale  and  a  mortgage  are  essentially  differ- 
Australian,  &c.  Co.  v.  Mounsey,  4  K.  &  J.  ent.  A  power  to  sell  implies  that  the  at- 
733;  Huldenby  v.  Spofforth,  1  Beav.  390;  torney  is  to  receive  for  the  benefit  of  the 
Stronghill  v.  Austey,  1  Ue  G.,  M.  &  G.  principal  a  fair  and  adequate  price  for  the 
63.5;  Bloomer  i;.  Waldron,  3  Hill  (N.  Y.),  land;  a  power  to  mortgage  involves  a 
361;  Morris  v.  Watson,  1.5  Minn.  212;  right  in  the  attorney  to  convey  the  land 
Colesbury  v.  Dart,  61  Ga.  620.  for  a  less  sum,  so  that  the  whole  estate 

Otherwise  in  Pennsylvania:  Lancaster  may  be  taken  on  a  foreclosure  for  only  a 
V.  JJolan,  1  Kawle,  231  ;  Zane  i;.  Kennody,  part  of  its  value.  So,  under  a  will,  a  trust 
73  Pa.  St.  182  ;  Presbyterian  Corporation  with  a  power  to  sell  prima  facie  imports  a 
V.  Wallace,  3  Kawle,  109;  (iordon  r.  power  to  sell  'out  and  out,' and  will  not 
Preston,  1  Watts,  385  ;  Duval's  Appeal,  authorize  a  mortgage,  unless  there  is  some- 
38  Pa.  St.  112,  118;  Penn.  Life  Ins.  Co.  thing  in  the  will  to  show  that  a  mortgage 
V.  Austin,  42  Pa.  St.  257.  was  within  the  intention  of  the  testator." 

But  a  mortgage  made  under  such  a  '^  See  Coutant  i;.  Scrvoss,  3  Barb.  (N. 
power  for  a  greater  sum  than  is  actually     Y.)  128. 

105 


§  130.]  THE  PARTIES  TO   A   MORTGAGE. 

erty,  gives  him  the  option  to  mortgage  it,  in  the  event  he  cannot 
sell  at  a  reasonable  price.^  A  power  to  sell  for  the  expressed 
purpose  of  raising  money  is  held  to  imply  a  power  to  give  a 
mortgage  which  is  only  a  conditional  sale.^  A  power  by  will,  or 
otherwise,  to  raise  a  sum  of  money  upon  certain  land  authorizes 
either  an  absolute  sale  or  a  mortgage,  as  may  be  deemed  expe- 
dient.^ 

A  power  to  mortgage  given  in  general  terms,  without  specify- 
ing the  provisions  the  deed  shall  contain,  includes  the  power  to 
make  it  in  the  form  and  with  the  provisions  customarily  used  in 
the  state  or  country  where  the  land  is  situated.  Thus  such  a 
power  to  mortgage  given  in  England,  or  in  some  American  states, 
would  authorize  the  giving  of  a  mortgage  with  a  power  of  sale  ;  * 
while  in  states  in  which  such  a  power  is  not  in  general  use  a 
power  inserted  without  special  authority  would  be  void.  And  in 
regard  to  any  other  provision,  as,  for  instance,  that  forfeiting 
credit  on  the  mortgage  upon  any  default  in  the  payment  of  inter- 
est, and  giving  the  mortgagee  the  option  thereupon  to  consider 
the  whole  sum  due,  a  general  power  to  mortgage  would  authorize 
its  use  in  some  states,  while  the  same  power  would  not  authorize 
it  in  others.^ 

130.  Mode  of  exercising  the  power.  —  It  is  a  rule  of  convey- 
ancing that  a  deed  by  an  attorney  must  be  executed  in  the  name 
of  the  principal.  In  Combe's  case,^  "  it  was  resolved  that  when 
any  has  authority,  as  attorney,  to  do  any  act,  he  ought  to  do  it  in 
his  name  who  gives  the  authority  ;  for  he  appoints  the  attorney 
to  be  in  his  place,  and  to  represent  his  person  ;  and  therefore  the 
attorney  cannot  do  it  in  his  own  name,  nor  as  his  proper  act,  but 
in  the  name,  and  as  the  act,  of  him  who  gives  the  authority." 

A  mortgage  by  a  corporation  must  be  executed  in  its  name  by 
the  agent  or  officer  authorized  to  act  for  it.  Although  it  may 
purport  to  be  the  mortgage  of  a  corporation,  yet  if  executed  by 
its  attorney  or  officer  in  his  individual  name,  it  is  not  the  legal 
mortgage   of   the  corporation,   and   does    not  bind  it  except  in 

1  Mylius  V.  Copes,  23  Kans.  617.  *  See  chapter  XL.  ;  Wilson  v.  Troup,  7 

2  Powell    on    Mortg.    ch.   4;    Mills  r.  Johns.  (N.  Y.)  Ch.  25 ;  -S".  C.  2  Cow.  195. 
Banks,  3  P.  Wms.   1 ;    Ball  v.  Harris,  4         6  See  §  76 ;  Jesup  v.  City  Bank  of  Ra- 
Myl.  &  C.  267  ;  Page  v.  Cooper,  16  Beav.  cine,  14  Wis.  331. 

396;  Oxford  V.  Albermarle,  17  L.J.  N.  S.  ^g   Coke,    75;    and    see    Copeland   v. 

Ch.  396;  Devaynes  v.  Robinson,  24  Beav.  Mercantile  Ins.  Co.  6  Pick.  (Mass.)  198; 

86.  Elwell  V  Shaw,  16  Mass.  42. 

3  Wareham  i;.  Brown,  2  Vern.  153. 

106 


WHO   MAY   TAKE  A   MORTGAGE.  [§§  131-133. 

equity.^  But  a  mortgage  executed  in  behalf  of  a  corporation 
and  formal  in  every  other  respect  is  not  vitiated,  as  between  the 
parties,  by  any  informality  in  the  certificate  of  acknowledgment 
whereby  the  treasurer  acknowledges  the  instrument  to  be  his  own 
free  act  and  deed.^ 

Although  not  bound  by  the  act  of  an  agent  in  giving  a  mort- 
gage, the  principal  may  ratify  it  by  taking  the  benefit  of  it,  or 
may  otherwise  so  act  with  reference  to  the  exercise  of  the  power 
as  to  preclude  himself  from  attempting  to  invalidate  the  secu- 
rity .^ 

PART  11. 

"WHO    MAY   TAKE   A    MORTGAGE,    131-135. 

131.  In  general  any  one  capable  of  holding  real  estate  may- 
be a  mortgagee.  The  disabilities  which  prevent  the  making  of 
a  valid  mortgage  in  no  case  prevent  the  taking  of  a  mortgage, 
which  is  for  the  benefit  of  the  mortgagee.  An  infant  may  take 
a  mortgage.  He  is  bound  by  the  conditions  of  the  deed,  which 
must  be  wholly  good  or  void  altogether.* 

A  director  or  stockholder  of  a  private  corporation  is  not  de- 
barred by  his  relation  to  the  corporation  from  loaning  money  to 
it,  and  taking  a  mortgage  from  it  for  security ;  but  he  must  act 
fairly  and  in  good  faith.^  A  receiver,  however,  is  debarred  upon 
grounds  of  public  policy  from  taking  a  mortgage  upon  property 
which  he  holds  as  receiver,  to  secure  a  loan  or  advances  made  by 
him  to  the  owner  of  the  property.  He  is  not  allowed  to  deal  in 
respect  to  the  property  which  he  holds  in  trust.^ 

132.  Aliens.  —  In  the  United  States  aliens  are  generally  em- 
powered to  hold  real  estate.  But  aside  from  any  statutory  priv- 
ilpgt»,  a  mortgage  being  regarded  as  a  personal  interest,  the  debt 
the  principal  thing,  and  the  land  merely  an  incident,  an  alien  is 
held  entitled  to  hold  and  enforce  a  mortgage." 

133.  A  married  woman  may  at  common  law  be  a  mortgagee  ; 
but  she  cannot  enforce  a  foreclosure  of  a  mortgage  of  which  the 

1  Love  V.  Sierra  Ncvaii.i,  L.  W.  &  I)e  G.,  F.  &  J.  38;  Fitch  v.  Lewiston 
Mining  Co.  32  Cal.  639;  ami  see  Jirinlcy     Steiim-Mill  Co.  supra. 

V.  Mann,  2  Cush.    (Mhss.)  .337;  Saigeiit  *  I'arlvcr  i\  Lincoln,  12  Mass.  16. 

V.  Webster,  13  Met.  (.Mass.)  497.  ^  Harts  v.  BrovMi,  77  111.  2'i6. 

2  Fitch  V.  Lewiston  Steam -Mill  Co.  "Thompson  v.  Ilolladay  (Oreg.),  14 
(Me.)  12  Atl.  Hep.  732.  Pac.  Kep.  725. 

»  Terry  i;.    Iloll,   2  Gif.   138;    S.  C.   2         ^  Hughes  v.  Ed ward.s,  9  Wheat.  489. 

107 


§  134.]  THE    PARTIES   TO   A   MORTGAGE. 

equity  of  redemption  is  held  by  her  husband,  either  by  suit  at 
law  or  in  equity,  or  by  entry  to  foreclose  in  the  presence  of  two 
witnesses.  Though  her  title  as  mortgagee  still  continues,  she  is 
debarred  from  all  proceedings  to  foreclose  the  mortgage  during 
the  continuance  of  the  marriage  relation. ^ 

But  there  are  decisions  that  a  mortgage  or  other  conveyance, 
made  directly  from  a  husband  to  his  wife,  is  in  equity  valid  and 
may  be  enforced.^ 

134.  A  corporation,  whether  private^  or  municipal,*  though 
not  expressly  authorized  by  its  charter  or  by  statute  to  take  a 
mortgage,  if  not  prohibited  may  do  so,  provided  only  it  be  in  fur- 
therance of  the  objects  for  which  it  was  created.  A  railroad 
company,  when  not  forbidden  to  take  anything  but  money  in  pay- 
ment for  its  stock,  may  take  mortgages  of  real  estate  securing 
notes  or  bonds  given  for  the  stock.^ 

A  bank  organized  under  the  national  banking  act  ^  is  author- 
ized to  take  and  hold  a  mortgage  of  real  estate  by  way  of  security 
for  debts  previously  contracted  ;  "^  but  not  to  take  such  a  mort- 
gage as  security  for  a  debt  contracted  at  the  time  or  for  future 
advances.  Such  a  mortgage  was  till  recently  regarded  as  in- 
valid.^ Therefore,  a  mortgage  made  to  a  national  bank  by  a 
customer,  as  collateral  security  for  the  payment  of  all  notes  then 
discounted  and  held  by  the  bank,  "or  for  any  other  indebted- 
ness now  due,  or  that  may  hereafter  become  due,"  was  regarded 
a  valid  security  only  for  the  indebtedness  existing  when  it  was 
given  ;  and  upon  the  payment  of  such  indebtedness,  and  the  sur- 
render of   the  specific  notes  constituting  such   indebtedness,  the 

1  Tucker  v.  Fenno,  110  Mass.  311.  See  Blunt  w.  Walker,  lb.  334  ;  Cornell  v.  Hich- 
Campbell  i;.  Galbreath,  12  Bush  (Ky.),  ens,  lb.  353;  Lyon  y.  Ewings,  17  Wis.  61 ; 
459.  Andrews  v.  Hart,  lb.  297  ;  Western  Bank 

2  Wochoska  v.  Woehoska,  45  Wis.  423  ;  of  Scotland  v.  Tallman,  lb.  530  ;  National 
Putnam  v.  Bicknell,  18  Wis.  333.  In  the  Trust  Co.  v.  Murphy,  30  N.  J.  Eq.  408; 
former  case  the  wife  enforced  her  rights  Massey  v.  Citizens'  Building  Asso.  22 
after  a  divorce,  and  in  the  latter  case  after  Kans.  624. 

the  death  of  her  husband.  6  ig64,  June  3,  §§  8,  28. 

3  Gordon  v.  Preston,  1  Watts  (Pa.),  '  Allen  y.  First  Nat.  Bank  of  Xenia,  23 
385  ;  Jackson  v.  Brown,  5  Wend.  (N.  Y.)  Ohio  St.  97 ;  Heath  v.  Second  Nat.  Bank 
590;  Madison,  &c.  Plank  Road  Co.  v.  Wa-  of  Lafayette,  70  lud.  106  ;  Scofield  v.  State 
tertown,  &c.  Plank  Road  Co.  5  Wis.  173.  Nat.  Bank,  9  Neb.  316. 

*  Alexander   v.  Knox,  6    Sawyer,  54  ;         8  Kansas  Valley  Bank  v.  Rowell,  2  Dill. 

Vanarsdall  v.  Watson,  65  Ind.  176;  State  371  ;  Crocker  v.  Whitney,  71  N.  Y.  161  ; 

Bank  of  Bay  City  v.  Chapelle,  40  Mich.  Fowler  v.  Scully,  72  Pa.  St.  456  ;  Ripley 

447.  V.  Harris,  3  Biss.  199. 

6  Clark   V.  Farrington,   1 1    Wis.   306  ; 

108 


WHO   MAY   TAKE  A   MORTGAGE.  [§  134. 

mortgage  was  discharged.^  The  Supreme  Court  has  recently, 
however,  established  a  different  and  more  reasonable  construction 
of  the  prohibition  in  the  national  banking  act  of  a  loan  made 
upon  real  estate  security,  declaring  that  although  such  a  loan  is 
prohibited  it  is  not  void.  A  mortgage  taken  in  violation  of  the 
prohibition  is  valid  and  may  be  enforced.  The  remedy  for  the 
violation  is  a  forfeiture  of  the  bank's  charter.^  The  statute  au- 
thorizes banks  to  hold  real  estate  in  mortgage  for  debts  previ- 
ously contracted.  It  does  not  in  terms,  but  only  by  implication, 
prohibit  a  loan  on  real  estate.  It  does  not  declare  such  a  security 
void.  It  is  silent  upon  the  subject.  If  Congress  so  meant,  it 
would  have  been  easy  to  say  so,  and  it  is  hardly  to  be  believed 
that  this  would  not  have  been  done,  instead  of  leaving  the  ques- 
tion to  be  settled  by  the  uncertain  results  of  litigation  and  judi- 
cial decision.  In  other  instances  contracts  are  not  void  where 
they  are  not  in  terms  made  so.  Tims,  where  a  corporation  is 
made  incompetent  by  its  charter  to  take  a  title  to  real  estate,  a 
conveyance  to  it  is  not  void,  but  only  voidable,  and  the  sovereign 
alone  can  object.  It  is  valid  until  assailed  in  a  direct  proceed- 
ing instituted  for  that  purpose.  In  conclusion,  Judge  Swayne, 
delivering  the  opinion  of  the  court,  said  :  "  We  cannot  believe  it 
was  meant  that  stockholders,  and  perhaps  depositors  and  other 
creditors,  should  be  punished  and  the  borrower  rewarded  by  giv- 
ing success  to  this  defence  whenever  the  offensive  fact  shall  occur. 
The  impending  danger  of  a  judgment  of  ouster  and  dissolution 
was,  we  think,  the  check,  and  none  other,  contemplated  by  Con- 
gress. That  has  been  always  the  punishment  prescribed  for  the 
wanton  violation  of  a  charter,  and  it  may  be  made  to  follow 
whenever  the  public  authority  shall  see  fit  to  invoke  its  applica- 
tion. A  private  person  cannot  directly  or  indirectly  usurp  this 
function  of  government."  ^  Where  a  bank  already  holds  a  mort- 
gage upon  land,  and  for  its  own  protection  pays  the  amount  ot  a 
prior  lien,  and  then   takes  a   mortgage  for  this  sum,  the  transac- 

1  Crocker  v.  Whitney,  71  N.  Y.  161  ;  Exchange  Bank,  71  Mo.  221  ;  First  Nat. 
Woods  V.  People's  Nat.  Hank  of  Pitts-  Bank  v.  Elmore,  52  Iowa,  541  ;  Wrotca 
burgh,  83  I'a.  St.  57.  v.  Arinat,  31  Gratt.  (Va.)  228. 

2  iSatiomil  Bank  u.  Matthews,  98  U.  S.  "  Kupportini,'  this  view,  see  Silver  Lake 
621  ;  a.  a.  19  Alb.  L  .J.  132  ;  18  West.  Bank  v.  North,  4  Johns.  (N.  Y.)  Ch.  370; 
Jur.  176;  8  Cent.  L.J.  131;  National  Baird  r.  Bank  of  Washington,  1 1  S.  &  K. 
Bank  v.  Whitney,  103  U.  S.  99;  Kesuer  (la.)  411;  Graham  v.  Nat.  Bank  of  N. 
V.  Trigg,  98  U.  S.  50 ;  Thornton  i;.  Nat.  Y.  32  N.  J.  Eq.  804. 

109 


§  135.] 


THE  PARTIES   TO   A   MORTGAGE. 


tion  does  not  come  within  the  prohibition  of  the  statute  as  to  tak- 
ing mortgages  for  debts  concurrently  created.^ 

Where  a  state  bank  was  authorized  to  hold  mortgages,  but  it 
was  provided  by  statute  that  all  conveyances  of  real  estate  should 
be  made  to  the  president  of  the  bank,  it  was  held  that  a  mort- 
gage directly  to  the  bank  was  valid  notwithstanding  ;  ^  for  it  was 
considered  that  the  object  was  not  to  prohibit  the  bank  from  tak- 
ing title,  but  merely  to  facilitate  business  by  permitting  convey- 
ances to  be  made  for  the  benefit  of  the  bank  to  an  officer  of  it. 

In  a  few  states  foreign  corporations  have  at  different  times 
been  prohibited  from  making  loans  and  taking  security  upon  real 
estate  therefor.  A  mortgage  within  such  a  prohibition  is  invalid 
from  its  delivery,  and  consequently  a  sale  and  conveyance  under 
it  is  nugatory,  and  does  not  divest  the  owner  of  his  interest  in  the 
mortgaged  premises.^ 

135.  Joint  mortgagees.  —  A  mortgage  given  to  secure  a  joint 
debt  creates  a  joint  estate  in  the  mortgagees.^  Payment  to  either 
satisfies  the  mortgage.^  In  case  of  the  death  of  one  of  such  mort- 
gagees, an  action  to  recover  the  debt  or  to  enforce  the  mortgage 
mav  be  maintained  in   the  name  of  the  survivor.^     But  a  mort- 


1  Ornn  v.  Merchants'  Nat.  Bank,  16 
Kans.  341. 

2  Kennedy  v.  Knight,  21  "Wis.  340. 

8  Such  was  the  statute  in  Illinois  prior 
to  the  Act  of  1875  (Laws  of  1875,  p.  6.5), 
repealing  the  former  statute,  and  confirm- 
ing and  validating  prior  loans  made  in 
contravention  of  it.  Scammon  v.  Com- 
mercial Union  Assurance  Co.  6  Bradw. 
551  ;  United  States  Mortgage  Co.  v.  Gross, 
93  111.  483.  And  see  Hards  v.  Conn.  Mut. 
L.  Ins.  Co.  8  Biss.  234. 

In  Pennsylvania  a  foreign  corporation 
may  enforce  a  mortgage  upon  lauds  in 
that  state.  Leasure  v.  Union  Mut.  Life 
Ins.  Co.  91  Pa.  St.  491. 

*  Appleton  V.  Boyd,  7  Mass.  131. 

In  Massachusetts  mortgages  are  ex- 
pressly excepted  from  the  provision  of 
statute  that  conveyances  made  to  two  or 
more  persons  shall  be  construed  to  cre- 
ate estates  in  common.  Gen.  Sts.  ch.  89, 
§  14.  It  leaves  the  nature  of  the  estate 
open  to  inquiry. 

In  Maine  a  mortgage  to  two  or  more 
persons  is   considered   as    constituting   a 

110 


joint  tenancy  unless  otherwise  expressed. 
Acts  1881,  ch.  46;  R.  S.  1883,  ch.  73, 
§13. 

In  Minnesota  it  is  provided  that  all 
mortgages  heretofore  made  of  any  real 
property  or  of  any  interest  therein,  to  any 
partnership  or  firm,  in  their  partnership 
or  firm  name,  which  mortgages  have  been 
foreclosed  by  advertisement  pursuant  to 
the  statute  relating  to  foreclosure  by  ad- 
vertisement, in  the  name  of  the  said  part- 
nership or  firm,  be  and  the  same  are,  to- 
gether with  all  proceedings  had  in  such 
foreclosure,  hereby  legalized  and  confirmed 
so  far  as  relates  to  any  question  of  defect 
by  reason  of  the  mortgagees'  names  biing 
stated  in  said  mortgages  by  their  partner- 
ship or  firm  name  instead  of  the  individ- 
ual names  of  the  members  of  said  part- 
nership or  firm.     Laws  1881,  ch.  140. 

6  Wright  V.  Ware,  58  Ga.  150. 

6  Blake  v.  Sanborn,  8  Gray  (Mass.), 
154  ;  Webster  v.  Vandeventer,  6  lb.  428  ; 
Mutual  L.  Ins.  Co.  v.  Sturges,  32  N.  J. 
Eq.  678. 


WHO  MAY   TAKE   A   MORTGAGE.  [§  135. 

gage  given  to  two  or  more  persons  to  secure  their  several  debts  is 
several  and  not  joint ;  each  mortgagee  has  a  right  to  enforce  his 
claim  under  the  mortgage,  in  a  form  adapted  to  the  case,  and  of 
course  the  surviving  mortgagee  cannot  maintain  an  action  on  the 
mortgage  to  enforce  payment  of  the  debt  due  the  deceased  mort- 
gagee.i  The  mortgage  is  presumed  to  be  for  the  benefit  of  the 
mortgagees  pro  rata  to  the  debts  secured;  ^  though  if  the  amount 
of  the  debts  be  not  fixed,  the  mortgage  might  be  presumed  to  be 
for  their  benefit  equally.  Such  a  mortgage  does  not  constitute 
the  mortgagees  trustees  one  for  the  other,  at  least  before  the  law 
day.^ 

But  whether  the  debt  secured  be  joint  or  several,  after  fore- 
closure the  mortgagees  become  tenants  in  common  of  the  land.* 

A  mortgage  to  husband  and  wife  upon  the  death  of  the  hus- 
band vests  in  the  wife.^ 

Under  statutes  which  make  grants  to  two  or  more  persons  ten- 
ancies in  common,  unless  there  are  words  which  clearly  show  an 
intention  to  create  a  joint  tenancy,  the  mere  fact  that  the  convey- 
ance is  in  mortgage  affords  no  implication  controlling  the  statute 
and  making  the  mortgagees  joint  tenants.^ 

A  mortgagee  of  an  undivided  half  of  a  parcel  of  land  does  not 
become  a  tenant  in  common  with  the  owner  of  the  other  half 
until  his  title  has  become  absolute  by  a  completed  foreclosure. 
Before  that  time  the  mortgage  is  only  a  lien,  and  the  estate  is  to 
be  dealt  with  as  belonging  to  the  mortgagor.' 

1  Gilson  V.  Gilson,  2  Allen  (Mass.),  <  Goodwin  v.  Richardson,  11  Mass. 
115,  117;  Burnett  v.  Pratt,  22  Pick.  469;  Randall  v.  Phillips,  3  Mason,  378 ; 
(Mass.)  556;  Brown  v.  Bates,  55  Me.  Donneis  y.  Edwards,  2  Pick.  (Mass.)  617; 
520.  Burnett  v.  Pratt,  supra. 

2  Adams  v.  Robertson,  37  III.  45  ;  Wil-  &  Draper  v.  Jackson,  16  Mass.  480. 
lis  V.  Caldwell,   10   B.    Mon.    (Ky.)    199.  6  Randall  i;.  Phillips,  3  Mason,  378. 
See  Jones  on  Chattel  Mort^'af,a-s,  §  84.  ^  Norcross  t-.  Norcross,  105  Mass.  265, 

"  Bates  V.  Coe,  10  Conn.  280,  293.  and  cases  ^ited. 

Ill 


CHAPTER   IV. 

WHAT  MAY   BE   THE  SUBJECT   OF  A   MORTGAGE. 

I.  Existing    interests    in    real    property,  I  II.  Accessions   to  the   mortgaged   prop- 
136-148.  I  erty,  149-161. 

I.   Existing  Interests  in  Real  Property. 

136.  Every  kind  of  interest  in  real  estate  may  be  mort- 
gaged if  it  be  subject  to  sale  and  assignment.^  It  does  not  mat- 
ter that  it  is  a  right  in  remainder  or  reversion,  a  contingent  inter- 
est, or  a  possibility  coupled  with  an  interest,  if  it  be  an  interest 
in  the  land  itself.^  But  an  interest  in  the  proceeds  of  land  or- 
dered to  be  sold  and  distributed  among  legatees  is  not  a  subject 
of  mortgage.^  A  mere  personal  right  or  interest,  as,  for  instance, 
a  right  of  preemption  of  public  lands,  is  of  course  not  susceptible 
of  mortgage ;  *  yet  the  land  subject  to  preemption  may  be  mort- 
gaged,^ and  so  may  be  a  mining  claim  located  upon  public  land.^ 

The  Code  of  California  states  the  general  rule  of  law  upon  this 
subject,  in  the  provision  that  any  interest  in  real  property  which 
is  capable  of  being  transferred  may  be  mortgaged." 

Such,  for  instance,  is  the  interest  of  one  who  holds  an  agree- 
ment or  bond  for  title ;  ^  and  even  the  interest  of  one  in  posses- 

1  Neligh  y.  Michenor,  11  N.  J.  Eq.  539;  the  mortgage  in  ignorance  of  the  law. 
Miller  v.    Tiptun,  6  Blackf.    (Ind.)  238 ;     Douglas  v.  Gould,  52  Cal.  656. 

Dorsey  v.  Hall,  7  Neb.  460.  6  Whitney  v.   Buckman,  13   Cal.  536 ; 

2  Wilson  r.   Wilson,  32  Barb.  (N.  Y.)  Bush  v.  Marshall,  6  How.  284. 
328;'Ift   re   John    &   Cherry    Streets,   19  6  Alexander    v.   Sherman    (Ariz.),    16 
W^end.  (N.  Y.)  659;  Wilson  v.   Russ,  17  Pac.  Rep.  45. 

Fla.  691.  ■  Civil  Code,  §  2947. 

8  Gray  u.  Spiith,  3  Watts  (Pa.),  289.  »  Laughlin  v.   Braley,    25  Kans.    147 

*  Penn  V.  Ott,  12  La.  Ann.  233;  Gilbert  Baker  v.  Bishop  Hill  Colony,>5  111.  264 

17.  Penn,  12  La.  Ann.  235  ;  Broussard  v.  Crane  r.    Turner,  7  Hun  (N.   Y.),  357 

Dugas,  5  La.  Ann.  585.     See  §  177.  5.    C.  67   N.   Y.  437 ;  Farmers'  Loan   & 

A  court  of  equity  will  not  set  aside  a  Trust  Co.  v.  Curtis,  7  N.  Y.  466 ;  Smith 

mortgage  made  by  a  preemptor,  for  the  v.  Patton,  12  W.  Va.  541  ;  Houghton  v. 

reason  that  the  statute  prohibits  him  from  Allen  (Cal.),  16  Pac.  Rep.  532;  6\   C.  14 

perfecting   his    preemption    after   he   has  lb.  641. 

executed  a  mortgage,  and  that  he   gave 

112 


EXISTING   INTERESTS   IN    REAL   PROPERTY.       [§§  137,  138. 

sion  under  a  parol  contract  to  purchase  ;  ^  or  the  interest  of  the 
holder  of  school  land  certificates  until  forfeited  by  non-fulfilment 
of  the  conditions  of  sale,^  or  of  a  certificate  of  stock  in  an  unin- 
corporated company  representing  an  interest  in  real  estate.^ 

A  mere  possibility  or  expectancy,  not  coupled  with  any  interest 
in  or  growing  out  of  the  property,  cannot  be  made  the  subject 
of  a  mortgage.^  A  mere  expectancy  of  acquiring  property, 
without  a  present  interest  in  it,  is  not  a  subject  of  sale,  and 
therefore  not  of  mortgage.  "  The  next  cast  of  a  fisherman's  net " 
has  long  been  used  as  an  illustration  of  a  mere  expectancy,  not 
the  subject  of  grant.  In  a  late  case  in  Massachusetts  it  was 
sought  to  substantiate  such  a  sale,  and  the  court  were  obliged  to 
adjudge  that  a  man  has  no  salable  interest  in  halibut  in  the  sea. 
There  is  a  possibility,  they  say,  the  man  may  catch  halibut,  but 
he  has  no  actual  or  potential  interest  in  the  fish  until  he  has 
cauglit  them.^ 

137.  An  estate  tail  may  be  mortgaged  by  the  life  tenant. 
Such  tenant  cannot  prejudice  the  rights  of  the  remainder-men, 
but  can  convey  whatever  interest  he  has.^  A  vested  interest  in 
remainder  may  be  conveyed  in  mortgage.'^  A  contingent  or  pos- 
sible interest  may  also  be  the  subject  of  a  mortgage.^  Rever- 
sions and  remainders,  being  capable  of  assignment,  may  be  the 
subject  of  a  mortgage.^ 

138.  A  mortgage  passes  the  interest  of  the  mortgagor 
"Whatever  it  may  be.  When  a  mortgage  is  made  of  an  estate 
or  interest  already  incumbered  in  any  manner,  the  mortgage  of 
course  attaches  only  to  the  interest  then  remaining  in  the  mort- 
gagor. Upon  the  discharge  of  any  prior  incumbrance,  the  mort- 
gage interest  has  the  full  advantage  of  the  discharge.  If  the 
mortgagor  acquires  any  title  after  making  the  mortgage,  that,  as 
a  general  rule,  accrues  to  the  benefit  of  the  mortgage  title. 

Although  the  mortgage  purports  to  convey  a  title  in  fee  simple, 

1  Sinclair   v.   Armitage,    12   N.  J.  Eq.  other  maxim  (not  of  the  law)  is  applica- 

174  ;  Bull  V.  Sykcs,  7  Wis.  449  ;  Hagar  v.  ble  :  "  First  catch  your  fish,"  etc, 

Brainerd,  44  Vt.  294.  o  Hosmer  v.  Carter,  68  111.    98.     The 

•^  Mowryi;.  Wood,  12  Wis.  413;  Dodge  limitation    was     to    "her     body    heirs." 

V.   Siiverthorn,    12    Wis.   644;    Jarvis   v.  Lehndorf  i;.  Cope  (111),  13  N.  E.  Rep.  505. 

Dutcher,  16  Wis.  307.  7  Flanders  v.  Grecly   (N.  II.),  10  Atl. 

'  Durkee  v.  Stringham,  8  Wis.  1.  Hep.  686. 

♦  Ski[>per  V.  Stoke.x,  42  Ala.  2.^5;  Pur-  »  Wilson  v.  Wilson,  32  Barb.  (N.  Y.) 

cell  j;.  Mather,  3.5  Ala,  570.     See  Iloff  v.  328. 

Burd,  17  N.  J.  Eq.  201.  «  2  Story  Eq.   Jur.   §    1021  ;   Curtis  v. 

'  Low   V.   Pew,    108   Mobs.    347.     The  Root,  20  111.  518,  522. 


VOL.  I.  8 


113 


§  138.]         WHAT   MAY    BE   THE   SUBJECT   OF  A   MORTGAGE. 

when  the  mortgagor  has  only  an  equitable  title,  it  is  effectual  to 
pass  such  equitable  title,  and  the  record  of  it  is  notice  to  subse- 
quent purchasers  of  the  mortgagor's  interest.^ 

Unless  the  conveyance  in  mortgage  be  limited  in  its  operation 
it  passes  all  the  interest  of  the  mortgagor  in  the  property  de- 
scribed. It  passes  any  reversionary  interest  he  has ;  for  instance, 
a  mortgage  of  land  subject  to  a  homestead  right  conveys  the  re- 
versionary interest  after  the  expiration  of  the  homestead  estate, 
although  the  wife  did  not  join  in  it.^  If  there  be  an  outstanding 
contract  of  sale  of  which  notice  is  imparted  by  the  record  or  by 
the  vendee's  possession,  the  mortgage  is  subject  to  the  vendee's 
right  to  purchase ;  and  upon  a  foreclosure  and  sale  under  the 
mortgage,  the  purchaser  takes  the  property  subject  to  the  same 
right. 3 

A  mortgage  may  be  made  of  any  imperfect  title  which  the 
mortgagor  has,  as,  for  instance,  an  imperfect  Spanish  title  which 
was  subject  to  sale  and  assignment.* 

A  clause  in  a  mortgage,  "  excepting  therefrom  so  much  of  said 
tracts  as  have  been  conveyed  by  the  mortgagor  by  deed  to  differ- 
ent individuals,"  does  not  reserve  from  its  operation  a  portion  of 
the  premises  covered  by  a  prior  unrecorded  mortgage.^ 

A  mortgage  of  several  lots  of  land  described  by  numbers  on  a 
plan,  and  by  courses  and  distances,  will  pass  all  the  title  the 
mortgagor  has  in  the  lots,  although  he  has  only  a  mortgage  title 
to  one  of  them.^  But  where  a  mortgagor  became  the  husband  of 
the  mortgagee,  and  the  two  joined  in  a  second  mortgage  of  the 
premises  to  secure  a  prior  debt  of  the  husband,  it  was  held  that 
the  wife's  interest  under  the  first  mortgage  was  not  thereby 
affected.  She  had  not  joined  in  the  mortgage  to  assign  her  own 
mortgage,  but  to  effectually  pass  the  equity  of  redemption.'''  So 
a  mortgage  of  all  the  land  and  right  to  land  which  the  grantor 
has  in  a  certain  town  does  not  include  land  to  which  he  has  only 
a  possibility  of  a  reversion  on  the  non-performance  of  a  condition 
subsequent.^  But  a  mortgage  of  land  by  a  vendor,  who  holds 
notes  tor  the  purchase  money  of  the  same  land  and  a  vendor's  lien, 

1  Lincoln   Building  &  Saving  Asao.  v.         ^  Eaton  v.  White,  18  Wis.  517. 

Hass,   10  Neb,  581  ;  Laughlin  v.  Braley,  ^  Murdock  v.  Chapman,  9  Gray  (Mass.), 

25  Kans.  147.  156. 

2  Smith  V.  Provin,  4  Allen  (Mass.),  516  ;  ''  Power  v.  Lester,  23  N.  Y.  527. 
McGuire  v.  Van  Pelt,  55  Ala.  344.  ^  Richardson    v.    Cambridge,   2   Allen 

8  Laverty  v.  Moore,  33  N.  Y.  658.  (Mass.),  118. 

*  Massey  v.  Papin,  24  How.  362. 

114 


EXISTING  INTERESTS  IN  REAL  PROPERTY.   [§§  139-141. 

does  not  transfer  the  notes  in  the  absence  of  an  express  mention 
of  them.^ 

139.  There  may  be  a  mortgage  of  a  mortgage.  One  may 
mortgage  an  interest  in  real  estate  which  he  himself  holds  in 
mortgage.^  He  conveys  all  the  interest  he  has  ;  and  if  he  after- 
wards acquire  an  absolute  title,  the  second  mortgagee  by  fore- 
closing his  mortgage  acquires  an  absolute  estate.^  If  a  married 
woman  having  a  mortgage  upon  her  husband's  land  unite  with 
him  in  the  granting  part  of  the  deed  and  in  the  covenants,  she 
conveys  her  mortgage  interest ;  *  but  if  having  such  a  mortgage 
she  join  her  husband  in  a  subsequent  mortgage  merely  to  release 
her  dower  and  homestead,  she  does  not  thereby  subject  her  mort- 
gage interest  to  the  lien  of  the  latter  mortgage.^ 

140.  A  mortgage  may  be  miade  of  rents  due  under  a  lease, 
and  although  a  right  of  entry  be  given  to  the  mortgagee  the 
mortgage  is  a  mere  security,  like  any  other  mortgage  of  real 
estate,  and  the  mortgagor  remains  the  real  owner  until  foreclosure 
and  sale.^  A  mortgage  may  be  made  of  a  ditch  for  mining  pur- 
poses, the  grantee  having  authority  to  collect  the  rents  and  profits 
of  it.7 

141.  A  mortgage  given  by  one  part  owner  of  land  upon  pur- 
chasing the  remaining  portion,  which  describes  the  whole  parcel, 
is  construed  to  embrace  the  entire  interest,  and  not  merely  the 
undivided  interest  conveyed  by  the  mortgagee.^ 

The  owner  of  certain  land  having  conveyed  an  undivided  half 
of  it  by  a  deed  fully  describing  it,  afterwards  conveyed  the  re- 
maining undivided  half  to  the  same  grantee,  and  received  from 
him  at  the  same  time  a  mortgage  conveying  "  the  following  real 
estate  in  Stamford  :  viz.,  the  same  and  all  the  real  estate  de- 
scribed in  tha  deed  of  the  said  grantor  to  me  dated  Nov.  18, 
1847,"  the  first  named  deed.  The  mortgage  was  construed  to 
cover  thfe  whole  title  and  interest  acquired  by  the  mortgagor  by 
the  two  deeds,  and  not  merely  the  undivided  half  conveyed  to 
him  by  the  former  deed.^ 

A  mortgage  by  a  tenant  in  common  of  a  moiety  of  land  passes 

•  Bell  V.  Blair  (Miss.),  3  So.  Rep.  373.  *  Gret;ory  v.  Gregory,  IG  Oiiio  St.  560. 

•  Cutts  V.  York  Miinuf.  Co.  18  Me.  190.  '  Kitchell  v.  Mudgett,  37  Mich.  81. 
This  point  was  not  Ijcfore  the  court.     Bat  ^  Van  Rensselaer  v.  Dennison,  35  N.  Y. 
sec  Hudson  City  Sav.  Inst.  v.  McArthur,  393. 

9  N.  Y.  W.  Dig.  63.  7  Kidd  v.  Teeplc,  22  Cal.  255. 

•  Murdock  v.  Chapman,  9  Gray  (Mass.),         *  Potts  v.  Blaiiciiard,  19  La.  Ann.  107. 
156.     Sec  Power  v.  Lester,  23  N.  Y.  527.  »  Carpenter  v.  Millard,  38  Vt.  9. 

115 


§§  142,  143.]      WHAT   MAY   BE   THE   SUBJECT   OF  A   MORTGAGE. 

only  his  interest,  although  he  at  the  time  holds  a  power  from  the 
owner  of  the  other  moiety,  and  the  mortgage  purports  to  be  of 
the  whole  estate,  if  it  does  not  purport  to  be  made  by  virtue  of 
his  power  from  the  other  owner,  as  well  as  in  his  own  right.^ 

142.  The  mortgage  of  a  building  carries  with  it  the  land 
on  which  it  stands  and  which  is  essential  to  its  use,  if  such  ap- 
pears to  have  been  the  intention  of  the  parties.^  Thus  a  mort- 
gage made  to  secure  advances  to  enable  the  mortgagor  to  erect  a 
building  on  leased  land  of  "  all  his  right,  title,  and  interest,  which 
he  now  has  in  the  foundation  or  stone  work  of  said  building,  and 
which  he  may  have  in  and  unto  said  building,  during  its  erec- 
tion and  completion,  and  after  it  is  completed,"  passes  the  land 
on  which  the  building  stands.^  The  right  which  the  grantor  has 
in  the  foundation,  stone  work,  and  building  is  not  merely  or 
mostly  a  right  to  the  materials  of  which  they  are  composed,  but 
the  right  of  having  them  on  the  premises  as  part  of  a  structure, 
with  the  right  to  use  and  occupy  them  for  a  long  period  of  time. 
It  is  a  grant  of  his  right  to  use  and  occupy  the  land  under  the 
lease. 

As  a  general  rule,  a  building  erected  upon  the  land  of  another 
becomes  a  part  of  the  realty,  and  it  is  only  by  an  express  agree- 
ment that  one  can  have  a  separate  property  in  such  a  building 
as  a  chattel,  with  a  right  to  remove  it.  If  one  having  a  contract 
for  the  purchase  of  a  lot  of  land  erects  a  house  upon  it,  in  pursu- 
ance of  an  agreement  that  he  will  do  so,  and  that  on  receiving  a 
deed  of  the  land  he  will  mortgage  it  to  the  owner  to  secure  the 
purchase  money,  he  cannot,  before  receiving  a  deed  of  the  land, 
mortgage  the  house  as  personal  property  to  another.  This  agree- 
ment, instead  of  being  an  agreement  that  the  house  may  be  held 
separate  from  the  land,  is  in  effect  an  agreement  that  the  build- 
ing and  land  shall  be  united  and  held  together.* 

143.  House  moved  from  the  land.  —  A  mortgage  was  made 
of  a  lot  of  land  upon  which  was  a  dwelling-house.  Subsequently, 
and  without  the  knowledge  or  consent  of  the  mortgagee,  the  mort- 
gagor removed  the  house  from  the  lot  upon  which  it  stood,  and 
placed  it  upon  an  adjoining  lot.     It  was  held  that  the  mortgagee 

1  Shirras  v.  Caig,  7  Cranch,  34.  ^  Greenwood     v.     Murdock,     9    Gray 

2  Wilson  V.  Hunter,  14  Wis.  683;  and     (Mass.),  20. 

see  Whitney  j;.  OIney,  3  Mason,  280;  Esty  *  Milton  v.  Colby,  5  Met.  (Mass.)  78. 
V.  Baker,  48  Me.  495 ;  Doyle  v.  Lord,  64  Or  the  mortgsgee  might  maintain  tres- 
N.  Y.  433,  436.  pass.     Smith  v.  Goodwin,  2  Me.  173.    See 

§  687 ;  and  Jones  on  Chattel  Mortgages, 
116  §  123. 


EXISTING   INTERESTS   IN   REAL    PROPERTY.  [§  143. 

retained  his  lien  upon  the  dwelling-house,  and  that  the  house 
might  be  sold  after  first  applying  the  lot  covered  by  the  mort- 
gage towards  satisfying  it.  The  adjoining  lot  was  owned  by  the 
wife  of  the  mortgagor,  and  the  removal  was  with  her  knowledge.^ 
By  agreement,  express  or  implied,  between  the  owner  of  real  estate 
and  the  owner  of  buildings,  the  latter  may  annex  the  buildings 
to  the  realty,  without  their  becoming  part  of  it.  So  in  the  case 
stated,  the  house  did  not  necessarily  become  a  part  of  the  lot  upon 
which  it  was  placed  by  the  removal.  Under  such  circumstances 
there  is  no  reason  why  the  mortgagee  should  not  have  the  benefit 
of  the  security  for  which  he  contracted.  No  question  arises  in 
this  case  as  to  the  effect  of  substantial  alterations  in  the  building, 
which  might  sometimes  affect  or  change  the  title  to  property 
altered  from  its  original  form.  Such  was  the  case  where  a  mort- 
gagor removed  a  dwelling-house  from  the  mortgaged  premises, 
and  used  the  materials  in  the  construction  of  a  house  upon  an- 
other lot  of  land,  and  afterwards  sold  the  house  and  lot.  The 
materials  having  thus  become  a  part  of  the  freehold,  the  right  of 
property  therein  vested  in  the  grantee  of  the  land  ;  and  therefore 
the  mortgagee  could  not  maintain  trover  against  the  purchaser, 
either  for  the  new  house  or  for  the  old  materials  used  in  its  con- 
struction.^ 

1  Haralin  v.  Parsons,  12  Minn.  108  ;  general  rule.  It  is  laid  down  by  MoUoy 
and  see  Hutchins  v.  King,  1  Wall.  53  ;  as  a  settled  principle  of  law,  that  if  a  man 
§§  453,  688.  cuts  down  trees  of  another,  or  takes  tim- 

2  Peirce  v.  Goddard,  22  Pick.  (Mass)  beror  plank  prepared  for  the  erecting  or 
559.  "The  general  rule  is,"  says  Mr.  repairing  of  a  dwelling-house,  nay, though 
Justice  Wilde,  "  that  the  owner  of  prop-  some  of  them  are  for  shipping,  and  builds 
erty,  whether  the  property  be  movable  or  a  ship,  the  property  follows,  not  the  own- 
immovable,  has  the  right  to  that  which  ers,  but  the  builders.  Mol.  de  Jure  Mar. 
is  united  to  it  by  accession  or  adjunction,  lib.  2,  ch.  1,  §  7.  ...  In  the  present  case 
But  by  the  law  of  England  as  well  as  by  it  cannot  be  questioned  tliat  the  newly 
the  civil  law,  a  trespasser  who  wilfully  erected  dwelling-house  was  a  part  of  the 
takes  the  property  of  another  can  acquire  frceiiold,  and  was  the  pro[)erty  of  the 
no  right  in  it  on  the  principle  of  acces-  mortgagor.  The  materials  used  in  its  con- 
sion,  but  the  owner  may  reclaim  it,  what-  structiou  ceased  to  be  personal  property, 
ever  alteration  of  form  it  may  have  un-  and  the  owner's  property  in  them  was 
dergone,  unless  it  be  changed  into  a  dif-  divested  as  effectually  as  though  they  had 
ferent  species  and  be  incapable  of  being  been  destroyed.  It  is  clear,  therefore,  that 
restored  to  its  former  state  ;  and  even  the  plaintiff  could  not  maintain  an  action, 
then  the  trespasser,  by  the  civil  law,  could  even  against  the  mortgagor,  for  the  con- 
acquire  no  right  by  the  accession,  unless  version  of  the  new  house.  And  it  is 
the  materials  had  been  taken  away  in  ig-  equally  clear  that  ho  cannot  maintain  the 
norance  of  their  being  the  property  of  present  action  for  the  conversion  of  the 
another.     But  there  are  exceptions  to  the  materials  taken  from  the  old  house.     The 

117 


§  144.]         WHAT    MAY    BE   THE    SUBJECT    OF   A   MORTGAGE. 

144.  Whether  fixtures  severed  from  the  realty  become  per- 
sonal property,  and  when  taken  away  from  the  realty  are  freed 
from  the  lien  of  the  mortgage,  is  a  question  upon  which  the  au- 
thorities are  divided.^  A  house  having  been  floated  off  the  lot 
covered  by  the  mortgage  into  an  adjacent  street  by  a  flood  was 
sold  by  the  owner  to  a  person  who  had  notice  of  all  the  circum- 
stances. An  action  was  brought  to  foreclose  the  mortgage  upon 
the  land  and  the  house  then  standing  in  the  street.  The  court 
held  that  the  house  was  effectually  removed  from  the  operation  of 
the  mortgage  lien  ;  and  that  so  far  as  the  legal  effect  of  the  re- 
iLOval  was  concerned  it  was  immaterial  whether  the  severance 
was  by  the  act  of  God,  as  in  this  case,  or  the  act  of  man.^  But 
in  a  case  before  the  Supreme  Court  of  the  United  States,^  Mr. 
Justice  Field  declared  that  the  mortgage  covers  the  timber  after 
it  is  cut  and  removed  from  the  land  as  well  as  before  ;  that  the 
sale  of  it  by  the  mortgagors  does  not  divest  the  mortgage  lien  ; 
that  the  purchaser  of  the  timber  takes  it  subject  to  this  para- 
mount lien  ;  and  that  the  holders  of  the  mortgage  can  follow  it 
and  take  possession  of  it,  and  hold  it  until  the  amount  due  upon 
the  mortgage  is  paid.  But  what  the  effect  of  the  severance  of 
fixtures  is  depends  very  largely  upon  the  view  taken  as  to  the 
nature  and  effect  of  a  mortgage  ;  whether  it  be  regarded  as  a  con- 
veyance of  the  legal  title  to  the  property,  giving  the  mortgagee 
also  the  right  of  possession,  or  whether  it  be  regarded  merely  as 
a  lien,  and  the  mortgagor  is  protected  in  his  possession  until  fore- 
closure. On  the  one  hand  the  mortgagee's  legal  ownership  or  his 
actual  or  constructive  possession  enable  him  to  follow  and  recover 
the  property  severed  ;  but  on  the  other  liand  he  has  merely  a  right 
to  restrain  the  removal  of  the  property  by  injunction,  or  after  the 

taking  down  of  that  house  and  using  the  was  given,  is  disincumbered  of  the  lien, 

materials  in  the  construction  of  the  new  substantially  on    the  same   principle  that 

building  was  the  tortious  act  of  the  mort-  a  building,  erected  upon   the  lands  after 

gagor,  for  which  he  alone  is  responsible."  the  giving  of  the  mortgage,  is  subject  to 

1  Hill  V.  Gwin,  51  Cal.  47  ;  Gardner  v.  the  lien.  In  the  first  case  the  building  is 
Finley,  19  Barb.  (N.  Y.)  317,  hold  that  withdrawn  from  the  operation  of  the  mort- 
the  lien  is  lost.  But  contra,  see  Hutchins  gage,  for  the  reason  that  it  has  ceased  to 
V.  King,  1  Wall.  5.3,  59,  per  Field,  J.,  cited  be  a  thing  real ;  in  the  other,  mere  mate- 
below  ;  Dorr  v.  Dudderar,  88  111.  107  ;  rials  are  brought  under  the  lien,  for  the 
§  688.  reason  that  they  have  become  a  structure 

2  Buckout  V.  Swift,  27  Cal.  433.  Mr.  by  combination,  and  the  structure  has  be- 
Justice  Shafter,  delivering  the  opinion  of  come  a  thing  real  by  position." 

the  court, said:  "  A  building,  severed  and         3  urchins    v.    King,  sufira.     And   see 
removed  from  mortgaged  lands,  of  which     Gore  v.  Jenness,  19  Me.  53. 
lands  it  formed  a  part  when  the  mortgage 

118 


EXISTING  INTERESTS   IN   REAL  PROPERTY.        [§§  145-148. 

« 

removal  at  most  only  a  right  to  recover  damages  for  wrongfully 
impairing  his  security.^ 

145.  A  mortgage  of  wood  not  standing  on  the  land  of  the 
mortgagor  is  a  mortgage  of  personal  property,  and  a  record  of  it 
as  a  mortgage  of  real  estate  is  ineffectiial.^  But  grovring  wood  or 
timber  is  a  portion  of  the  realty,  and  is  embraced  in  a  mortgage 
of  the  land. 

146.  A  mortgage  of  improvements  conveys  no  title  to  the 
land  itself.  It  passes  only  a  right  to  the  improvements  placed 
upon  the  land  by  the  mortgagor,  or  an  equitable  right  to  compen- 
sation for  them  in  case  the  owner  of  the  land  should  take  posses- 
sion. A  subsequent  acquisition  of  the  title  to  the  land  by  the 
mortgagor  does  not  in  such  case  enure  to  the  benefit  of  the  mort- 
gagee.^ A  mortgage  of  a  building  erected  on  leased  land  under 
an  agreement  that  the  lessee  might  remove  it,  or  the  lessor  should 
pay  for  it  at  its  appraised  value,  is  a  mortgage  of  realty  falling 
within  the  designation  of  a  chattel  real  at  common  law.* 

147.  The  lien  of  a  mortgage  extends  to  all  improvements 
and  repairs  subsequently  made  upon  the  mortgaged  premises, 
whether  made  by  the  mortgagor  or  by  a  purchaser  from  him 
without  actual  notice  of  the  existence  of  the  mortgage.^  Thus  a 
mortgage  of  a  ditch  or  flume  in  process  of  construction  includes, 
without  any  special  mention,  all  improvements  or  fixtures  then 
on  the  line  located  for  the  flume,  as  well  as  those  which  may  after- 
wards be  put  thereon.^ 

148.  An  abstract  of  title  delivered  by  the  owner  of  land  to 
the  mortgagee's  attorne}-,  for  the  purpose  of  decreasing  the  ex- 
penses of  searching  the  title,  may  be  regarded  as  part  of  the  se- 
curity for  the  loan  ;  and  accordingly  it  has  been  held  that  the 
mortgagor  is  not  entitled  to  the  possession  of  it  until  the  mortgage 
is  paid.  In  case  of  a  sale  of  the  mortgage,  or  of  a  foreclosure,  it 
would  be  necessary  that  the  mortgagee  should  have  it,  or  that 
another  should  be  made.^ 

'  See  §  453.  Dewey,  54  Barb.  (N.  Y.)  455  ;  Wharton  v. 

2  Douglas  t;.  Shumway,  13  Gray  (Mass.),     Moure,  84  N.  C  479. 

^98'  ^  Union   Water  Co.   v.    Murphy's  Flat 

3  Mitchell  V.  lUack,  64  Me.  48.  Flumin-  Co.  22  Cal.  620. 

*  Griffin  V.  Marine  Co.  of  Chicago,  52         '  Holm  v.   Wust,  11   Abb.  (N.  Y.)  Pr. 
iH'- 13'>.  N.S.I  13. 


Martin  v.  Beatty,  54  111.  100  ;  Rice  v. 


119 


§§  149,  150.]      WHAT   MAY   BE  THE  SUBJECT   OF   A  MORTGAGE. 

II.   Accessions  to  the  Mortgaged  Property. 

149.  At  common  laTV,  nothing  can  be  mortgaged  that  does 
not  belong  to  the  mortgagor  at  the  time  the  mortgage  is  made.' 
"It  is  a  common  learning  in  the  law,  that  a  man  cannot  grant  or 
charge  that  which  he  hath  not."  ^  He  must  have  a  present  prop- 
erty, either  actual  or  potential,  in  the  thing  sold  or  mortgaged.^ 
Therefore  at  law,  although  a  mortgage  in  terms  is  made  to  cover 
after-acquired  property,  yet,  after  such  property  is  acquired,  an 
execution  levied  upon  it  as  the  property  of  the  mortgagor,  or  a 
sale  by  him,  will  prevail  over  the  mortgage.* 

But  a  different  rule  prevails  in  equity.^  Judge  Story,  after  an 
elaborate  examination  of  the  question,  in  stating  the  result  of  it 
says  :  "  It  seems  to  me  the  clear  result  of  all  the  authoi'ities,  that 
wherever  the  parties  by  their  contract  intended  to  create  a  posi- 
tive lien  or  charge,  either  upon  real  or  personal  property,  whether 
then  owned  by  the  assignor  or  not,  or  if  personal  property,  whether 
it  is  then  in  esse  or  not,  it  attaches  in  equity  as  a  lien  or  charge 
upon  the  particular  property,  as  soon  as  the  assignor  or  contractor 
acquires  a  title  thereto  against  the  latter,  and  all  persons  asserting 
a  claim  thereto  under  him,  either  voluntarily  or  with  notice,  or  in 
bankruptcy."  ^ 

150.  Products  of  the  soil.  —  Upon  this  principle  a  valid  mort- 
gage may  be  made  by  an  owner  or  lessee  in  possession  of  land,  of 
a  crop  to  be  raised  by  him  the  coming  season,  or  of  crops  to  be 
grown  within  a  certain  period.''     It  is  a  general  rule  that  a  thing 

1  Jones  on  Chattel  Mortgages,  §  138;  it  is  said  that  if  such  a  mortgage  is  en- 
Moody  V.  Wijght,  13  Met.  (Mass.)  17;  forcible  in  equity  at  all,  it  can  only  be 
Jones  V.  Richavdson,  10  lb.  481  ;  Pierce  enforced  as  a  right  under  the  contract, 
w.  Emery,  32  N.  H.  4S4;  Amonett  y.  Amis,  and  not  as  a  trust  attached  to  the  prop- 
16  La,  Ann.  225  ;  Ross  v.  Wilson,  7  Bush  erty.  Ross  v.  Wilson,  supra. 
(Ky.),29;  and  see  Coe«;.  Columbus,  Piqua  '^  Mitchell  v.  Winslow,  2  Story,  630; 
&  Ind.  R.  R.  Co.  10  Ohio  St.  372,  391  ;  and  see  Smithurst  v.  Edmunds,  supra. 
Lunn  V.  Thornton,  1  Com.  B.  379.  ''  Jones  on  Chattel  Mortgages,  §  142  ; 

2  Perkins,  tit.  Grant,  §  65.  Arques  v.  Wasson,  51  Cal.  620 ;  Lehman 

3  Looker  v.  Peckwell,  38  N.  J.  L.  253  ;  v.  Marshall,  47  Ala.  362 ;  Jones  v.  Web- 
Smithurst  v.  Edmunds,  14  N.J.  Eq.  408 ;  ster,  48  Ala.  109;  and  see  Van  Hoozer 
Benjamin  on  Sales,  §§  78-84.  v.  Cory,  34  Barb.  (N.  Y)  9,  12;    Stover 

*  Looker  v.  Peckwell,  supra,  and  cases  v.   Eycleshiraer,   3    Keyes    (N.    Y.),   620. 

cited.  See  contra,  at  law,  Milliman  v.  Neher,  20 

s  Langton  v.  Horton,  1  Hare,  549;  Lit-  Barb.   (N.   Y.)  37  ;  Barnard  v.  Eaton,  2 

tie  Rock  &  Fort  Smith  Ry.  Co.  v.  Page,  Cush.  (Mass.)  294,  per  Shaw.  C.  J. ;  Com- 

35  Ark.  304.  stock  i;.   Scales,  7  Wis,  159;   Hutchinson 

la  a  recent  case  in  Kentucky,  however,  v.  Ford,  9  Bush  (Ky.),  318;    Booker  v. 

120 


ACCESSIONS   TO   THE   MORTGAGED   PROPERTY. 


[§151. 


which  has  a  potential  existence  may  be  mortgaged.  "  Land  is  the 
mother  and  root  of  all  fruits,  "  says  Lord  Hobart.^  "  Therefore 
he  that  hath  it  may  grant  all  fruits  that  may  arise  from  it  after, 
and  the  property  shall  pass  as  soon  as  the  fruits  are  extant." 

A  landlord  has  no  such  interest  in,  or  title  to,  crops  grown 
on  the  rented  lands  as  can  be  made  the  subject  of  a  valid  mort- 
gage.2 

A  mortgage  of  grain  "  now  standing  and  gi'owing  "  in  the  field 
does  not  cover,  as  against  an  attaching  creditoi-,  grain  which  had 
at  the  time  of  the  execution  of  the  mortgage  been  cut.^ 

Under  a  mortgage  of  a  greenhouse  and  nursery,  together  with 
the  shrubs  and  plants  belonging  to  the  same,  new  plants  and 
shrubs,  the  growth  of  cuttings  from  those  growing  at  the  time  of 
the  mortgage,  pass  to  the  mortgagee  by  accession.^ 

151.  Crops  not  sown.  —  A  valid  mortgage  of  a  crop  before  it 
is  raised  may  be  made  by  an  owner  or  lessee  of  land,^  and  al- 
though the  seed  of  it  has  not  been  sown.^  A  person  having  the 
right  by  parol  agreement  to  sow  certain  land  with  wheat  upon 
shares  with  the  owner  of  the  land,  may,  after  sowing  the  wheat, 


Jones,  55  Ala.  266.  See,  however,  Tom- 
linson  v.  Greenfield,  31  Ark.  557  ;  Redd 
V.  Burrus,  58  Ga.  574 ;  Gittings  v.  Nel- 
son, 86  III.  591. 

1  Grantham  v.  Hawley,  Hobart,  132. 
He  further  remarks  that  "  a  person  may 
grant  all  the  tithe  wool  that  he  shall  have 
in  such  a  year ;  yet  perhaps  he  shall  have 
none ;  but  a  man  cannot  grant  all  the 
wool  that  shall  grow  upon  his  sheep  that 
he  shall  buy  hereafter  ;  for  there  he  hath 
it  neither  actually  nor  potentially." 

2  Broughton  ;;.  Powell,  52  Ala.  123. 
'  Ford  V.  Sutherlin,  2  Mon.  440. 

*  Bryant  v.  Pennell,  61.  Me.  108.  The 
plaintiff  attached  so  much  of  the  stock  of 
I)lants  and  shrubs  as  were  not  covered  by 
the  mortgage.  His  counsel  claimed  that 
the  maxim,  "Partus  sequitur  ventrem," 
did  not  apply ;  that  it  might  as  well  be 
contended  that  trees  raised  from  the  seed 
of  apples  y)icked  from  a  mortgaged  tree 
passed  under  the  mortgage,  as  to  say  the 
cuttings  dill. 

*  See  §  160 ;  Jones  on  Chattel  Mort- 
gages, §  143;  Ellett  v.  Butt,  1  Woods, 
214;  Robinson  v.  Mauldin,  11  Ala.  977; 
Kverman  v.  Robb,  52  Miss.  653. 


6  Butt  V.  Ellett,  19  Wall.  544;  Apper- 
son  V.  Moore,  30  Ark.  56 ;  Comstock  v. 
Scales,  7  Wis.  159. 

The  statute  of  Mississippi,  providing 
that  mortgages  may  be  made  of  cotton 
crops  to  be  produced  within  fifteen  mouths, 
is  merely  declaratory  of  the  law,  with  a 
limitation  as  to  the  time  within  which  the 
crop  must  be  produced.  Act  Feb.  18, 
1867;  Sillers  v.  Lester,  48  Miss.  513; 
Ellett  V.  Butt,  supra.  In  this  state  mort- 
gages and  deeds  of  trust  may  be  made  to 
cover  growing  crops,  or  crops  to  be  grovvn 
within  fifteen  months  from  the  making  of 
such  mortgage  or  deed,  which  are  valid  on 
the  interest  of  the  mortgagor  or  grantor 
in  such  crop,  but  are  subject  to  any  lien 
in  favor  of  the  landlord  for  the  rent  of  the 
property.  Such  mortgages  must  be  re- 
corded in  a  separate  book,  entitled  a  chat- 
tel deed  book.     Laws  1876,  pp.  100,  113. 

In  Arkansas,  mortgages  may  be  made 
of  crops  already  planted,  or  to  be  planted, 
and  are  binding  upon  8i»ch  crops  and  their 
products.  And  a  lal)orcr  may  mortgage 
his  interest  in  a  crop  for  supplii^s  furnished 
to  him.  Acts  1875,  p.  230;  Dig.  of  Stat. 
1884,  §  4747. 

121 


§  152.]         WHAT   MAY   BE   THE   SUBJECT   OF   A   MORTGAGE. 

make  a  valid  mortgage  of  his  interest  in  the  crop,  which  will  cover 
the  interest  of  the  mortgagor  in  the  land.^  A  mortgage  of  crops 
by  one  who  is  cultivating  a  farm  upon  shares  covers  only  his 
share. 2  Possession  by  a  prior  mortgagee  of  a  crop  is  notice  of  his 
rights  to  subsequent  purchasers.^  The  mortgage  in  equity  at- 
taches as  soon  as  the  crop  comes  into  existence.* 

The  ci'op  is  a  chattel  merely  after  it  is  gathered,  and  a  mort- 
gage of  it,  to  take  effect  when  it  is  gathered,  should  be  recorded  as 
a  chattel  mortgage ;  but  a  growing  crop  attached  to  the  soil  may 
be  an  interest  in  the  real  estate ;  so  that  a  mortgage  of  a  present 
interest  should,  under  some  circumstances,  be  recorded  as  a  mort- 
gage of  real  estate.^  Whnn  properly  recorded,  one  who  purchases 
and  removes  the  crop,  without  the  knowledge  of  the  mortgagee, 
takes  it  subject  to  the  rights  of  the  mortgagee,  who  may  recover 
the  property  if  it  can  be  identified,  and  if  not,  he  may  recover 
the  value  of  it  from  such  purchaser.^  The  mortgagee  is  entitled 
to  the  possession  of  the  crojj,  when  it  is  matured  and  gathered, 
and  may  then  maintain  an  action  to  recover  it  or  its  value. '^  Such 
a  mortgage  passes  a  mere  equitable  interest  while  the  crop  is 
growing,  but  after  severance  the  equitable  interest  ripens  into  a 
legal  title.^  If  the  crop  be  severed  and  sold  without  the  consent 
of  the  mortgagee,  he  may  recover  the  value  of  it  from  a  purchaser, 
although  he  has  purchased  it  in  the  usual  course  of  trade,  and 
without  actual  notice.  The  record  is  constructive  notice.  The 
removal  of  the  crop  is  not  such  a  change  in  the  property  as  will 
divest  the  title  of  the  mortgagee.^ 

152.  A  mortgage  by  a  railroad  company  specifically  cover- 
ing after-acquired  property  is  binding  in  equity  upon  real  estate 
and  personal  property  afterwards  purchased  for  the  use  of  the 
road,  as  against  the  mortgagors  and  all  persons  claiming  under 
them,  except  purchasers  for  value  and  without  notice  ;  and  espe- 
cially will  it  bind  such  property,  as  against  claimants  under  a 
junior  mortgage,  which  by  its  terms  is  subject  to  the  prior  mort- 
gaged*^    If  the  mortgage  in  distinct  terms  covers  after-acquired 

1  Shuart  v.  Taylor,  7  How.  (N.  Y.)  Pr.         ^  Duke  i'.  Strickland,  43  Ind.  494. 

251.  "^  Lehman  v.  Marshall,  supra  ;  Adams  v. 

2  McGee  v.  Fitzer,  37  Tex.  27.  Tanner,  5  lb.  740  ;  Robinson  v.  Mauldia, 

3  Grimes  v.  Rose,  24  Mich.  416.  II  Ala.  977. 

*  Butty.  Ellett,  19  Wall.  544;  Apper-  8  Mauldin  v.  Armi.stead,  14  Ala.  702; 

son   V.    Moore,  30   Ark.  56 ;   Lehman  v.  S.  C.  1 8  Ala.  500. 

Marshall,  47  Ala.  362.  9  Duke  v.  Strickland,  supra. 

6  Butler  V.  Hill,  57  Tenn.  375.  lo  Steveas  v.  Watson,  4  Abb    (N.   Y.) 

122 


ACCESSIONS   TO   THE   MORTGAGED   PROPERTY. 


[§153. 


property,  the  record  of  the  mortgage  is  sufficient  notice  of  the 
lien.  "  Whenever  a  mortgage  is  made  by  a  railroad  company  to 
secure  bonds,  and  the  mortgage  declares  that  it  shall  include  all 
present  and  after-acquired  property,  as  soon  as  the  property  is 
acquired  the  mortgage  operates  upon  it.  In  other  words,  it  seizes 
the  property  or  operates  upon  it  by  way  of  estoppel,  as  soon  as  it 
comes  into  existence  and  is  in  possession  of  the  mortgagor ;  and 
the  mortgagees,  under  such  circumstances,  have  a  prior  equity  to 
the  claims  of  creditors  obtaining  judgments  and  executions  after 
the  property  is  thus  acquired  and  placed  in  possession  of  the  mort- 
gagor." ^  Such  is  the  settled  law  of  the  federal  courts  ;2  and  gen- 
erally of  the  state  courts  as  well.^  The  rule  is  applied  equally  to 
real  estate  and  personal  property ;  to  mortgages  by  individuals  as 
well  as  those  made  by  corporations.^ 

153.  Rule  as  to  after-acquired  property.  —  A  conveyance  of 
what  does  not  exist  does  not  operate  as  a  present  transfer  in 
equity  any  more  than  it  does  in  law.  The  difference  is  merely 
that  at  law  the  conveyance,  having  nothing  to  operate  upon,  is 


App.  Dec.  302;  Calhoun  v.  Memphis  & 
Paducah  R.  R.  Co.  2  Flip.  442,  447  ; 
Parker  v.  New  Orleans,  &c.  Ry.  Co.  33 
Fed.  Rep.  693. 

This  subject  is  fully  examined  in  Jones 
on  Railroad  Securities,  §§  121-153,  and 
no  attempt  is  here  made  to  make  more 
than  a  brief  reference  to  it. 

1  Per  Drummond,  J.,  in  Scott  v.  Clin- 
ton &  Springfield  R.  R.  Co.  8  Chicago 
Legal  News,  210. 

-  Pennock  v.  Coe,  23  How.  117  ;  Gal- 
veston R.  R.  Co.  V.  Cowdrey,  11  "Wall. 
4.59,  481  ;  Dunham  v.  Cin.,  Pern,  &c. 
Railway  Co.  1  Wall.  254;  Mitchell  v. 
Winslow,  2  Story,  630. 

3  Pierce  v.  Mil.  &  St.  Paul  R.  R.  Co.  24 
Wis.  551 ;  Iloyle  v.  Piattsburgh  &  Mon- 
treal R.  R.  Co.  51  Barb.  (N.  Y.)  45 ;  Sey- 
mour );.  Canandaigua  &  Niagara  Falls  R. 
R.  Co.  25  lb.  284  ;  Benjamin  v.  I':imira, 
Jeff.  &  Can.  R.  R.  Co.  49  lb.  441  ;  S.  0. 
.54  N.  Y.  C75;  Sillers  v.  Lester,  48  Miss. 
513;  Howe  v.  Freeman,  14  Gray  (Mass.), 
560;  Coopers  v.  Wolf,  15  Ohio  St.  52.1; 
Phillips  V.  Winslow,  18  B.  Mon.  (Ky.) 
4.T1  ;  Morrill  v.  Noyea,  56  Mc.  458;  Phiia., 
Wil.  &  Bait.   R.  R.   Co.  V.  Woclpper,  04 


Pa.  St.  366;  Mitchell  v.  Amador  C.  & 
M.  Co.  (Cal.)  17  Pac.  Rep.  246. 

*  Holroyd  v.  Marshall,  10  H.  L.  Cas. 
191,  overruling  dictum  of  Baron  Parke  in 
Mogg  V.  Baker,  3  M.  &  W.  195.  The  lat- 
ter case  was  followed  by  the  Supreme 
Court  of  Massachusetts  in  Moody  v. 
Wright,  13  Met.  17,  holding  that  prop- 
erty not  in  existence  at  the  time  of  mak- 
ing the  mortgage  is  incapable  of  being 
conveyed  by  it. 

In  the  District  Court  for  Massachusetts 
the  doctrine  of  the  state  courts  was  dis- 
sented from  in  the  recent  case  of  Brett  v. 
Carter,  2  Lowell,  458,  where  it  was  held 
that  a  mortgage  of  after-acquired  chat- 
tels is  valid  against  the  assignee  in  bank- 
ruptcy of  tlie  mortgagor.  See  same  case 
in  3  Cent.  L.  Jour.  286,  and  an  article 
upon  it  in  the  same  volume,  p.  359.  See, 
also,  in  same  volume,  p.  608,  decision  of 
Judge  Clifford,  in  the  case  of  Harnard  ». 
Norwich  &  Worcester  R.  R.  Co.,  before 
the  Circuit  Court  of  tlie  United  States, 
reported  al.so  in  14  N.  B.  R.  409. 

Sec  Jones  on  Chattel  Mortgages,  §  138- 
175,  for  a  full  discussion  of  tlie  subject 
of  mortgages  of  future  persoua!  property 
both  at  law  and  in  equity. 

123 


'  §  154.]         WHAT   MAY   BE   THE   SUBJECT   OF   A   MORTGAGE. 

void;  while  in  equity  what  is  in  form  a  conveyance  operates,  by 
way  of  present  contract,  to  take  effect  and  attach  to  the  subject 
of  it  as  soon  as  it  comes  into  being;  the  agreement  to  convey 
then  ripens  into  an  actual  transfer.^ 

Equity  considers  as  done  that  which  the  mortgagor  has  dis- 
tinctly agreed  to  do,  and  is  in  consequence  bound  to  do.  Upon 
every  acquisition  of  property  within  the  description  contained  in 
the  mortgage,  a  decree  might  be  obtained  that  the  mortgagor 
should  execute  a  mortgage  of  such  property  ;  but  instead  of  act- 
ually following  out  this  troublesome  process,  equity  treats  the 
mortgage  as  already  attaching  to  the  newly  acquired  property  as 
it  comes  into  the  mortgagor's  possession,  or,  in  other  words,  con- 
siders that,  of  every  article  of  property  as  acquired,  there  was  an 
actual  mortgage  then  executed  in  fulfilment  of  the  mortgagor's 
contract. 

The  chief  question,  therefore,  is,  whether  the  parties  to  the 
mortgage  intended  that  the  after-acquired  property,  which  is  in 
any  case  the  subject  of  litigation,  should  be  subject  to  the  lien  of 
the  mortgage  ;  and  it  will  be  noticed  that  in  the  recent  cases  the 
contention  is  generally  upon  this  question. 

154.  Applied  to  railroad  companies.  —  A  mortgage  which  by 
its  terms  covers  property  which  a  railroad  company  may  after- 
wards acquire,  though  given  before  any  part  of  the  road  is  built, 
covers  after-acquired  property  contemplated  by  the  mortgage.^ 
It  attaches  to  the  property  as  it  comes  into  existence.  As  against 
the  railroad  company  and  its  privies,  the  after-acquired  property 
feeds  the  estoppel  created  by  the  deed.  Even  against  a  con- 
tractor who  has  at  his  own  expense  finished  a  railroad  under  con- 
tract that  he  shall  keep  possession  until  he  has  been  paid,  a 
mortgage  in  such  terms  will  pass  the  road  afterwards  built  and 
acquired.^  A  mortgage  of  its  line  of  road,  its  tolls  and  revenues, 
covers  all  the  rolling  stock  and  fixtures,  whether  movable  or  im- 
movable, essential   to  the  production  of  tolls  and  revenues.*     A 

1  Emerson  v.  European  &  N.  A.  Ry.  785  ;    Calhoun    v.    Memphis   &   Paducah 
Co.  67  Me.  387 ;  Mitchell  v.  Wiuslow,  2  R.  R.  Co.   2   Flip.  442,  447  ;    Parker   v. 
Story,  630,  644,  where  the  cases  are  re-  New  Orleans  Ry.  Co.  33  Fed.  Rep.  693 ; 
viewed;    Christy  v.  Dana,  34   Cal.   548;  Jones  on  Railroad  Securities,  §  147. 
Amonett  v.  Amis,  16  La.  Ann.  225.  »  Dunham  v.  Cm.,  Peru,  &c.  Railway 

2  WiUink  V.  Morris  Canal  &  Banking  Co.  1  Wall.  254. 

Company,  4  N.  J.  Eq.  (3  Gr.)  377,  402;         *  State  v.  Northern  Central  R.  R.  Co. 
Galveston  R.R.  Co.  v.  Cowdrey,  11  Wall.      18  Md.  193. 
459,  481 ;  Bell  v.  Railroad  Co.  34  La.  Ann. 

124 


ACCESSIONS   TO   THE   MORTGAGED   PROPERTY.  [§  155. 

mortgage  by  a  railroad  company  of  "all  the  present  and  future 
to  be  acquired  property  of  the  companj^  including  the  right  of 
way  and  land  occupied,  and  all  rails  and  other  materials  used 
therein  or  procured  therefor,"  includes  the  rolling  stock  of  the 
road.^  A  mortgage  on  a  road  with  its  engines,  depots,  and  shops 
then  owned  by  the  company,  or  which  it  might  thereafter  acquire, 
"with  the  superstructure,  rails,  and  other  materials  used  thereon," 
is  construed  to  embrace  wood  provided  for  the  use  of  the  road 
from  time  to  time.^ 

155.  After-acquired  property  may  pass  as  an  incident  to 
the  franchise,  and  as  an  accession  to  the  subject  of  the  mortgage.^ 
The  suggestion  that  a  mortgage  by  a  railroad  company  made  in 
pursuance  of  its  charter,  or  of  a  law  authorizing  it,  attaches  to 
subsequently  acquired  property,  for  the  reason  that  the  franchise 
by  virtue  of  which  the  property  was  acquired  itself  passed  by 
the  mortgage,  was  noticed  by  the  Supreme  Court  of  Wisconsin. 
The  court,  however,  while  questioning  the  reason  so  assigned, 
held  that  when  a  mortgage  by  express  terms  covers  lands  that 
may  be  subsequently  acquired  for  the  uses  of  the  company,  the 
lien  will  attach  to  such  lands  the  moment  the  company  acquires 
an  interest  in  them,  although  this  interest  be  only  a  contract  of 
purchase.  The  mortgagee  may  compel  a  conveyance  under  such 
a  contract,  and  the  company  cannot  impair  the  lien  by  a  sale 
without  the  mortgagee's  consent.*  But  in  a  case  before  the  Court 
of  Appeals  of  Kentucky  the  power  of  a  corporation  to  pass  by  its 
mortgage  after-acquired  property  was  placed  altogether  upon  this 
ground,  the  court  saying  that  the  power  to  pledge  the  franchises 
and  rights  of  the  corporation  implies,  as  incident  thereto,  the 
power  to  pledge  everything  that  may  be  necessary  to  the  enjoy- 
ment of  the  franchise,  and  upon  which  its  real  value  depends. 
When  a  railroad  mortgage  is  made  which  is  to  continue  for  many 
years,  new  cars  and  engines  and  materials  of  different  kinds  will 
become  necessary  from  time  to  time,  and  the  road  would  be  of 

•  Pullan  i;.  Cincinnati  &  Chicago  Air  this  jjroposition.     See   Kowan  v.  Sharpb' 

Line  11.  K.  Co.  4  liiss.  35;  and  see,  also,  Killc  Manuf.  Co.  29  Conn.  282;  Chew  v. 

llovle  V.  I'laitsburgh   &,  Montreal  K.  K.  Barnct,  11   S.  &  U.  (Pa.)  ;38'J ;  I'ieice  v. 

Co.  51  Barb.  (N.  Y.)  45,  Emery,  32  M.  H.  484. 

■^  Coe  V.  McBrown,  22  Ind.  252.     See         *  Farmers'  Loan  &  Trust  Co.  v.  Fisher, 

Hath  i;.  Miller,  53  Me.  308.  17  Wis.  114;  Hill  v.  La  Crosse  &  Milw. 

8  Stevens  v.  Buffalo,  Corning  &  N.  Y.  li.  U.  Co.  11  Wis.  214;  Farmers'  Loan  & 

li   K.  Co.  45  How.  (N.  Y.)  I'r.  104.     The  Trust  Co.  v.  Commercial  Hank  of  Uacinc, 

(Jctision    was   not,   however,    based   upon  II  Wis.  207 ;  6'.  C  15  Wis.  424. 

125 


§  156.]         WHAT   MAY   BE  THE   SUBJECT   OF  A   MORTGAGE. 

little  value  without  them  ;  therefore  if  included  in  a  mortgage 
they  are  effectually  covered  by  it.^ 

On  the  principle  of  accession  it  has  been  held  that  without 
particular  mention  of  the  property  afterwards  acquired,  a  mort- 
gage by  a  railroad  company  of  all  its  property  and  rights  of  prop- 
erty will  pass  property  afterwards  acquired  and  essential  to  its 
use,  even  as  against  other  creditors  who  claim  by  later  mortgages. 
Such  a  mortgage  is  regarded  as  in  substance  a  conveyance  of  the 
road  and  franchise  as  an  entire  thing,  and  the  subsequently  ac- 
quired property  as  becoming  a  part  of  it  by  accession,  and  as 
incident  to  the  franchise ;  and  therefore  a  cargo  of  railroad  iron, 
after  it  is  delivered  to  the  railroad  company,  becomes  subject  to 
the  lien  of  such  a  mortgage.^ 

This  doctrine  rests  upon  the  authority  of  a  few  cases,  and  is 
not  generally  supported.  Mortgages  of  after-acquired  property, 
although  made  by  corporations,  are  made  to  rest  upon  the  broad 
equitable  principles  applicable  to  such  mortgages  in  general. 

156.  A  mortgage  by  a  rail\7ay  company  does  not  by  impli- 
cation cover  property  not  essential  to  its  business,  unless  it 
is  specifically  described  by  the  terms  of  the  mortgage.  Thus  a 
mortgage  by  a  railroad  company  of  its  real  estate,  road,  bridges, 
ferries,  locomotives,  engines,  cars,  and  all  other  personal  property 
belonging  to  it,  does  not  include  canal  boats  run  in  connection 
with  the  road  beyond  its  terminus.^  Town  lots,  held  by  a  rail- 
road company,  do  not  pass  by  a  sheriff's  sale,  under  a  mortgage 
of  the  road,  "  with  its  corporate  privileges  and  appurtenances," 
when  they  are  not  directly  appurtenant  to  the  railroad  and  indis- 
pensably necessary  to  the  enjoyment  of  its  franchises.*  A  mort- 
gage of  the  stock,  materials,  and  every  other  kind  of  personal 
property  which  shall  be  used  for  operating  a  railroad,  does  not 
profess  to  cover  railroad  chairs  afterwards  bought  by  the  com- 
pany, but  which  were  never  used  by  it.^  A  mortgage  which  does 
not  purport  to  cover  materials  subsequently  acquired  is  not  made 
valid  as  to  such  materials  from  any  consideration  of  the  nature 
and  object  of  the  mortgage,  as,  for  instance,  that  it  was  made  for 
the  purpose  of  raising  money  to  complete  the  road.^ 

A  mortgage  by  a  railroad  company  of  its  road  and  real  estate 

1  Phillips  V.  Winslow,  18  B.  Mon.  (Ky.)  *  Shamokin  Valley  K.  R.  Co.  v.  Liver- 
431,  445.  more,  47  Pa.  St.  465. 

2  Pierce  v.  Emery,  32  N.  H.  484.  ^  Farmers'  Loan  &  Trust  Co.  v.  Com- 
8  Parish  v.  Wheeler,  22  N.  Y.  494.               mercial  Bauk  of  Racine,  1 1  Wis.  207. 

6  Farmers'  Loan  &  Trust  Co.  v.  Com- 
126  mercial  Bank  of  Racine,  15  Wis.  424. 


ACCESSIONS   TO   THE   MORTGAGED   PROPERTY.  [§  157. 

then  owned  by  it,  or  which  it  might  afterwards  acquire,  is  con- 
sidered an  equitable  mortgage  as  to  the  property  subsequently 
acquired  for  the  purposes  of  its  road,  and  is  a  valid  lien  upon 
after-acquired  land  so  taken  and  used.^  Any  property  connected 
with  the  use  of  its  franchise,  whether  real  or  personal,  either  al- 
ready or  subsequently  acquired,  may  be  effectually  mortgaged.^ 
Upon  foreclosure  of  such  a  mortgage,  the  property  and  rights  of 
the  corporation  as  they  exist  at  the  time  of  the  foreclosure  pass 
to  the  mortgagees  or  to  the  purchasers.^ 

167.  After- acquired  land  not  within  the  terms  of  the  mort- 
gage is  not  covered  by  it.  Thus  a  mortgage  by  a  railroad  com- 
pany of  its  road  and  appurtenances,  and  of  lands  after  acquired 
for  stations,  shops,  and  the  like  uses,  does  not  create  any  lien 
upon  a  tract  of  woodland  afterwards  acquired,  situate  seven  miles 
from  its  road,  although  purchased  and  used  by  the  company  for 
the  purpose  of  supplying  the  road  with  timber  and  wood  ;  for 
such  a  mortgage  contains  no  apt  words  to  embrace  land  remote 
from  the  road,  and  which  cannot  be  used  for  any  of  the  specific 
purposes  mentioned.* 

The  authority  of  a  company  to  bind  its  future  acquisitions  by 
mortgage  is  limited  to  such  property  as  it  has  the  power  by  law 
to  acquire ;  and  therefore  it  has  been  held  that  a  railroad  com- 
pany having  at  the  time  of  making  a  mortgage  no  power  by  its 
charter  or  by  general  law  to  accept  a  land  grant  from  the  United 
States,  its  mortgage,  though  broad  enough  in  terms  to  cover  such 
a  grant,  would  not  embrace  a  land  grant  subsequently  made,  and 
which  the  company  was  by  special  act  afterwards  empowered  to 
accept.^  But  a  railroad  company  having  the  authority  to  accept 
a  land  grant  may  undoubtedly  mortgage  it  before  it  has  fulfilled 
the  conditions  upon  which  tlie  grant  is  to  be  made.^  A  mortgage 
by  a  railroad  company  in  its  terms  embracing  all  property  which 
it  may  subsequently  acquire  includes  a  lease  it  afterwards  takes  of. 
another  railroad.' 

1  Benjamin  v.  Elrnira,  Jefferson  &  Ca-  12  Wis.  649;  and  see  Walsh  v.   Barton, 

nandaiyua  li.  II.  Co.  4'J  Barb.  441  ;  .b'.  C.  24  Ohio  St.  28. 

.^4  N.  Y.  67.5;  Seymour  v.  Canandai^Mia  ''  Meyer  u.  Johnston,  53  Ala.  237,  331. 

&  Nia^;ara  Falls  K.  K.  Co.  2!i  Barb.  284.  *  See  Campbell  i'.  Texas  &  New  Orleans 

'^  Cue  j;.  Peacock,  14  Ohio  St.  187  ;   Kay-  H.  U.  Co.  2  Woods,  263. 

mond  V.  Clark.  46  Conn.  12!».  ^  Barnard  v.  Norwich  &  Worcester  11.  li. 

»  .Miller  i-.  Kuilaud  &  Wash.  R.  H.  Co.  Co.   14   N.  Bank.   K.  469;  .b'.  C.  3  Cent. 

36  Vt.  452.  L.  J.  608. 

*  Dinsmoro  i;.  Rucinc  &  Miss.  R.  R.  Co. 

127 


§§  158,  159.]      WHAT   MAY   BE   THE   SUBJECT   OF  A   MORTGAGE. 

158.  The  mortgage  is  subject  to  any  liens  there  may  be 
upon  the  property  when  acquiied.  The  mortgage  attaches  to 
the  property  in  the  condition  in  which  it  comes  into  the  mort- 
gagor's hands.  If  it  be  at  that  time  already  subject  to  mort- 
gages or  other  liens,  the  general  mortgage  does  not  displace  them, 
though  they  may  be  junior  to  it  in  point  of  time.  "  It  only  at- 
taches to  such  interest  as  the  mortgagor  acquires ;  and  if  he  pur- 
chase property  and  give  a  mortgage  for  the  purchase  money,  the 
deed  which  he  receives,  and  the  mortgage  which  he  gives,  are 
regarded  as  one  transaction,  and  no  general  lien  impending  over 
him,  whether  in  the  shape  of  a  general  mortgage  or  judgment, 
or  recognizance,  can  displace  such  mortgage  for  purchase  money. 
And  in  such  cases  a  failure  to  register  the  mortgage  for  purchase 
money  makes  no  diffei'ence.  It  does  not  come  within  the  reason 
of  the  registry  laws.  These  laws  are  intended  for  the  protection 
of  subsequent,  not  prior,  purchasers  and  creditors."  ^  Thus  a 
mechanic's  lien  for  work  done  and  materials  furnished  on  such 
after-acquired  property  takes  precedence  of  the  mortgage.^  Prop- 
erty subsequently  acquired  under  a  conditional  sale  comes  under 
the  mortgage  subject  to  the  terms  of  such  sale.^  Property  after- 
wards acquired  through  fraud  is  not  affected  by  an  existing 
mortgage.* 

159.  An  equitable  right  of  action  may  be  the  subject  of 
a  mortgage,  if  the  intention  to  include  it  be  made  apparent. 
But  whether  a  covenant  of  the  purchaser  of  a  portion  of  a  rail- 
road to  pay  a  portion  of  the  mortgage  debt,  and  in  case  of  default 
to  allow  the  company  to  reenter  upon  the  premises  and  sell  them 
under  foreclosure,  would  pass  by  a  subsequent  mortgage  given 
by  the  company,  conveying  the  road  with  its  franchises  and-  all 
"causes  of  action,  demands,  and  choses  in  action,  of  whatever 
nature,"  is  questionable.  The  fact  that  the  subsequent  mortgage 
was  expressly  made  subject  to  the  prior  mortgage  for  the  pay- 
ment of  a  portion  of  which  such  covenants  were  given  would 
probably  prevent  their  passing.^ 

A  right  of  way  for  a  railroad  may  be  pledged  as  security  for  a 

1  United  States  v.  New  Orleans  Rail-  3  Haven  v.  Emery,  33  N.  H.  66 ;  Taylor 
road,  12  Wall.  362-365,  per  Bradley,  J.;  v.  Burlington,  Cedar  Rapids  «Sb  Minn.  R.  R. 
Willink  V.  Morris  Canal  &  Banking  Co.     11  West.  Jur.  337. 

3  Green  (N.  J.)  Ch.  377.  *  Williamson  v.  N.  J.  Southern  R.  R. 

2  Williamson  v.  N.  J.  Southern  R.  R.     Co.  supra. 

Co.  28  N.  J.  Eq.  277,  298;  5.  C.  29  lb.         ^  Milwaukee  &  Minn.  R.  R.  Co.  v.  Mil- 
311.  waukee  &  West.  R.  R.  Co.  20  Wis.  174. 

128 


ACCESSIONS  TO   THE   MORTGAGED   PROPERTY.      [§§  160,  161. 

loan,  and  upon  default  may  be  sold  and  transferred  so  as  to  vest 
the  easement  in  the  purchaser.^ 

160.  A  mortgage  may  be  made  of  the  future  net  earnings 
of  a  railroad  company  to  secure  the  payment  of  interest  upon  its 
construction  bonds.^  Even  a  mortgage  of  a  railroad  and  its  pres- 
ent and  subsequently  acquired  property  is  a  prior  lien  upon  the 
net  earnings  of  the  road  while  the  mortgagor  retains  possession.^ 
A  mortgage  of  tolls  and  revenues  covers  only  the  net  income 
after  the  payment  of  all  expenses.*  But  until  the  mortgagee 
takes  possession,  the  earnings  belong  wholly  to  the  railroad  com. 
pany  and  are  subject  to  its  control.^  Even  after  the  road  has 
passed  into  the  possession  of  a  receiver  appointed  by  court  in  the 
interest  of  the  bondholders,  the  net  earnings  may  be  applied  by 
the  receiver  to  the  payment  of  claims  having  equities  superior  to 
those  of  the  bondholders.^ 

161.  A  mortgage  by  a  railroad  company  of  its  road  and 
franchise,  as  security  for  debt,  is  held  not  to  convey  its  cor- 
porate existence,  or  its  general  corporate  powers,  but  only  the 
franchise  necessary  to  make  the  conveyance  beneficial  to  the 
grantees,  and  to  enable  them  to  maintain  and  manage  the  road, 
and  receive  the  profits  to  their  own  use." 

1  Junction  R.  E.  Co.  v.  Ruggles,  7  Ohio  Parkhurst  v.  Northern  Cent,  R.  R.  Co.  19 

St.  1.  Md.  472. 

•^  See  Jones  on  Railroad  Securities,  §§  ^  Fosdick  v.  Schall,  99  U.  S.  235,  253. 

114-120  ;  Jessup  v.  Bridge,  11  Iowa,  572 ;  ^  j  Jjale  v.  Frost,  supra. 

Dunham  v.  Isett,  15  Iowa,  284;  Farmers'  ''  Eidridge  v.  Smith,  34  Vt.  484  ;  Meyer 

Loan  &  Trust  Co.  v.  Gary,  13  Wis.  110.  v.  Johnston,  53  Ala.  237,  325;  Miller  v. 

8  Hale  V.  Frost,  99  U.  S.  389.  Rutland  &  Washington  R.  R.  Co.  36  Vt. 

*  Jones  on   R.   R.   Securities,   §    117;  452,  498;    see  article   19  American  Law 

Rev.  440. 

VOL.  I.                     9  129 


CHAPTER  V. 


EQUITABLE   MORTGAGES. 


I.  By  agreements  and  informal  mortgages, 
163-171, 


11.  By  assignments  of  contracts  of  pur- 
chase, 172-178. 
III.  By  deposits  of  title  deeds,  179-188. 


162.  Introductory.  —  It  has  been  noticed  that  a  conveyance, 
accompanied  by  a  condition  contained  either  in  the  deed  itself  or 
in  a  separate  instrument  executed  at  the  same  time,  constitutes 
a  legal  mortgage,  or  a  mortgage  at  common  law.  In  addition  to 
these  formal  instruments  which  are  properly  entitled  to  the  des- 
ignation of  mortgages,  deeds  and  contracts  which  are  wanting  in 
one  or  both  of  these  characteristics  of  a  common  law  mortgage 
are  often  used  by  parties  for  the  purpose  of  pledging  real  prop- 
erty, or  some  interest  in  it,  as  security  for  a  debt  or  obligation, 
and  with  the  intention  that  they  shall  have  effect  as  mortgages. 
Equity  comes  to  the  aid  of  the  parties  in  such  cases,  and  gives 
effect  to  their  intentions.  Mortgages  of  this  kind  are  therefore 
called  equitable  mortgages.^ 

There  are  many  kinds  of  equitable  mortgages,  —  as  many  as 
there  are  varieties  of  ways  in  which  parties  may  contract  for 
security  by  pledging  some  interest  in  lands.  Whatever  the  form 
of  the  contract  may  be,  if  it  is  intended  thereby  to  create  a  secu- 
rity, it  is  an  equitable  mortgage.^  It  is  not  even  necessary  that 
the  contract  should  be  in  express  terms  a  security  ;  for  equity 
will  often  imply  this  from  the  nature  of  the  transactions  between 
the  parties.  For  instance,  a  contract  for  security  is,  in  England 
and  in  some  States  of  America,  implied  from  a  deposit  of  title 
deeds. 

It  has  been  noticed  in  the  preceding  chapter  that  rights  and 
interests  in  realty  which  are  only  equitable  are  often  the  subject 

1  Quoted  with  approval  by  Harlan,  J.,     23;  Wayt   v.  Carwithen,  21  W.  Va.  516; 
in  Ketchum  v.   St.  Louis,  101  U.  S.  306,     Hoile  v.  Bailey,  58  Wis.  434. 
317.     And  see  Brown  v.  Brown,  103  Ind.         2  Quoted  with  approval  in  Hall  v.  Mo- 
bile &  Montgomery  Ry.   Co.  58  Ala.   10, 
130  22. 


BY    AGREEMENTS   AND  INFORMAL   MORTGAGES.  [§  163. 

of  mortgage ;  tbat  in  equity  formal  mortgages  are  often  made  to 
embrace  property  which  at  common  law  would  not  be  covered  at 
all ;  as,  for  instance,  property  acquired  after  the  execution  of  the 
mortgage.  But  the  term  "  equitable  mortgage  "  is  used  more  prop- 
erly with  reference  solely  to  the  kind  of  instrument  or  contract 
by  which  equity  establishes  a  lien.  It  is  the  equitable  form  of 
the  transaction,  rather  than  the  equitable  nature  of  the  property, 
to  which  this  chapter  has  reference. 

There  are  some  kinds  of  equitable  mortgage  so  common  and  so 
important  that  they  will  be  treated  of  at  length  farther  on  ;  as, 
for  instance,  absolute  conveyances  without  any  defeasance  except 
by  parol,  and  liens  of  vendors  under  written  contracts  or  reserva- 
tions. In  this  chapter,  therefore,  the  less  important  transactions 
which  in  equity  are  recognized  as  creating  securities  will  be 
treated  of. 

I.    By  Agreements  and  Informal  Mortgages. 

163.  An  agreement  to  give  a  mortgage,  not  objectionable 
for  want  of  consideration,  is  treated  in  equity  as  a  mortgage, 
upon  the  principle  that  equity  will  treat  that  as  done  which  by 
agreement  is  to  be  done.  This  doctrine  has  been  asserted  fre- 
quently, both  in  this  country  and  in  England.^  It  is  of  frequent 
application  under  the  bankrupt  laws,  where  it  operates  to  make 
valid  a  mortgage  given  to  a  creditor,  shortly  before  the  filing  of  a 
petition  in  bankruptcy  by  the  mortgagor,  when  this  is  done  in 
pursuance  of  an  agreement  made  at  a  time  when  the  giving  of  the 
mortgage  would  not  have  been  a  fraudulent  preference.^ 

An  agreement  to  make  a  conveyance  of  land,  when  intended  as 
security  for  a  debt,  is  in  the  same  manner  a  mortgage.  But  all 
such  agreements  to  give  mortgages  or  other  conveyances  by  way 
of  security  are  ineffectual  when  no  particular  property  is  specified 

1  Russel  V.  Russel,  1  Bro.  C.  C.  269 ;  son,  41  Miss.  258.  Connecticut :  Hall  v. 
Biebinj^er  v.  Contiuental  Bank,  99  U.  S.  Hall,  50  Conn.  104.  Missouri :  McQuie 
143.  Ohio:  CottL-rell  v.  Long,  20  Ohio,  y.  Pcay,  58  Mo.  56.  Vermont:  Poland  v. 
464;  Bank  of  Mu.skitigum  v.  Carpenter,  Lamoille  Valley  R.  R.  Co.  52  Vt.  144. 
7  Ohio,  21.  New  York:  Chase  v.  Peck,  Arkansas  :  Richardson  v.  Hanilctt,  33  Ark. 
21  N.  Y.  581  ;  In  re  Howe,  1  Paige,  125.  2.57.  New  "Jersey  :  Oliva  t'.  Bunaforza,  31 
Alabama :  Morrow  v.  Turney,  35  Ala.  N.  J.  Eq.  395.  Texas  :  Boehl  i-.  Wadgy- 
I'U  ;  O'Neal  v.  Sexias,  4  So.  Rep.  745.  mar,  54  Tex.  589.  Sec,  however,  Hum- 
California:  l)a;.'g(;tl  ».  Rankin,  31  Cal.  jdireys  i».  Snyder,  Morri.s  (Iowa),  263. 
■'i'Jl.  South  Carolina :  DclMirc  i;.  Keenan,  '■'  Burdick  i;.  Jackson,  7  Huu  (N.  Y.), 
.'<  OoHaus,  74.  Mississippi:  Petric  v.  488. 
Wright,  6  Sm.  &  M.  647  ;  Adams  v.  John- 

181 


§§  164,  165.]  EQUITABLE   MORTGAGES, 

on  whicli  the  security  is  to  be  given.^  An  agreement  to  give  a 
mortgage  on  sufficient  property  is  not  effectual.^  Such  agree- 
ment can  of  course  bind  only  the  maker  of  it  and  his  heirs,  and 
persons  having  notice.  It  is  not  of  any  force  as  against  his  sub- 
sequent judgment  creditors.^ 

The  meaning  of  the  maxim,  that  equity  looks  upon  things 
agreed  to  be  done  as  actually  performed,  is  that  equity  will  treat 
the  matter,  as  to  collateral  consequences  and  incidents,  in  the 
same  manner  as  if  the  final  acts  contemplated  by  the  parties  had 
been  executed  exactly  as  they  ought  to  have  been.* 

164.  It  is  not  even  necessary  that  the  agreement  should  in 
all  cases  be  in  -writing.  Although  a  parol  agreement  in  respect 
to  lands  while  it  remains  altogether  executory  is  not  enforcible, 
yet  when  there  has  been  a  part  performance  of  it,  it  cannot  in 
equity  be  avoided.  When  such  parol  agreement  has  been  per- 
formed by  a  delivery  of  a  formal  mortgage,  all  objection  to  the 
validity  of  the  agreement  is  removed,  and  it  becomes  as  effectual 
for  all  purposes  as  if  it  had  been  reduced  to  writing  originally. 
In  this  way  a  mortgage  made  a  few  days  before  the  bankruptcy 
of  the  mortgagor,  but  in  pursuance  of  a  parol  agreement  made 
fifteen  months  before,  and  based  upon  a  good  consideration,  is 
good  against  the  assignee  in  bankruptcy,  and  is  not  open  to  the 
objection  that  it  is  void  as  a  fraudulent  preference.^ 

165.  Upon  this  principle,  the  entry  of  an  agreement  by  a 
corporation  upon  its  records,  that  a  certain  bond  for  title  should 
be  pledged  to  certain  of  its  members  as  security  for  liabilities 
which  they  were  about  to  incur  for  the  company,  was  held  to  be 
an  equitable  mortgage ;  and  although  a  deed  of  trust  was  after- 
wai'ds  made  in  conformity  with  the  resolution,  yet  these  members, 
having  acted  upon  the  faith  of  it  before  the  deed  of  trust  was 
made,  were  held  to  be  entitled  to  the  security  as  from  that  time, 
and  the  deed  of  trust  was  regarded  only  as  a  confirmation  of  the 
agreement,  and  as  having  relation  to  the  resolution.^ 

The  maker  of  two  notes  gave  an  instrument  to  his  sureties  on 

1  Langley  v.  Vaughn,  10  Heisk.  (Tenn.)  Whitwoith   v.   Gaugain,    3    Hare,    416  ; 

553.  Abbott  v.  Stratten,  3  Jo.  &  Lat.  603. 

•2  Adams  v.  Johnson,  41  Miss.  258.  *  Daggett  v.  Rankin,  31  Cal.  321,  326, 

"  Price  V.  Cutts,  29  Ga.  142  ;  Racouil-  per  Currey,  C.  J.;  Wayt  v.  Carwithen,  21 

lat  V.  Sansevain,  32  Cal.  376.  W.  Va.  516. 

But  in  England  an  equitable  mortgage  ^  Burdicky.  Jackson,  7  Hnn  (N.Y.),  488. 

has  priority  of  a  subsequent  judgment.  ^  Miller  v.  Moore,  3  Jones  (N.  C.)  Eq. 

431. 

132 


BY   AGREEMENTS   AND   INFORMAL   MORTGAGES.  [§  166. 

the  notes  reciting  that  they  were  given  for  the  purchase  of  land, 
and  providing,  "In  case  I  fail  to  pay  said  notes,  I  do  bind  myself, 
my  heirs,  etc.,  to  convey  to  said  sureties  the  aforesaid  land."  It 
was  held  that  upon  the  failure  of  the  principal  to  pay  the  notes, 
the  sureties  w^re  entitled,  not  to  an  absolute  conveyance,  but  to  a 
mortgage.^ 

166.  An  instrument  which  does  not  transfer  the  legal  es- 
tate may  yet  operate  as  an  equitable  transfer  of  it  in  the  nature 
of  a  mortgage.  Thus,  a  mortgage  to  certain  executors  from 
which  the  word  "  heirs,"  creating  a  fee,  was  omitted,  and  the 
word  "  successors  "  used  in  its  stead,  was  held  to  be  an  equitable 
mortgage  in  fee,  and  was  reformed.^  Such  was  held  to  be  the 
effect  of  an  agreement  under  seal  made  by  one  to  whom  land  was 
conveyed  in  consideration  that  he  should  support  and  maintain 
the  grantor,  whereby  the  produce  of  the  land  was  pledged  for 
that  purpose,  and  if  that  should  prove  insufficient,  the  entire  fee 
was  appropriated.^  Such,  too,  is  a  similar  instrument  in  which 
the  signer  agrees  to  maintain  his  father  and  mother  during  their 
natural  lives,  and  as  security  for  the  fulfilment  of  the  agreement 
conveys  and  grants  to  them  "  each  and  severally  a  life  lien  or 
dower  or  lien  of  maintenance  for  life  "  in  real  estate.*  The 
words,  "  we  mortgage  the  property,"  accompanied  by  a  provision 
for  the  sale  of  it  upon  non-payment  of  money  thus  secured,  have 
been  held  sufficient  to  create  a  mortgage.^ 

An  instrument  whereby  a  corporation  "  pledges  the  real  and 
personal  estate  of  said  company,"  for  the  fulfilment  of  a  contract, 
may  be  enforced  as  a  mortgage  against  the  company  and  all  per- 
sons claiming  under  it  with  notice;  and  is  not  rendered  invalid 
for  the  reason  that  the  property  of  the  company  is  pledged  with- 
out specification,  or  that  the  amount  secured  is  not  stated,  or  the 
time  of  redemption  fixed.^  An  instrument  which  recites  that  the 
maker  of  it  had  employed  certain  persons  as  counsel  to  prosecute 
a  claim  to  certain  land,  and  promises  the  payment  of  a  certain 
sum  "  at  the  end  of  the  litigation  out  of  the  land,"  is  a  mortgage.'^ 
It  indicates  the  creation  of  a  lien,  and  specifies  the  debt  intended 
to  be  secured,  and   the  property  upon  which   it  is  to  take  effect. 

1  Courtney   v.  Scott,    Litt.  (Ky  )    Rel.  ^  De  Leon  y.  lliguera,  15  Cal.  483 ;  and 

Ca«.  457  ;  Wayt  v.  Carwithen,  21  W.  Va.  Bee  Barroilhet  v.  Battelle,  7  Cul.  450. 

516.  ft  Mobile  &  C.  r.  R.  li.  Co.  v.  Talman, 

*  Gale  V.  Morris,  29  N.  J.  Eq.  222.  15  AIiu  472. 

'  See  Chase  v.  Peck,  21  N.  Y.  581.  '  Jacksou  v.  CarswcU,  34  Ga.  279. 

*  Gilson   t;.   GiUon,    2    Allen    (Mass.), 

115.  188 


§  167.]  EQUITABLE   MORTGAGES. 

And  SO  an  agreement  in  a  lease,  that  the  lessor  "  is  to  have  a 
lien  "  upon  certain  property  for  the  faithful  performance  of  the 
lessee's  obligation  to  pay  rent,  is  in  effect  a  mortgage.^ 

A  covenant  by  a  debtor,  to  execute  to  his  creditor  a  mortgage 
upon  the  debtor's  share  under  his  father's  will,  whenever  a  divi- 
sion shall  have  been  made,  is  a  mortgage.^  So  is  a  provision  in  a 
deed  that  the  grantee  shall  pay  certain  legacies  or  certain  liens 
which  are  a  charge  upon  the  property  conveyed.'^  So  also  an 
agreement  not  under  seal  which  provides  that  the  purchase  money 
of  land  if  not  sold  by  the  purchaser  should  be  secured  by  the 
property,  and  if  sold,  then  paid  from  the  proceeds.*  A  seal  is 
not  necessary  to  make  an  instrument  a  good  equitable  mortgage.^ 
So  a  power  of  attorney  executed  by  a  debtor  to  his  creditor,  au- 
thorizing the  latter  to  convey  the  debtor's  property  unless  he 
should  pay  the  debt  within  a  time  named.^ 

167.  A  written  agreement  that  attempts  to  appropriate 
specific  property  to  the  payment  of  a  debt,  and  gives  the  cred- 
itor possession  of  it  to  hold  till  the  debtor  shall  make  sale  of  the 
land  and  satisfy  the  debt  from  such  sale,  the  occupation  of  the 
land  and  the  doing  of  certain  work  to  offset  interest  on  the  debt, 
constitutes  an  equitable  mortgage  binding  upon  the  owner  of  the 
land,  and  upon  any  one  who  buys  of  him  with  notice  of  the  agree- 
ment.^ An  agreement  on  the  back  of  a  note,  making  it  a  charge 
upon  particular  land,  is  an  equitable  mortgage.  In  this  way  an 
agreement  intended  to  operate  as  a  revival  of  a  mortgage  note 
which  had  been  paid  may  be  rendered  effectual,  although  inef- 
fectual to  revive  the  mortgage  lien.^ 

An  agreement  by  the  equitable  owner  of  land,  that  the  holder 
of  the  legal  title  may  hold  it  as  security  for  the  payment  of  a  sura 
of  money  borrowed  by  the  former  of  a  third  person,  creates  an 
equitable  lien  upon  the  land  in  favor  of  the  lender.^ 

An  agreement  made  by  bondholders  secured  by  a  mortgage  of 
a  railroad  that  certain  preference  bonds  secured  by  a  subsequent 

1  Whiting  V.  Eichelberger,  16  Iowa,  ^  Pemberton  v.  Simmons  (N.  C.)  6  S. 
422.  E.  Rep.  122. 

2  Lynch  v.  Utica  Ins.  Co.  18  Wend.  ^  Blackburn  v.  Tweedie,  60  Mo.  505; 
(N.  Y.)  236.  Wayt  v.  Carwithen,  21  W.  Va.  516  ;  Dun- 

3  Stewart  v.  Hutchins,  6  Hill  (N.  Y.),  man  v.  Coleman,  59  Tex.  199;  Hoile  v. 
143  ;  Mitchell  v.  Wade,  39  Ark.  377.  Bailey,  58  Wis.  434.     See,  however,  Allen 

*  Racouillat  v.  Sansevain,  32  Cal.  376.       v.  Montgomery,  48  Miss.  101. 
5  Woods  V.  Wallace,  22  Pa.  St.   171  ;         »  Peckham  v.  Haddock,  36  111.  38. 
Spencer  v.  Haynes,  12  Phila.  (Pa.)  452.  »  Chadwick  v.  Clapp,  69  111.  119. 

134 


BY   AGREEMENTS   AND   INFORMAL   MORTGAGES.  [§  168. 

mortgage  should  be  a  lien  on  the  railroad  prior  to  the  bonds  held 
"by  the  several  signers  of  the  agreement  operates  as  a  pledge  or 
equitable  mortgage  of  the  interest  of  such  bondholders  under  the 
prior  mortgage ;  but  of  course  such  agreement  does  not  in  any- 
way affect  the  interest  or  the  priority  of  the  lien  of  any  bond- 
holders who  do  not  sign  the  agreement.^ 

A  mortgage  made  by  a  person  individually  to  himself  as  guar- 
dian to  secure  moneys  belonging  to  his  ward  would  be  regarded 
in  a  court  of  equity  as  a  valid  security  against  the  guardian,  and 
would  be  given  effect  for  the  purpose  of  protecting  the  interest 
of  the  ward.  After  a  sale  of  the  mortgaged  premises,  a  judgment 
in  a  foreclosure  suit  would  estop  the  parties  from  questioning  the 
mortgage,  and  a  sale  would  confer  a  good  title  upon  the  pur- 
chaser.2 

It  has  even  been  held  that  if  land  intended  to  be  included  in  a 
mortgage  is  omitted  by  mistake,  and  a  judgment  is  subsequently 
rendered  against  the  mortgagor,  the  lien  of  the  judgment  cred- 
itor is  subject  to  the  equity  of  the  mortgage.^ 

168.  Informal  mortgages.  —  A  mortgage,  or  trust  deed,  which 
cannot  be  enforced  by  a  sale  under  the  power  or  by  a  judgment 
of  foreclosure,  on  account  of  the  omission  of  some  formality  requi- 
site to  a  complete  mortgage  or  deed  of  trust,  will  nevertheless  be 
regarded  as  an  equitable  mortgage,  and  the  lien  will  be  enforced 
by  special  proceedings  in  equity.  The  attempt  to  create  a  security 
in  legal  form  upon  specific  property  having  failed,  effect  is  given 
to  the  intention  of  the  parties,  and  the  lien  enforced  as  an  equi- 
table mortgage.  Any  agreement  between  the  parties  in  interest 
that  shows  an  intention  to  create  a  lien  may  be  in  equity  a  mort- 
gage.* As  stated  by  Judge  Story ,^  "  If  a  transaction  resolve  itself 
into  a  security,  whatever  may  be  its  form,  and  whatever  name  the 
parties  may  choose  to  give  it,  it  is  in  equity  a  mortgage,"  Effect 
has  been  given  in  this  way  to  a  deed  of  trust  in  which  the  name 
of  the  trustee  was  accidentally  omitted  ;  ^  to  one  from  which  a 
seal  was  omitted  by  mistake ; ''  to  one  sealed  in  fact,  but  not  ex- 
pressed  to  be  sealed  ;  ^  to   one  imperfectly  acknowledged,  or  not 

1  Poland  V.  Lamoile  Valley  R.  R.  Co.  «  McQuie  v.  Peay,  58  Mo.  56 ;  Burn- 
52  Vt.  144.  sidey.  Wayman,  49  Mo.  356. 

2  Lyon  V.  Lyon,  67  N.  Y.  250.  t  McClure  v.  Phillips.  49  Mo.  315  ;  57 
8  Martin  v.  Nixon  (Mo.),  4  S.  W.  Rep.     Mo.  214  ;    Dunn  v.  Kaley,  58   Mo.  1.14; 

5a3.     Ls  this  deci-sion  a  safe  precedent  1  Harrington  v.  Fortner,  58  Mo.  408  ;  Gill 

*  DaijKett  V.  Rankin,  31  Cal.  321.  v.  Clark,  54  Mo.  415. 

'  Flagg  V.  Mann,  2  Sum.  486,  533.  *  Jonca  v.  Brewinplon,  58  Mo.  210. 

135 


§§169,  170.]  EQUITABLE  MORTGAGES. 

acknowledged  at  all ;  ^  or  not  witnessed  as  a  deed  of  real  estate  is 
required  to  be.^  But  it  seems  that  effect  will  not  be  given  to  a 
mortgage  witnessed,  acknowledged,  and  recorded,  but  not  signed 
by  the  mortgagor.^ 

169.  A  mortgage  defectively  executed  in  the  name  of  an 
agent,  though  purporting  to  be  the  mortgage  of  the  corporation, 
is  held  to  be  binding  in  equity  if  it  appear  that  the  officer  or  agent 
had  authority  to  bind  it,  and  by  accident  or  mistake  executed  it 
in  his  own  name  instead  of  the  name  of  the  company.*  In  such 
a  case,  before  the  Supreme  Court  of  California,^  it  was  urged 
that  the  defective  execution  of  the  mortgage  was  caused  by  a  mis- 
take of  law,  and  that  therefore  the  defective  execution  could  not 
be  aided.  In  answer  to  this  Mr.  Justice  Shaffter,  delivering  the 
opinion  of  the  court,  replies,  that  where  there  is  a  defective  exe- 
cution of  a  power,  it  is  a  matter  of  no  equitable  moment  wliether 
the  error  came  of  a  mistake  of  law  or  mistake  of  fact.  It  is 
enough  that  the  power  existed,  and  that  there  was  an  attempt 
to  act  under  it.  The  relief  is  not  so  much  by  way  of  reforming 
the  instrument  as  by  aiding  its  defective  execution  ;  which  aid  is 
administered  through  or  by  the  application  of  well  settled  max- 
ims of  the  law ;  or,  as  in  the  class  of  cases  to  which  this  belongs, 
the  instrument  defectively  executed  as  a  deed  is  considered  as 
properly  executed  as  a  contract  for  a  deed ;  and  therefore  as  re- 
quiring neither  reformation  nor  aid,  but  as  ripe  for  enforcement, 
according  to  the  methods  peculiar  to  courts  of  equity. 

170.  Mortgage  by  implied  trust.  —  If  a  mortgage  be  made  to 
two  persons  conditioned  to  secure  the  payment  of  a  debt  to  one 
of  them  only,  the  legal  estate  would  vest  in  them  as  tenants  in 
common ;  but  the  one  having  no  claim  secured  would  be  trustee 
to  the  extent  of  his  moiety,  and  hold  it  in  trust  to  secure  the  debt 
due  the  other.^ 

In  like  manner  where  one  advances  money  to  'pay  off  a  mort- 
gage, which  is  thereupon  assigned  for  his  protection  to  one  of  the 
owners  of  a  part  of  the  property,  it  is  a  trust  in  the  hands  of  the 
latter,  and  may  be  established,  as  against  all  parties  having  no- 

1  Black  V.  Gregg,  58  Mo.  565.  R.  Co.  36  Vt.  452 ;  Welsh  v.  Usher,  2  Hill 

2  Abbott  V.  Godfrey,  1  Mich.  178  ;  Lake     (S.  C.)  Ch.  167.     See  §  127. 

V.  Doud,  10  Ohio,  415.  ^  Love  v.  Sierra  Nevada,  L.  W.  &  Miu- 

8  Goodman  v.  Randall,  44  Conn.  321.         ing  Co.  32  Cal.  639. 
*  Miller  v.  Rutland  &  Washington   R.         «  Root  v.  Bancroft,  10  Met.  (Mass.)  44. 

136 


BY  ASSIGNMENTS   OF  CONTRACTS  OF   PURCHASE.       [§§  171,  172. 

tice  of  these  facts,  as  an  equitable  lien,  although  the  mortgage 
has  been  discharged  of  record. ^ 

A  conveyance  to  a  creditor  as  trustee  to  sell  and  apply  the  pro- 
ceeds in  payment  of  certain  enumerated  debts  due  to  him  and  to 
others,  and  then  return  any  balance  to  the  grantor,  the  creditors 
assenting  in  writing  to  such  conveyance,  has  the  effect  of  a  mort- 
gage for  their  benefit, ^ 

171.  An  assignment  of  rents  and  profits  of  land  as  security 
is  an  equitable  mortgage.  Such  an  assignment,  in  the  words  of 
Lord  Thurlow,  "  is  an  odd  way  of  conveying ;  but  it  amounts  to 
an  equitable  lien,  and  would  entitle  the  assignee  to  come  into 
equity  and  insist  upon  a  mortgage."  ^ 

A  formal  mortgage  of  a  leasehold  estate  amounts  only  to  an 
assignment  of  tlie  rents  and  profits  for  the  whole  term,  in  states 
where  foreclosure  cannot  be  effected  by  a  sale,  but  only  by  a 
strict  foreclosure  or  a  proceeding  in  that  nature.* 

A  stipulation  in  a  lease,  that  the  building  erected  by  the  lessee 
"  is  mortgaged  as  security  "  for  rent,  is  a  good  mortgage.^  An 
assignment  of  a  lease  absolutely,  accompanied  with  a  bond  stat- 
ing it  to  have  been  made  to  secure  the  payment  of  a  debt,  and 
providing  for  a  reconveyance  upon  payment,  is  a  mortgage,^  in 
the  same  way  that  an  absolute  conveyance  in  fee  accompanied  by 
such  a  bond  is  a  mortgage. 

An  irrevocable  power  of  attorney  to  collect  rents,  given  as  secu- 
rity, is,  as  between  the  parties,  an  equitable  mortgage  of  the 
rents.'^ 

II.  By  Assignments  of  Contracts  of  Purchase. 

172.  An  assignment  by  the  vendee  of  a  contract  of  pur- 
chase of  land  as  security  for  a  loan  may  be  regarded  as  an  equi- 
table   mortgage.^     The    rules  applicable    to  a    mortgage  of   real 

1  King  V.  McVickar,  3  Sandf.  (N.  Y.)         "  Abbott  v.  Stratten,  supra;  9  Ir.  Eq. 
Ch.  192.  233;  Smith  Co.  v.  McGiiinness,  14  R.  I. 

2  Fox  V.  Fia.ser,  92  Ind.  265.    See  §  62.     59. 

''-  Ex   parte   Willis,   1    Ves.   Jun.    162;  »  Fitzhngh  ;•.  Smith,  62  111.  486  ;  Smith 

Abbott  1-.  Stratten,  3  Jo.  &  Lat.  603.    See,  v.  Lackor,  23  Minn.  454  ;  Niggeler  v.  Mau- 

however,  Alexander    v.    Berry,   54    Miss,  rin,  34   Minn.   118;  Slioeenift  v.  Internal 

^'^•-  Improvement  Fund,  8  Sup.  Ct.  Kcp.  686; 

<  Iliileit  V.  Soiilhird,  26  Vt.  295.  Gilkerson  v.  Connor,  24  S.  C.  321  ;  Roddy 

''  Harroilhrt  v.  B;iitelle,  7  Cal.  4.50.  v.  Elam,  12  Rieh.  (S.  C.)  Eq.  343,  345. 

*■'  Jaekson  t*.  (Jretn,  4   Johns.  (N.   Y.) 


186. 


137 


§  173.]  EQUITABLE  MORTGAGES. 

property  govern  it  both  as  to  the  effect  of  it  and  the  mode  of  en- 
forcing it.i 

Where  one  having  a  contract  for  the  purchase  of  land  agrees 
with  another  that  he  shall  pay  the  purchase  money  and  take  a 
deed  of  the  land  for  his  security  until  repaid,  the  arrangement 
amounts  to  a  mortgage  of  such  equitable  title.^  In  like  manner 
if  the  owner  of  land  warrants  secures  a  debt  by  having  them  en- 
tered in  the  name  of  his  creditor,  such  entry  is  a  mortgage.^ 

A  mortgage  made  by  one  who  holds  only  a  bond  or  contract  of 
purchase  passes  only  the  title  he  has  in  the  premises  at  the  time, 
subject  to  be  enlarged  by  the  mortgagor's  acquiring  afterwards 
the  legal  title.  Such  a  mortgage  amounts  to  a  qualified  assign- 
ment of  the  bond  or  contract.  If  the  contract  and  mortgage  be 
executed  formally  so  that  they  may  be  recorded,  the  record  is 
notice  to  any  subsequent  purchaser  from  the  vendor  of  the  mort- 
gagee's right  to  purchase  the  property  under  the  contract,  if  the 
vendee  does  not  perform  the  condition  of  the  mortgage.^  The 
vendor  and  vendee  cannot  rescind  the  contract  as  against  such 
mortgagee  after  the  vendor  has  actual  notice  of  the  mortgage.  If 
a  second  mortgagee  of  such  an  equitable  title  be  obliged  for  his 
own  protection  to  pay  the  purchase  money  remaining  due  upon 
the  bond,  his  lien  for  the  money  so  advanced  is  superior  to  that 
of  the  first  mortgagee  of  such  equitable  interest.^ 

173.  A  bond  for  a  conveyance  may  be  assigned  by  way  of 
mortgage.  If  the  assignee  subsequently  obtains  the  legal  title  to 
the  land  by  virtue  of  the  bond,  and  surrenders  that,  he  will  hold 
the  land  subject  to  the  right  of  his  assignor  to  redeem.^  Such  a 
bond  is  itself  sometimes  declared  to  be  in  equity  equivalent  to  a 
conveyance  of  the  property,  with  a  mortgage  back ;  so  that  the 
assignment  of  it  is  equivalent  to  the  assignment  of  a  mortgage.^ 

When  land  is  sold  on  credit,  and  a  bond  is  given  to  the  pur- 
chaser to  make  title  on  payment  of  the  purchase  money,  the  effect 

1  Brockway  v.  Wells,  1  Paige  (N.  Y.),  v.  Sykes,  7  Wis.  449;  Newhoiise  v.  Hill, 
617.  7  Blackf.  (Ind.)  584;  Fenno  v.  Sayre,  3 

2  Fessler's  Appeal,  75  Pa.  St.  483  ;  Ala.  458;  Alderson  v.  Ames,  6  Md.  52; 
Purdy  u.  Bullard,  41  Cal.  444.  Sinclair  ?;.  Arraitage,  12  N.  J.   Eq.  174; 

8  Dwen  V.  Blake,  44  111.  135.  Christy  v.  Dana,  34  Cal.  548 ;  Neligh  v. 

*  Alden  v.  Garver,  32  111.  32;  Steinke-  Michenor,  3  Stockt.  (N.J.)  ."539. 

meyer  y.  Gillespie,  82  111.  253.  '  Jones  v.  Lapham,  15  Kans.  540,  per 

5  Steinkeraeyer  v.  Gillespie,  supra.  Brewer,  J. ;  Button  v.   Schroyer,  5  Wis. 

6  Baker  v.  Bishop  Hill  Colony,  45  111.  598. 
264 ;  Jones  v.  Lapham,  15  Kans.  540 ;  Bull 

138 


BY   ASSIGNMENTS   OF   CONTRACTS   OF   PURCHASE.      [§§  174-176. 

of  the  contract  is  to  create  a  mortgage,  the  same  as  if  the  vendor 
had  conveyed  the  land  by.  an  absolute  deed  to  the  purchaser,  and 
taken  back  a  mortgage  to  secure  the  payment  of  the  purchase 
money.  The  lien  so  created  is  an  incumbrance  on  the  land,  not 
only  against  the  purchaser  and  his  heirs,  but  also  against  all  sub- 
sequent purchasers.^  It  is  said  that  bonds  for  title  came  into 
common  use  through  the  inability  of  the  vendor,  under  the  public 
land  system  of  the  United  States,  to  make  title  at  the  time  of  the 
sale. 

174.  Although  the  contract  of  sale  be  conditional,  it  pro- 
viding that  the  purchaser  shall  do  certain  things  before  he  shall 
be  entitled  to  the  conveyance  of  the  land,  the  purchaser  has  an 
interest,  before  the  performance  of  the  things  to  be  done  on  his 
part,  which  he  may  assign  by  way  of  security.  By  complying 
with  all  the  conditions  of  the  contract  he  acquires  an  equitable 
title,  and  when  he  has  that  he  may  compel  a  conveyance  of  the 
legal  title.  He  may  also  sell  his  interest,  and  by  agreement  re- 
serve a  lien  upon  the  contract  to  secure  his  vendee's  note  for  the 
purchase  price,  and  upon  the  failure  of  his  vendee  to  pay  as 
agreed,  he  may,  in  an  action  upon  the  note  and  to  foreclose  his 
lien  upon  the  contract,  have  judgment  upon  the  note,  and  a  decree 
of  sale  of  the  interest  under  the  contract  to  satisfy  it.  There  is 
a  sufficient  interest  in  the  land  to  support  the  action,  although  it 
does  not  amount  to  a  title  or  estate.^ 

175.  The  assignment  of  a  partial  interest  in  a  contract  of 
purchase,  as  security  for  the  payment  of  a  debt,  is  an  equitable 
mortgage  ;  and  the  mortgagee  may  enforce  his  rights  in  equity 
against  the  assignor  and  those  claiming  under  him  with  notice  of 
his  rights.  The  holder  of  the  legal  title  may  be  enjoined  from 
making  a  transfer  to  any  one  else  of  the  property  covered  by  the 
assignment.'^ 

176.  The  assignment  of  a  certificate  of  purchase  of  public 
lands  issued  by  a  state  operates  as  an  equitable  mortgage,  when 
intended  to  secure  a  debt  due  from  the  assignor  to  the  assio-nee.* 

1  Lewis  i;.  Boskins,  27  Ark.  61  ;  Smith  2  Curtis  v.  Buckley,  14  Kans.  449. 

V.  Robinson,  l.'i  Ark.  .W.3  ;  Moore  v.  An-  «  Northup  v.  Cross,  Seld.  Notes  (N.  Y.), 

ders,   14  Ark.    628;    Shall   v.   Bhvoe,  18  111. 

Ark.  142;  Graham  v.  McCarnpbdl,  Mei;,'.s,  •»  Hill  y.  Eldred.  49  Cal.  398;  and  see 

52;  Tanner  v.   Hicks,  4  S.  &  M.  (Miss.)  Wrij^ht  v.  Shumway,  1   Biss.  23;  Stover 

294;    I'intard    v.    Goodloe,    Hemp.    502;  «.  Bound.s,  1  Ohio  St.  107 ;  Hays  v.  Hall, 

ThrcdfiU  V.  Pintard,  12  How.  24.  4  Port.  (Ala.)  374;  Dodge  v.  Silvcrthorni 

139 


§  177.]  EQUITABLE  MORTGAGES. 

It  may  be  enforced  for  the  debt,  and  for  money  paid  by  the  as- 
signee, in  order  to  prevent  a  forfeiture- of  the  title.i  A  clause  in 
a  mortgage  of  a  land  certificate,  empowering  the  mortgagee  to 
locate,  enter  upon,  enjoy,  and  dispose  of  said  land,  as  if  acquired 
by  a  good  and  lawful  title,  only  amplifies  the  security  without 
rendering  the  conveyance  absolute.^  The  mortgage  is  of  course 
subject  to  the  payment  of  the  amount  due  upon  the  certificate.^ 
If  the  purchaser  pay  this,  the  amount  so  paid  becomes  a  prior  lien 
upon  the  proceeds  of  a  foreclosure  sale  of  the  land.* 

A  mortgage  made  by  assigning  a  contract  of  purchase,  or  a 
land  certificate,  may  be  foreclosed  by  a  bill  in  equity,  in  which  a 
decree  will  be  made  for  the  sale  of  the  right  under  the  contract.^ 

An  assignment  of  land  certificates,  such,  for  instance,  as  the 
school  land  certificates  in  some  states,  which  are  by  their  terms 
transferable  by  assignment  and  delivery,  amounts  to  an  equitable 
mortgage.^  In  hke  manner  certificates  of  stock  in  an  unincorpo- 
rated  joint  stock  company,  representing  an  interest  in  real  estate, 
may  be  mortgaged  in  equity.  The  mortgage  in  such  case  is  of 
course  subject  to  the  debts  of  the  company,  and  to  existing  equi- 
ties in  favor  of  other  stockholders.'^ 

A  settler  upon  public  lands  under  the  homestead  act,  after 
making  proof  of  compliance  with  all  the  requirements  of  the  law, 
so  as  to  be  entitled  to  a  patent,  may  make  a  valid  mortgage  al- 
though the  patent  has  not  been  issued.^  But  if  he  sell  the  land 
to  another  who  obtains  the  title  from  the  United  States,  the  mort- 
gagee will  lose  his  title.^ 

177.  A  preemptor  of  public  land  cannot  mortgage  his  in- 
terest before  entry.  Before  a  valid  mortgage  can  be  made  of  a 
preemption  of  public  land,  an  entry  of  it  according  to  law  must  be 
made.  The  statutes  of  the  United  States  provide  that  any  grant 
or  conveyance  made  before  entry  shall  be  void.  Even  where  a 
mortgage  is  regarded  as  neither  a  grant  nor  a  conveyance,  and 
therefore  not  within  the  letter  of  the  statute,  it  is  construed  to 
include  a  mortgage  within  its  prohibition.     The  intention  of  the 

12  Wis.  644;  Case  v.  McCabe,  35  Mich.  ^  Crumbaugh  y.  Smock,  1  Blackf.  (Ind.) 

100;  Gunderman  v.   Gunnison,  39  Mich.  305. 

313.  6  Mowry  v.  Wood,  12  Wis.  413;  Jarvis 

1  Hill  V.  Eldred,  49  Cal.  398.  v.  Dutcher,  16  Wis.  307. 

2  Ross  V.  Mitchell,  28  Tex.  150.  ■?  Durkee  v.  Stringham,  8  Wis.  1. 

3  Dodge  V.  Silverthorn,  12  Wis  044.  8  Jones  v.  Yoakam,  5  Neb.  265. 
*  Dodge  V.  Silverthorn,  supra.  ^  Bull  v.  Shaw,  48  Cal.  455. 

140 


BY   ASSIGNMENTS   OF   CONTRACTS   OF   PURCHASE.         [§  178. 

act  was,  that  the  title  should  be  perfect  and  unincumbered  when 
it  passes  from  the  United  States  by  the  entry  to  the  settler.^ 

But  a  mortgage  may  be  made  by  an  occupant  before  the  issuing 
of  a  patent.2  If  an  occupant  having  a  right  of  preemption  mort- 
gages his  interest  for  a  valuable  consideration,  and  subsequently 
commutes  the  same,  proves  his  occupation,  pays  the  purchase 
price,  and  receives  a  patent  of  the  land,  the  mortgage  is  a  valid 
lien  upon  the  property,  and  the  title  thus  acquired  enures  to  the 
benefit  of  the  mortgagee.^ 

178.  A  mortgage  may  be  constituted  by  act  of  legislature,* 
as  where  a  railroad  company  accepted  certain  bonds  issued  under 
an  act  which  declared  that  the  bonds  should  "  constitute  a  first 
lien  and  mortgage  upon  the  road  and  property  "  of  the  company. 
The  word  "  property  "  includes  all  the  lands  of  the  company,  and 
any  sale  made  by  it  is  subject  to  the  mortgage.^ 

To  constitute  a  statutory  lien  it  must  clearly  appear  that  it  was 
intended  that  the  statute  should  have  this  effect.^  Such  a  lien 
may  be  released  by  the  authority  that  created  it,''  or  another 
person  may  be  substituted  by  agreement  of  parties  in  place  of  the 
original  lien-holder.^ 

The  bonds  of  a  corporation,  pledging  its  real  and  personal 
property  for  the  payment  of  the  debt,  are  treated  in  equity  as  a 
mortgage.^ 

1  Sec.  13  of  the  Act  of  Congress  Sept.  2  Pajge  v.  Peters  (Wis.),  35  N.W.  Rep. 

4,  1841,  R.  S.  §  2262,  provides  that  before  328;  Nycum  v.  McAllister,  33  Iowa,  374; 

an   entry  shall  be   allowed  the  claimant  Fuller  v.  Hunt,  48  Iowa,   163;  Kirkaldie 

shall  make  oath  that  "he  has  not  directly  v.  Larrabee,  31  Cal.  455  ;  Orr  v.  Stewart, 

or  indirectly  made  any  agreement  or  con-  67  Cal.  275;  7  Pac.  Rep.  693;  Cheney  v. 

tract,  in  any  manner,  with  any  person  or  White,  5  Neb.  261  ;  Jones  v.  Yoakam,  lb. 

persons   whatsoever,    by    which    the   title  265. 

which  he  might  acquire  from  the  govern-  3  Spies   i'.  Newberg  (Wis.),  37  N.   W. 

ment  of  the  United  States  should  enure  Rep.  417. 

in  whole  or  in  part  to  the  benefit  of  any  *  See    Jones    on    Railroad    Securities, 

person  except  himself."     And  it  also  pro-  §§  78-83. 

vides    that    "any   grant    or    conveyance  ^  Wilson    v.    Boyce,    92    U.    S.    320; 

which  he  may  have  made,  except  in  the  Whitehead  v.  Vineyard,  50  Mo.  30. 

hand.H  of  a  bond  fide  purchaser  for  valu-  e  Brunswick   &   Albany    R.  R.    Co.  v. 

able  consideration,  shall  be  null  and  void."  Hughes,  52  Ga.  557. 

See,  al8<j,  §  2296.     Warren  v.  Van  Brunt,  ">  Murdock   v.   Woodson,  2    Dill.    188; 

19  Wall.  646;    Brewster   i;.  Madden,   15  Woodson  y.  Murdock,  22  Wall.  351. 

Kans.  249;  Green  v.  Houston,  22   Kans.  «  Ketchum  i-.  Pacific  Railroad,  4  Dill. 

35;  McCue  v.  Smith,  9  Minn.  252;  Bass  78. 

f.  Buker  (Mont.),  12  Pac.  Rep.  922.     See  »  White    Water    Valley    Canal    Co,   t;. 

§  136.  Vallelte,  21  How.  414. 

141 


§§  179,  180.]  EQUITABLE   MORTGAGES. 

III.    By  Deposit  of  Title  Deeds. 

179.  An  equitable  mortgage  may  at  common  law  be  cre- 
ated by  deposit  of  the  title  deeds  of  a  legal  or  an  equitable 
estate  as  security  for  the  payment  of  money.^  This  method  of 
creating  a  lien  upon  land  is  of  frequent  use  in  England.  There, 
in  the  absence  of  a  general  system  of  recording,  the  possession  of 
the  title  deeds  of  an  estate  is  evidence  of  title.  A  transfer  can- 
not be  made  without  them.  No  one  is  supposed  to  have  the  right 
to  retain  them  unless  he  has  a  legal  or  equitable  claim  to  the 
estate  they  represent.  In  all  transfers  of  real  estate  the  original 
deeds  go  with  the  property  as  evidences  of  title,  and  their  exami- 
nation by  the  solicitor  of  the  parties  is  a  prerequisite  to  every  sale. 
Except  in  the  counties  of  Middlesex  and  York,  there  are  no  regis- 
tries where  search  can  be  made  to  ascertain  the  titles  to  lands, 
with  the  exception  of  copyhold  titles,  which  are  always  to  be 
found  recorded  in  the  manor  courts.  The  only  security  which 
the  purchaser  has  for  the  validity  of  his  grantor's  title  is  posses- 
sion of  the  deeds  which  establish  it. 

In  the  United  States,  however,  the  reason  for  this  doctrine  does 
not  exist.  The  registry  system  dispenses  with  the  necessity  of 
any  production  of  title  deeds,  and  supplies  all  the  evidence  to 
protect  both  vendor  and  vendee.  It  furnishes  at  once  a  true 
statement  of  the  present  condition  of  all  legal  rights  to  land,  and 
if  an  original  conveyance  is  ever  lost  or  destroyed,  a  copy  from 
the  record  is  received  as  an  equivalent.^ 

180.  The  doctrine  in  England  is  well  established,  although 
it  has  been  received  with  considerable  disapprobation.  "Now, 
since  the  case  of  Bussel  v.  Bussel,'''  says  Kindersley,  V.  C.,^ 
"  this  is  well  settled  :  that  supposing  A.,  owing  money  to  B., 
deposits  the  title  deeds  of  his  estate  with  B.  for  the  purpose  of  a 
security,  even  without  any  writing,  it  is  a  good  equitable  mort- 
gage ;  it  gives  B.  a  lien ;  and  notwithstanding  the  expressions  of 
regret  of  Lord  Eldon  that  the  law  should  be  so,  even  in  his  time, 
we  find  him  saying  he  could  not  disturb  it ;  since  that  time  it  has 

1  Russel  V.  Russel,  1   Bro.  C.  C.  269 ;  ^  Probasco  v.  Johnson,  2  Disney  (Ohio), 

Pye  V.  Daubuz,  2  Dick.  759 ;  VVhitbread  96,  98. 

V.  Jordan,  I  Y,  &  C.  303 ;  Mandeville  v.  ^  Lacon   v.   Allen,   3    Drew.  579,   582. 

Welch,  5  Wheat.  277;  Jarvis  v.  Dutcher,  And  see  National  Bank  v.  Cherry,  L.  R. 

16  Wis.  307;  Carey  v.  Rawson,  8  Mass.  3  P.  C.  C.  299;  Ex  parte  Kensington,  2 

159.  V.  &B.  79. 
142 


BY  DEPOSIT  OF  TITLE  DEEDS.      [§§  181,  182. 

been  acted  upon  over  and  over  again.     That  doctrine  cannot  now 
then  be  disturbed." 

181.  The  legal  effect  of  the  deposit  is,  that  the  mortgagor 
contracts  that  bis  interest  in  the  land  shall  be  liable  for  the  debt, 
and  that  he  will  make  such  a  mortgage  or  conveyance  as  may  be 
necessary  to  vest  that  interest  in  the  mortgagee.^  It  binds  what- 
ever interest  he  has  in  the  whole  property  described  in  the  title 
deeds.  It  does  not  imply  that  he  will  make  perfect  title  to  the 
property,  but  that  he  will  give  effect  to  the  interest  he  has  in  it 
at  the  time,  or  may  acquire  afterwards  during  the  deposit,  by  the 
discharge  of  an  incumbrance  upon  it,^  or  the  like.  One  holding 
title  deeds  as  indemnity  against  contingent  liabilities  is  not  enti- 
tled to  a  formal  mortgage  before  he  has  paid  anything  on  account 
of  such  liability,  but  is  entitled  to  a  memorandum  giving  the 
terms  of  the  deposit.^ 

The  deposit  may  be  made  to  cover  subsequent  advances  by  a 
subsequent  parol  agreement  to  that  effect  between  the  parties, 
without  a  return  of  the  deeds  and  a  new  deposit  of  them.^ 

In  this  respect  an  equitable  mortgage  is  a  broader  security  than 
a  legal  one  ;  for  a  legal  mortgage  cannot  be  enlarged  in  its  effect 
by  a  subsequent  parol  agreement  that  it  shall  secure  further  ad- 
vances ;  but  although  the  mortgagee  holds  the  title  deeds,  he  is 
not  entitled  to  say  that  he  holds  them  as  a  deposit,^  unless  the 
parties  make  an  express  agreement  that  they  shall  be  so  held.^ 

182.  It  is  not  necessary  that  every  deed  relating  to  the 
property  should  be  deposited ; '    nor  is  it  necessary  that  they 

1  Pryce  v.  Bury,  2  Drew.  41,  42,  per  put  back  into  the  hands  of  the  owner,  and 
Kindersley,  V.  C.  a  redelivery  of  them  required;  on  which 

2  Ex  parte  Bisdee,  re  Baker,  1  M.,  D.  fact  there  is  no  doubt  that  the  deposit 
&  De  G.  333.  wouhi  amount  to  an  equitable  lien,  within 

^  Sporle  V.  Whayman,  20  Beav.  607.  the  princi]/le  of  these  ca^es." 

*  Ex  parte  Laiigston,  17  Ves.  227  ;  Bay-  *  Ex  parte  iioope,  lie  iiewett,  1  Mcr.  7. 

nard  v.  WooUey,  20  lieav.  586;  Ex  parte  '^  Re  iilenry.  Ex  parte  Crosslield,3  Ir. 

Keusiuj^lon,  2  V.  &  B.  79,  83.  Eq.  67. 

In  the  latter  case  Lord  Eldon  said  :  "  In  '  Ex  parte  Wetherell,  1 1  Ves.  398, 401 ; 

the  cases  alluded  to  1  went  the  lenjjth  of  Lacon  u.  Allen,  3  Drew.  582.     In  the  lat- 

Biatiiig  that,  wliere  the  deposit  originally  ter  case,  Kindersley,  V.  C,  said:   "The 

was  for  a  particular  purpose,  that  purpose  que.-tion  is,  is  it  necessary  that  every  title 

may  be  enlarged   by  a  subsequent  parol  deed  should  be  deposited  ?     Suppose  the 

agreement ;   and  this  distinction  appeared  owner  Inis  lost  an  importatit  deed,  could 

to  me  to  be  too  thin,  that  you  should  not  lie  not  deposit  the  rest '?     In  each  case  we 

have  the    benclit  of  such   an   agreement  must  judge  whether  the  instruments  de- 

uuless  you    added   to   the    terms   of    that  posited  are  material  parts  of  the  title  ;  and 

agreement  the  fact,  that  the  deeds  were  if  they  are,  it  is  not  necessary  lo  say  there 

143 


§§  183-185.]  EQUITABLE   MORTGAGES. 

should  show  a  title  in  the  mortgagor  by  including  the  deed  by 
which  he  acquired  title. ^  A  deposit  of  the  title  deed,  omitting 
the  latter  deed,  has  priority  over  a  subsequent  deposit  of  the  latter 
deed  alone.^ 

183.  A  deposit  for  the  purpose  of  preparing  a  legal  mort- 
gage creates  an  equitable  mortgage."^  "  The  principle  of  an 
equitable  mortgage  is,"  said  Lord  Eldon,^  "  that  the  deposit  of 
the  deeds  is  evidence  of  the  agreement;  but  if  they  are  deposited 
for  the  express  purpose  of  preparing  the  security  of  a  legal  mort- 
gage, is  not  that  stronger  than  an  implied  intention  ?  "  Where 
no  written  contract  or  memorandum  accompanies  the  deposit,  the 
presumption  that  a  mortgage  was  intended,  arising  from  the  pos- 
session of  the  deeds,  may  be  rebutted  by  parol  evidence  of  the  cir- 
cumstances under  which  the  deeds  were  left,  and  of  the  intention 
of  the  parties  in  the  matter.^  Of  course  a  statement  in  writing 
of  the  purpose  for  which  the  deposit  was  made  cannot  be  contra- 
dicted.^ 

184.  The  law  of  the  place  of  contract  governs.  When  a 
citizen  of  a  foreign  country,  by  the  law  of  which  a  lien  cannot  be 
created  in  this  way,  being  in  England,  there  makes  a  deposit  of 
title  deeds  as  security,  his  contract  is  governed  by  the  law  of 
England.'^ 

185.  In  America  the  doctrine  of  a  mortgage  by  deposit  of  title 
deeds  has  been  adopted  only  to  a  very  limited  extent.  Generally 
something  more  is  required  than  a  mere  verbal  agreement  or  un- 
derstanding that  the  creditor  is  to  hold  them  as  security  or  in- 
demnity. To  create  a  lien  upon  land  in  this  way  would  be,  it  is 
declared,  to  repeal  judicially  the  statutes  of  frauds  and  perjuries, 
making  void  sales  not  evidenced  by  writing.  The  doctrine,  more- 
over, is  not  compatible  with  the  registry  system. 

The  attempts  to  apply  the  doctrine  have  not  been  very  nume- 

are  other  deeds  material,  if  there  is  suffi-        *  Ex  parte  Bruce,  1  Rose,  374;  and  see. 

cient   evidence   to  show  that  the  deposit  Ex  parte  Wright,  1 9  Ves.  255,  258. 
was  made  for  the  purpose  of  creating  a         ^  £x  parte  liangston,  17  Ves.  227;  Lu- 

tnortgage."  cas  v.  Dorrien,  1  Moo.  29  ;  7  Taunt.  278. 

1  Roberts  v.  Croft,  24  Beav.  223  ;  aff.  2         6  Ex  parte  Coombe,  17  Ves.  369  ;  Bay- 
De  G.  &  J.  1.  Dard  v.  Woollej,  20  Beav.  583. 

2  Roberts  v.  Croft,  supra.  '  Ex  parte  Holthausen,  Re  Scheibler,  L. 

3  Ex  parte  Hooper,  1  Mer.  7;   19  Ves.  R.  9  Ch.   App.  722.     See   Varden    Seth 
477;    Hockley  v.  Bantock,   1   Russ.   141.  Sam  j;.  Luckpathy  Royjee  Lallah,  9  Moo. 
The  law  seems  to  be  otherwise  in  South  Ind.  App.  303.     See,  also,  Ex  parte  Pol- 
Carolina  :  Hutzler  v.  Phillips,  1  S.  E,  Rep.  lard,  In  re  Courtney,  Mont.  &  C.  239. 
502. 

144 


BY  DEPOSIT  OF  TITLE  DEEDS.      [§§  186-188. 

rons,  it  being  generally  understood  that  it  has  no  application  here. 
The  doctrine,  therefore,  may  be  considered  as  generally  rejected, 
so  far  as  it  sustains  a  mortgage  upon  a  verbal  or  implied  promise 
in  connection  with  the  deposit  of  the  deeds.^ 

186.  Yet  in  several  cases  mortgages  created  in  this  way 
have  been  sustained,^  especially  where  an  equity  is  shown  be- 
yond the  mere  deposit  of  title  deeds.^  The  deposit  of  a  deed, 
conveying  the  legal  title  to  an  estate  as  security  for  the  amount 
of  a  mortgage  released  by  the  person  receiving  the  deposit,  was 
held  to  constitute  an  equitable  mortgage,  as  between  the  original 
parties  and  those  subject  to  their  equities.*  A  court  of  equity  in 
such  case  will  not  compel  the  holder  of  the  deeds  to  deliver  them 
up  until  he  has  received  payment  of  the  debt  for  which  they  were 
pledged.^  On  the  contrary,  it  will  establish  the  lien  and  enforce 
a  sale  of  the  depositor's  interest,  and  the  interest  of  those  subject 
to  this  equitj'.^  A  suit  in  equity  is  the  proper  means  to  establish 
the  lien,  and  the  decree  should  be  for  a  sale,  if  the  debt  be  not 
paid  b}^  a  given  day.' 

187.  A  written  memorandum  makes  the  deposit  a  mort- 
gage. Even  where  a  deposit  of  title  deeds  upon  a  verbal  agree- 
ment that  they  shall  be  held  as  security  for  a  debt  does  not  con- 
stitute an  equitable  mortgage,  a  written  agreement  to  the  same 
effect  accompanying  the  deeds  will  make  the  transaction  a  mort- 
gage.^ As  already  noticed,  such  written  agreement  alone,  without 
the  deposit  of  title  deeds,  is  regarded  as  an  equitable  mortgage. 

188.  The  remedy  under  an  equitable  mortgage  created  by  a 
deposit  of  title  deeds  or  other  equitable  transfer,  to  cut  off  the 
equity  of  redemption,  is  by  a  suit  in  equity.^     When,  however,  a 

1  Pennsylvania:  Shitz  i?.  Dieffenbacb,  3  Iliitzler  u.  Thillips  (S.  C),  I  S.  E.  Rep. 

Pa.  St.  2.33  ;  Bowers  v.  Oyster,  3  Penii.  502. 

239;    Spencer  v.  Ilaynes,  12  Phila.   452.  3  First  Nat.  Bank  v.  Caldwell,  4  Dill. 

Tennessee  :  Meador  v.  Meador,  3  Heisk.  314. 

5G2.     Kentucky  :  \"anmcter  i,'.  McFaddin,  *  Ilackctt  v.   llcynolds,  4   R.   I.   512  ; 

H  B.  Mon.  435,  438.     Mississippi:  Goth-  Rockwell   v.    Hobby,   2    Saudf.    (N.   Y.) 

ard  f.  Plynn,  25  Miss.  58.    The  iiuestiou  Ch.  9. 

was  previously  raised  iii  Williams  r.  Strut-  ''  Sec  Griffin   v.  Griffin,  supra,  decided 

ton,  10  Srn.  &  M.  418.     Georgia:  English  witli  reference  to  New  York  law. 

V.  .McElroy,  62  Ga.  413.    Maine:    Hall  v.  "^  Hackett  y.  Reynolds,  .SKy^ra. 

McDuff,   24  Me.    311.      Ohio:   Bioora    v.  ^  Jarvig  y.  Dmcher,  16  Wis.  307. 

Noggle,  4  Ohio  St.  45.  »  Luch's  Appeiil,  44  Pa.  St.  519  ;  Ed- 
See  eases  in  favor  of  the  doctrine,  §§  wards  v.  Truinbull,  50  Pa.  St.  509;  Ran- 

179,  186.  kin  j;.  Mortiniere,  7  Watts,  372;    Spencer 

■^  Gale  V.   Morris,    29   N.  J.    Eq.    222;  v.  Hiiynes,  12  Pliilii.  452. 

Griffin  v.  Griffin,  18  N.  J.  Eq.  104.     See  "  Mowry  v.  Wood,  12  Wis.  413  ;  Jarvis 


VOL. 


JO  145 


§  188.]  EQUITABLE  MORTGAGES. 

mortgage  is  created  by  a  conveyance  of  an  equitable  estate  legal 
in  form,  it  may  be  foreclosed  in  the  ordinary  way. 

When  a  mortgage  is  effected  by  an  assignment  of  an  executory 
contract  of  purchase,  a  foreclosure  and  sale  operate  only  to  trans- 
fer the  debt  to  the  purchaser,  who  becomes  in  equity  the  assignee 
of  the  mortgagor's  contract,  and  entitled  to  the  full  benefit  of  it 
without  redemption.  Such  a  mortgage  is  ineffectual  to  transfer 
the  legal  title,  although  the  mortgagor  may  have  subsequently  ac- 
quired that.     It  can  only  be  enforced  as  an  equitable  lien.^ 

Whether  an  absolute  deed  was  given  as  an  equitable  mortgage 
or  not  is  a  question  which  must  be  decided  by  a  court  of  equity. 
It  cannot  be  determined  at  law,  as,  for  instance,  in  a  petition  for 
partition. 2 

V.  Dutcher,  16  Wis.  307  ;  Case  r.McCabe,  ^  Bailey  v.  Knapp  (Me.),  9  Atl.  Rep. 
35  Mich.  100.  356. 

1  Stewart  v.  Hutchinson,  29  How.  (N. 
y.)  Pr.  181. 

146 


CHAPTER   VI. 

THE   vendor's   lien   BY   CONTRACT   OR   RESERVATION. 

I.  Nature  and  extent  of  the  lien,  217-228.  1  II.  Transfer  and  enforcement  of  the  lien 

I  229-240. 

189-216.  The  previous  editions  of  this  work  contain  a  state- 
ment of  the  law  of  the  subject  of  The  Vendor's  Implied  Lien  for 
purcliase  money.  Although  this  lien  is  not  a  mortgage,  and  is  in 
its  nature  very  different  from  a  mortgage,  it  in  some  ways  resem- 
bles an  equitable  mortgage ;  and  for  this  reason,  as  well  as  for  the 
reason  that  the  subject  had  not  anywhere  been  recently  commen- 
tated upon,  it  seemed  best  to  include  in  the  original  woik  a  con- 
densed statement  of  the  law.  The  sections  of  the  chapter  formerly 
devoted  to  it  are  now  omitted  because  the  author  has  in  another 
work  treated  the  subject  more  completely,^  and  it  did  not  seem 
desirable  to  increase  the  size  of  the  present  work  by  repeating 
what  does  not  strictly  belong  to  the  subject  of  mortgages.  The 
vendor's  lien  by  contract  or  reservation  is,  however,  in  effect  an 
equitable  mortgage,  and  therefore  the  sections  devoted  to  the  con- 
sideration of  this  part  of  the  subject  are  retained  and  made  more 
complete  in  the  present  edition. 

I.  Nature  and  Extent  of  the  Lien. 

217.  A  lien  by  contract  is  not  a  vendor's  lien.  The  inter- 
est of  a  vendor  who  has  given  an  ordinary  contract  or  bond  for 
the  sale  of  land,  but  retains  the  title  to  the  land  in  himself,  is 
often  spoken  of  in  the  cases  as  a  vendor's  lien  ;  ^  but  it  is  con- 
ceived that  this  is  a  misuse  of  terms,  which  should  be  avoided  as 
leading  to  confu.sion.  There  is  a  fundamental  distinction  between 
a  vendor's  security  in  such  case  and  the  lien  implied  by  law,  and 
properly  known  as  a  vendor's  lien.^  When  the  legal  title  re- 
mains in  the  vendor,  the  vendee  has  merely  an  equity  of  redemp- 

1  Jones  on  Lif-ns,  §§  lOCl-llOC.  1.3  Knns.  24.');  Neil  v.  Clay,  48  Ala.  252  ; 

2  Sec,  of  recent  cubis,  Stevens  v.  Chad-     Hill  i;.  Cri<,'sby,  .12  Cal.  55. 

wick,  10  Kans.  40G ;  Smith  v.  Rowland,         »  Lowery  i;.    Tetcrson,    75    Ala.    109; 

147 


§  217.]      vendor's  lien  by  contract  or  reservation. 

tioii  in  the  land,  and  no  act  of  his  can  possibly  affect  the  vendor's 
title ;  while,  in  case  of  a  mere  lien  in  the  vendor,  the  fee  is  in 
the  purchaser,  who  may  at  any  time  discharge  the  lien  by  con- 
veying the  land  to  a  honci  fide  purchaser  for  value. ^  In  the  one 
case  the  vendor  has  a  lien  without  any  title,  and  in  the  other  he 
has  the  title  without  any  occasion  for  a  lien.  His  title,  by  the 
terms  of  the  contract,  is  his  security  ;  and  he  cannot  in  any  way 
be  divested  of  his  title,  except  the  vendee  fulfil  his  contract,  and 
by  that  means  become  entitled  to  a  conveyance.  The  relation  of 
the  vendor  and  vendee  in  such  case  bears  a  strong  similitude  to 
that  of  mortgagee  and  mortgagor.  The  vendor,  when  he  has  the 
title,  has  a  substantial  security ;  when  he  has  no  title,  he  has  by 
implication  a  lien  in  name,  but  it  exists  only  in  name  until  a  court 
of  equity  has  given  it  force  by  a  decree.^  A  lien  by  contract 
"  has  none  of  the  odious  characteristics  of  the  vendor's  equitable 
lien."  3 

When  the  vendor  retains  the  legal  title,  the  interest  of  the 
purchaser  is  insecure,  unless  the  contract  of  purchase  be  recorded  ; 
for  the  land  is  subject  to  sale  by  the  vendor,  and  subject  to  levy 
upon  execution  by  his  creditors.* 

It  is  just  as  proper  to  call  a  mortgage  given  for  purchase  money 
a  vendor's  lien,  as  to  call  by  that  name  the  lien  of  one  who  has 
given  a  contract  to  sell,  but  retains  the  legal  title,  or  who  has 
reserved  a  lien  in  his  deed  of  conveyance. 

It  is  often  said  that  a  vendor's   lien   may  arise  as  well  before 

the  conveyance  as  after  it.^     But  the  same  courts  which  give  this 

name  to  the  lien  retained  by  a  vendor  who  holds  the  legal  title  as 

security    for  the  performance  of  the  contract  of  sale,  generally 

Bankhead  v.  Owen,  60  Ala.  457 ;  Baker  Per   Story,   J.,   in  Oilman  v.  Brown,   1 

I'.  Compton,  52  Tex.  252.  Mason,  191.     "His  lien  is  an  individual 

1  Church  V.  Smith,  39  Wis.  492,  496,  equity,  of  no  force  until  declared  by  a 
per  Lyon,  J.;  Sparks  v.  Hess,  15  Cal.  court  of  equity."  Hutton  v.  Moore,  26 
186,  194,  per  Ch.  J.  Field;  Driver  v.  Ark.  382,  396,  quoted  in  Campbell  r.  Ean- 
Hudspeth,  16  Ala.  348  ;  Wells  v.   Smith,  kin,  28  Ark.  401,  406. 

44  Miss.  296  ;  Pitts  v.  Parker,  44  Miss.  ^  Per  Chief  Justice  Watkins,  in  Moore 

247;    Hutton  v.   Moore,    26    Ark.    382;  f.  Anders,  14  Ark.  628,  634. 

Hines  v.  Perkins,  2  Heisk.  (Tenn.)  395;  *  Belly.  McDuffie,  71  Ga.  264. 

White  u.  Blakemore,  8  Lea  (Tenn.),  49;  ^  English    v.   Kussell,  1    Hempst.    35; 

Hale  V.  Baker,  60  Tex.  217;  Eansom  v.  Yancey  v.  Mauck,   15  Oratt.  (Va.)  300; 

Brown,  63  Tex.   188;  Reese  i-.  Burts,  39  Hill    v.  Origsby,  32  Cal.  55;  Amory    v. 

Oa.  565.  ReiJly,  9  Ind.  490;  Servis  v.  Beatty,  32 

2  "  It  is,  in  short,  a  right  which  has  no  Miss.  52,  distinguished  in  Wright  v. 
existence  until  it  is  established  by  the  de-  Troutman,  81  HI.  374. 

cree  of  a  court  in  the  particular  case." 

148 


NATURE   AND  EXTENT   OF   THE  LIEN.  [§  218- 

proceed  to  point  out  the  differences  between  this  lien  and  that 
which  is  iraphed  upon  a  conveyance  ;  and  inasmuch  as  the  only 
likeness  between  the  two  liens  is  in  their  both  securing  the  pur- 
chase  money,  it  is  proposed,  in  treating  of  the  subject,  to  confine 
the  term  "  vendor's  lien  "  to  that  lien  which  is  in  equity  implied 
to  belong  to  a  vendor  for  the  unpaid  purchase  price  of  land  sold 
and  conveyed  by  him. 

Under  a  contract  for  the  sale  of  land  which  says  nothing  about 
a  reservation  in  the  deed  of  the  vendor's  lien,  or  about  any  secu- 
rity being  given  for  the  deferred  payments  of  purchase  money, 
the  vendor  has  the  right  to  insert  in  his  deed  a  clause  reserving 
such  a  lien.i 

218.  The  legal  effect  of  a  title  bond,  or  agreement  for  a 
deed,  is  sometimes  said  to  be  like  a  deed  by  the  vendor  and  a 
mortgage  back  by  the  vendee.^  There  can  be  no  sensible  dis- 
tinction between  the  case  of  a  legal  title  conveyed  to  secure  the 
payment  of  a  debt,  and  a  legal  title  retained  to  secure  payment.^ 
The  vendor  holds  the  legal  title,  and  all  persons  must  necessarily 
take  notice  of  it ;  and  although  the  vendee  enter  into  possession, 
his  deed  will  of  course  convey  only  his  equitable  title.*  Like  a 
mortgagor  in  possession,  he  has  an  equity  of  redemption  ;  while 
the  vendor  holds  the  title  by  reservation  rather  than  by  grant,  as 
in  the  case  of  an  ordinary  mortgage.  The  equitable  estate  of  the 
vendee  may  be  alienated  or  devised  as  real  estate ;  and  upon  his 
death  it  will  descend  to  his  heirs ;  while,  on  the  other  hand,  al- 
though the  vendor  holds  the  legal  title,  upon  his  death  the  secu- 
rities he  has  taken  for  the  purchase  money  go  to  his  personal 
representative.^     Although  the  vendor's  remedy  upon  the  note  or 

1  Findley    v.    Armstrong,   23  W.    Va.  27  Ark.  61  ;    McConnell   v.   Beattie,  34 

113;    Warren  v.  Branch,   15  lb.  21,  38;  Ark.  113;  Schearffu.  Dodge,  33  Ark.  340, 

Hatcher  i;.  Hatcher,  1  Rand.  (Va.)  53.  345.     Georgia:  Scroggins  v.  Hoadley,  56 

■  W^lls  V.   Francis,  7  Colo.  396 ;  Har-  Ga.  165.     Maryland:  Lingan  v.  Hender- 

din  V.  Boyd,  113  U.  S.  756.  son,  1  Bland  Ch.  236.    Alabama:  Relfe  v. 

8  Bankhead   v.    Owen,    60    Ala.    457;  Relfe,  34  Ala.  500,  504  ;  Masterson  i».  Pul- 

Lowery  y.  Peterson,  75  Ala.  109.  len,  62  Ala.   145.     Tennessee:  Cleveland 

*  New  York  &  Cleveland  Gas  Coal  Co.  r.  Martin,  2  Head,  128;  Irvine  v.   Muse, 

V.  Pliimer,  96  Pa.  St.  99.  10  Heisk.  477  ;  Sehorn  v.  McWhirter,  8 

^'  Lewis    V.   Hawkins,    23    Wall.    119.  Bax.   201  ;  S.    C.   6   lb,   311;    White   v. 

Illinois:    Smith   v.   Moore,  26   111.    392;  Blakcmore,   8   Lea,  49.    West  Virginia: 

Smith  V.  Price,    42  111.    399 ;    Greene  v.  Richards   v.  Fisher,  8  W.  Va.  55.     CaU- 

Cook,  29  111.  186.     Wisconsin  :  Button  v.  fomia :  Merritt  v.  Judd,  14  Cal.  59  ;  Purdy 

Schroycr,  5  Wi.s.  59H.     Arkansas:  Martin  v.  Hullard,  41  Cal.  444.     Iowa:  Dukes  v. 

V.   O'Bannon,   35    Ark.   62;    Holman    v.  Turner,  44  Iowa,  575.     Kansas:  Walken- 

PattersoD,  29  Ark.  357 ;  Lewis  v.  Boskins,  horst  v.  Lewis,  24  Kans.  420. 

149 


§  219.]      vendor's  lien  by  contract  or  reservation. 

contract  or  bond  taken  for  the  purchase  money  be  barred  by  the 
statute  of  limitations,  or  by  the  discharge  in  bankruptcy  of  the 
vendee,  the  lien  upon  the  land  is  not  affected.  As  in  respect  to 
mortgages,  the  vendor's  lien  will  in  such  case  be  presumed  to 
have  been  satisfied  after  the  lapse  of  twenty  years,  and  the  con- 
tinued possession  of  the  vendee ;  ^  and  on  the  other  hand,  if  the 
vendor  remain  in  possession,  so  long  as  he  recognizes  the  vendee 
as  the  equitable  owner  the  statute  does  not  begin  to  run  ;  and 
after  it  does  begin  to  run,  the  vendee  may  at  any  time  within  the 
same  period  redeem  the  title.^ 

When  after  such  a  contract  the  vendor  pays  delinquent  taxes 
upon  the  land,^  or,  at  the  request  of  the  vendee,  pays  for  improve- 
ments upon  the  property,  which  by  the  terms  of  the  contract  the 
vendee  was  himself  to  make  before  receiving  a  conveyance,  the 
amount  so  paid  becomes  a  further  lien  upon  the  property,  which 
the  vendor  may  enforce  by  a  sale  of  the  vendee's  interest  under 
the  contract.* 

If  the  vendor  who  retains  the  title  also  retains  possession  of  the 
land  as  security  for  the  purchase-money,  he  is  not  liable  to  the 
vendee  for  the  rent  of  the  premises.^ 

219.  The  holder  of  the  contract  cannot  impair  the  secu- 
rity. The  legal  title  of  the  vendor  in  such  case  is  not  affected 
by  any  liens  created  by  the  person  who  holds  the  contract  of  pur- 
chase, as,  for  instance,  a  mechanic's  lien  for  labor  and  materials 
furnished  him  ;  ^  or  a  conveyance  or  mortgage  by  him ;  '^  or  a 
judgment  or  attachment  against  him.^  Such  claims  necessarily 
arise  after  the  lien  created  by  the  contract,  and  must  be  subject 
to  that  lien.  The  vendee  cannot  possibly  do  anything  to  impair 
that  lien,  any  more  than  a  mortgagor  can,  after  the  execution  of 
his  mortgage,  do  anything  with  his  title  to  impair  that  security. 
But  if  the  vendor,  after  a  lien  has  attached  to  the  interest  of  the 
vendee  for  materials  used  in  the  construction  of  a  house  upon  the 
premises,  takes  a  reconveyance  of  the  premises,  and  as  a  part  of 

1  Lewis  V.  Hawkins,  23  Wall.  119.  "  Sitz  v.  Deihl,  55  Mo.  17;  Beattie  v. 

2  Harris  v.  King,  16  Ark.  122.  Dickinson,  39  Ark.  205  ;  Harvill  v.  Lowe, 

3  Lillie  v.  Case,  54  Iowa,  177.  47  Ga.   214;    Carter  v.   Sims,  2    Heisk. 
*  Grove  v.  Miles,   71  111.  376;     S.  C.     (Tenn.)  166;  Rogers  ?;.  Blum,  56  Tex   1. 

58  111.  338.  »  Hadley  v.  Nash,  69  N.  C.  162  ;  Rob- 

6  Worrel  r.  Smith,  6  Colo.  141.  erts  v.   Francis,  2   Heisk.    (Tenn.)    127; 

8  Seitz  V.  U.  P.  R.  Co.  16  Kans.  133 ;     Tuck  v.  Calvert,  33  Md.  209. 

Cochran   v.    Wimberlj,    44    Miss.    503 ; 

Thorpe  v.  Durbon,  45  Iowa,  192. 

150 


NATURE   AND  EXTENT   OF   THE  LIEN.  [§  220. 

the  consideration  of  the  reconveyance  assumes  the  lien  debt,  the 
lien  may  be  enforced  against  the  whole  land.^ 

No  homestead  right  in  the  property  can  be  acquired  by  the 
purchaser  as  against  the  lien.^ 

If  the  vendee  sells  the  property  to  another,  his  lien  upon  the 
land  for  the  purchase  money  is  subordinate  to  the  lien  of  the 
original  vendor ;  and  a  surety  upon  the  purchase  notes  given  by 
the  first  vendee  has  an  equity  to  have  the  land  sold  for  the  pay- 
ment of  these  notes  superior  to  any  equity  which  any  claimant 
under  such  vendee  can  have  on  the  land.^ 

After  a  title  bond  or  a  contract  of  sale  has  been  given  for  the 
conveyance  of  lands  upon  the  payment  of  the  purchase  money, 
the  lands  are  not  subject  to  sale  under  execution  at  law  at  the 
suit  of  one  obtaining  judgment  afterwards  against  the  vendor; 
the  lien  of  the  vendee  prevails  against  the  lien  of  the  judgment 
creditor,  which  can  operate  only  upon  the  interest  which  the 
vendor  had  at  the  time  of  its  rendition.* 

220.  An  express  reservation  in  a  deed  of  a  lien  upon  the 
land  conveyed  creates  an  equitable  mortgage,  and  when  the  deed 
is  recorded  every  one  is  bound  to  take  notice  of  the  incumbrance.^ 
Thus,  where  land  was  sold,  and  for  the  purchase  money  several 
promissory  notes  of  the  purchaser  were  taken,  and  these  were 
described  in  the  deed  of  conveyance,  and  expressly  made  a  lien 
upon  the  land  conveyed,  a  purchaser  on  execution  obtained  only 
an  equity  of  redemption  subject  to  such  lien.^ 

To  create  such  a  lien  there  must  be  something  more  than  a 
mere  recitation  that  the  purchase  money,  to  a  certain  amount, 
remains  unpaid  ;  this  amount  must  be  expressly  charged  upon 
the  land  conveyed.^      A  note  or   bond  given   for  the  purchase 

1  Adams  v.  Russell,  85  111.  284.  Stratton  v.  Gold,  40  Miss.  778,  781  ;  Cald- 

2  Berry  v.  Boggess,  62  Tex.  2.39.  well  v.  Fraira,  32  Tex.  310.     Quoted  with 

*  Bcattie  v.  Dickin.son,  39  Ark.  205.  approval  in  Hall  v.  Mobile  &  Moutgomery 

*  Shinn  v.  Taylor,  28  Ark.  523 ;  Money     Ky.  Co.  58  Ala.  10,  22. 

V.  Dorsey,  7  S.  &  M.  (Miss.)  15,  22  ;  Tay-  ''  Heist  v.  Baker,  49  Pa.  St.  9.     There 

lor  V.  Eckford,  II  lb.  21.  is  a  broad  distinction  between  the  rights 

*  Ufford  V.  Wells,  52  Tex.  612;  Web-  of  a  vendor  under  an  absolute  deed  with 
8ter  i;.  Mann,  52  Tex.  416;  Baker  v.  warranty  which  recites  the  existence  of 
Compton,  52  Tex.  252  ;  Coles  v.  Withers,  unpaid  purchase  money  notes,  but  retains 
33  Gratt.  (Va.)  186;  Eichelberger  v.  Gitt,  no  ex])re.s8  lien  in  terms  for  their  j)ay- 
104  I'a.  St.  04;  Bank  v.  Bradley,  15  Lea  mont,  and  his  rights  under  a  deed  which 
(Tenn.),  279.  Qu<ited  with  approval  in  declares  that  a.  lion  is  reserved  for  unpaid 
J-ucaa  I'.  Hendrix,  92  Ind.  54,  57.  I)urclia.so  money.     Under  the   former,  the 

•^  Davis    V.    Hamilton,    50    Miss.    213;     vendor  has  parted  witii  title,  and  has  only 

151 


§  220.]       vendor's  lien  by  contract  or  reservation. 

money  of  land  conveyed  does  not  create  a  lien  upon  it.^  It  does 
not  stick  to  the  land,  though  it  recites  upon  its  face  that  it  is 
given  for  purchase  money  of  the  land.  But  a  reservation  of  a 
purchase  money  lieu  in  a  note  given  for  the  land  renders  the  sale 
executory  in  the  same  manner  as  if  the  reservation  were  con- 
tained in  the  deed  itself.^  But  a  grant  of  land,  "  to  have  and  to 
hold  the  same  under  and  subject,  nevertheless,  to  the  payment " 
of  a  certain  sum  at  the  decease  of  the  grantee,  constitutes  a 
charge  upon  the  land,  in  whosesoever  hands  it  may  be.^  A  deed 
of  land  "  charged  with  the  payment  "  of  certain  specified  sums 
creates  a  lien  in  the  nature  of  a  mortgage,  and  not  in  the  nature 
of  a  vendor's  lien.*  A  lien  is  effectually  reserved  in  a  deed  which 
describes  the  notes  given  for  the  purchase  money,  and  the  haben- 
dum is  "to  have  and  to  hold  on  the  payment  of  the  notes  herein 
above  stated."  °  No  particular  words  are  essential  for  creating 
a  lien  by  express  reservation.  All  that  is  necessary  is,  that  the 
words  used  should  distinctly  convey  the  idea  that  the  vendor  re- 
tains a  lien  on  the  land.  Astipulation  that  the  "land  shall  be 
bound  for  the  notes"  given  for  the  purchase  money  creates  an 
effectual  lien.'^ 

A  purchaser  who  buys  land  sold  under  a  decree  of  court,  which 
on  its  face  reserves  a  lien  for  the  purchase  money,  buys  subject  to 
the  lien  reserved." 

A  stipulation  in  a  deed,  that  the  title  shall  not  vest  in  the 
grantee  until  the  purchase  money  is  paid,  amounts  in  equity  to  a 
mortgage.^  So  does  a  deed  providing  that  it  shall  be  absolute  on 
the  payment  of  certain  notes,  but  in  default  of  payment  shall  be 
void.^ 

A  lien  may  be  reserved  for  the  security  of  a  note  for  the  pur- 
chase money  made  payable  to  a  third  person. ^^ 

an  implied  vendor's    lien    for    purchase  Rep.  737 ;  McKelvain  v.  Allen,  58  Tex. 

money ;  under  the  latter,  the  superior  ti-  383,  387. 

tie  remains  with  the  vendor,  and  the  deed  ^  Heist  v.  Baker,  49  Pa.  St.  9 ;  Eichel- 

is  the  evidence  of  an  executory  contract,  berger  v.  Gitt,  104  Pa.  St.  64. 

Baker    v.    Compton,    52    Tex.    252,   per  *  Stanhope  v.  Dodge,  52  Md.  483. 

Gould,  J.  5  Blaisdell  v.  Smith,  3  Bradw.  (111.)  150. 

1  Smith  V.  High,  85  N.  C.  93 ;  Hoskins  «  Moore  v.  Lackey,  53  Miss.  85. 

V.  "Wall,  77  N.  C.  249 ;  Eansom  v.  Brown,  "  Ross  v.  Swan,  7  Lea  (Tenn.),  463. 

63  Tex.  188;  Baker  v.  Compton,  52  Tex.  »  Pugh  v.  Holt,  27  Miss.  461 ;  Lavigne 

252      See,  however,  Briggs  v.  Planters'  v.  Naramore,  52  Vt.  267. 

Bank,  Freeman  (Miss.)  Ch.  574.  ^  Carr  v.  Holbrook,  1  Mo.  240 ;  Lucas 

2  Lundy  v.  Pierson  (Tex.),  2  So.  West.  v.  Hendrix,  92  Ind.  54,  57. 

1'^  Mize  V.  Barnes,  78  Kv.  506. 

152 


NATURE   AND   EXTENT    OF   THE   LIEN.  [§  221. 

When  a  deed  is  executed  in  compliance  with  an  oi'dinavy  agree- 
ment for  the  sale  of  land,  part  of  the  consideration  for  which  is 
to  be  paid  at  the  time  and  part  at  a  future  day,  and  nothing  is 
said  about  a  lien  or  other  security  for  the  future  payments,  the 
vendor  has  a  right  to  insert  in  his  deed  a  clause  reserving  a  ven- 
dor's lien  for  the  unpaid  purchase  money. ^ 

If  upon  an  absolute  sale  the  possession  be  expressly  reserved  to 
the  grantor  for  one  year,  the  right  of  possession  will  vest  in  the 
grantee  at  the  end  of  the  year,  in  the  absence  of  any  provision 
to  the  contrary,  although  a  part  of  the  purchase  price  remains 
unpaid.2 

221.  A  lien  reserved  is  a  lien  by  contract.  —  A  lien  for  the 
purchase  money  expressly  reserved  by  a  vendor  in  his  deed  of 
conveyance  is  a  lien  created  by  contract,  and  not  by  implication 
of  law.^  It  is  a  contract  that  the  land  shall  be  burdened  with  the 
lien  until  the  note  is  paid.  It  is  really  a  mortgage.  The  lien, 
then,  becomes  a  matter  of  record  when  the  deed  is  recorded.*  It 
is  not  waived  by  the  taking  of  other  security,  as  is  the  case  with 
an  ordinary  vendor's  lien.^  It  is  governed  by  the  same  rules  that 
a  mortgage  is.  It  passes  by  an  assignment  of  the  note  secured 
by  it.^  It  is  foreclosed  as  a  mortgage ;  and  there  is  the  same  right 
of  redemption  for  a  limited  period  after  a  foreclosure  sale." 

"  The  reservation  of  the  vendor's  lien  in  the  deed  of  convey- 
ance," says  Mr.  Justice  Bradley,  of  the  Supreme  Court  of  the 
United  States,^  "  is  equal  to  a  mortgage  taken  for  the  purchase 

1  Findley    v.    Armstrong,    23   W.  Va.  recorded ;    the    others    are,  from   express 

113.  contract,   visible  to   all,  and  may   be   re- 

-  Evans  v.  Enloe,  64  Wis.  671.  corded.     All  of  the  same  consequences  do 

^  Lucas  V.  Hendrix,  92  Ind.  54,  57.  not,  therefore,  necessarily  result,  as  to  as- 

*  Ober  V.  Gallagher,  93  U.  S.  199;  Ar-  signees  or  holders  of  the  debt  secured  b\' 

mentrout  v.  Gibbons,  30  Gratt.  (Va.)  632  ;  the  vendor's  lien,  nor  as  to  purchasers  of 

White  V.  Downs,  40  Tex.  225,  231,  per  the  land  liable  to  it,  as  between  the  origi- 

Gray,  J.     "The  vendor's  lien,  however,  nal  parties  and  privies,  as  do  often  occur 

proi)erIy  understood,  is  not  in  all  respects  in  the  cases  of  express  lien  by  contract." 

the  same  as  the  express  lien  often  reserved  See,  also,  Moore  v.  Lackey,  53  Miss.  85. 
in   deeds  of  conveyance  for  payment  of         ''  Carpenters.  Mitchell,  54  III.  126. 
purchase  money,  nor  as  strict  mortgages         "  Carpenters.  Mitchell,  siiy^ra ;  Markoe 

or  deeds  of  trust  for  it,  nor  yet  as   the  v.  Andras,  67  111.  34. 

sejurity  helil  by  a  vendor  who  has  only         "  Markoe    v.   Andras,    supra.      Quoted 

jriven   a  bond   for   the   title.     These  are  with  approval  in  Hull  v.  Mobile  &  Mont- 

often  confounded  with  the  vendor's  lien,  gomery  I{y.  Co.  58  Ala.  10,  22;  and  in 

because  security  of  the  jjurcbasc  money  is  Dinglcy  v.  Bunk  of  Ventura,  57  Cal.  467. 
common  to  all  «f  them.     Hut  th(;  vendor's         •*  l^'"g  i'-  Young  Men's  Ass'n,  1  Woods, 

lien  arises  wholly  from  inference  or  imjjli-  380. 
cation,  which  is  invisible,  and  cannot  be  153 


§§  222,  223.]     vendor's  lien  by  contract  or  reservation. 

money  contemporaneously  with  the  deed,  and  nothing  more.  The 
purcliaser  has  the  equity  of  redemption  precisely  as  if  he  had 
received  a  deed  and  given  a  mortgage  for  the  purchase  money.' 
The  legal  title  passes  to  the  purchaser  subject  to  the  lien,  and  the 
land  is  subject  to  attachment  and  execution  as  his  property,  just 
as  an  equity  of  redemption  is.^ 

The  lien  differs  also  from  a  vendor's  lien  in  that  it  may  secure 
the  performance  of  any  covenant  or  undertaking  agreed  upon, 
instead  of  a  fixed  sum  payable  in  money ;  as,  for  instance,  it  may 
secui'e  an  agreement  to  pay  in  specific  articles.^ 

Upon  the  sale  of  leasehold  property  with  certain  personal  prop- 
erty thereon  for  a  gross  sum  for  both,  the  reservation  of  a  lien 
in  the  instrument  of  transfer  is  effectual,  and  will  be  enforced  by 
a  sale  of  both  the  real  and  personal  property.^ 

If  upon  a  purchase  of  land  part  payment  be  made  in  the  notes 
of  third  persons,  and  the  conveyance  expressly  stipulates  that  the 
vendor  in  no  way  waives  his  lien  by  reason  of  taking  the  personal 
securities,  the  reservation  creates  a  contract  lien  in  the  nature  of 
an  equitable  mortgage,  which  may  be  enforced  upon  non-payment 
of  the  notes.* 

222.  Such  a  reservation  may  appropriately  be  said  to 
amount  substantially  to  a  mortgage,  where  by  this  term  is 
meant  simply  a  lien.  Thus,  in  a  recent  case  in  the  Circuit  Court 
of  the  United  States  for  Tennessee,  the  court,  having  said  that 
the  vendee  stands  (substantially)  in  the  same  position  as  if  he 
had  executed  a  mortgage  to  the  vendor  for  the  purchase  money? 
explained  that,  of  coui'se,  while  the  court  assimilated  the  lien  to 
that  of  a  mortgage,  it  did  not  mean  the  old  common  law  mort- 
gage, in  its  technical  sense,  but  the  modern  signification  of  that 
term,  as  one  applied  to  any  lien  created  by  express  contract  of 
the  parties  as  a  security  for  a  debt.  Such  a  reservation  creates 
an  express  lien  by  contract  or  agreement  of  the  parties ;  and  that 
is  all  that  is  meant  by  a  mortgage  in  half  or  more  of  the  states.'' 

223.  Ordinarily  a  purchaser  under  such  a  deed  would  not 
be  personally  liable  for  the  purchase  money,  unless  he  had  by 
note  or  some  other  writing  bound  himself  for  its  payment.  The 
general  rule  is   that  no   personal  obligation  is  implied  from  the 

1  Chitwood   V.   Trimble,  58  Tenn.  78;         s  Ruhl  v.  Ruhl,  24  W.  Va.  279,   287. 
Gordon  v.  Rixey,  76  Va.  694;  Lucas  v.     See  Jones  on  Liens,  §  1071. 
Hendrix,  92  Ind.  54,  57.  ^  Kyle  v.  Bellenger,  79  Ala.  516. 

'^  Harvey  v.  Kelly,  41  Miss.  490.  &  Kirk  v.  Williams,  24  Fed.  Rep.  437. 

And  see  Dingley  v.  Bank  of  Ventura,  57 
154  Cal.  467. 


NATURE   AND   EXTENT   OF   THE   LIEN.  [§  224. 

giving  of  a  mortgage  deed,  unless  there  is  an  express  stipulation 
or  covenant  in  the  deed  to  that  effect,  or  there  be  some  separate 
promise  in  writing  to  pay  the  money.^  In  Tennessee,  however, 
it  is  held  that,  in  an  action  against  the  grantee  to  recover  the  pur- 
chase money,  the  fact  that  he  has  accepted  a  deed  in  which  a 
lien  is  reserved  is  conclusive  proof  of  a  promise  on  his  part  to  pay 
the  money.^ 

224.  The  vendee's  title  is  imperfect  until  the  debt  is  paid. 
When  land  has  been  conveyed  by  a  deed,  reserving  a  lien  upon 
it  for  the -purchase  money,  the  lien  is  an  incumbrance  upon  it, 
and  an  execution  sale  of  it  as  the  property  of  the  vendee  should 
be  made  as  of  incumbered  property.''^  It  has  precedence  over  a 
prior  judgment  against  the  vendee.* 

The  vendee's  title  is  imperfect  until  this  debt  is  paid,  though 
the  debt  for  the  purchase  money  be  barred  by  the  statute  of  lim- 
itations.^ Though  the  vendor  cannot  enforce  his  lien  by  suit  to 
recover  the  money  and  foreclose  the  lien,  he  can  assert  his  superior 
title  to  the  land  as  owner.  He  cannot  be  evicted  after  he  has 
regained  possession.^  Every  one  purchasing  his  title  must  have 
notice  of  the  lien  reserved.  He  has  notice  only  of  the  debt  and 
simple  interest,  unless  more  be  reserved.'^  This  lien  is  in  fact  an 
equitable  mortgage.  In  the  case  of  an  implied  lien,  the  courts 
have  generally  been  unwilling  to  extend  it  beyond  the  security 
of  the  vendor,  because  it  might  tend  to  embarrass  the  vendee's 
right  of  disposing  of  the  property  by  giving  countenance  to  secret 
liens  upon  it;  but  this  reason  does  not  apply  when' the  lien  is 
reserved  by  express  contract  in  the  deed.^ 

The  effect  of  a  lien  expressly  reserved  cannot  be  controlled  by 
evidence  of  a  verbal  agreement  that  there  should  be  no  lien.^ 

In  Pennsylvania,  however,  the  law  upon  this  subject  is  excep- 
tional ;  for  it  is  held  tliat  a  charge  upon  land  created  b}?^  the  par- 
ties to  a  conveyance  is  divested  by  a  subsequent  sheriff's  sale, 
imless  the  charge  be  in  the  nature  of  a  testamentary  provision 
for  the  grantor's  wife  or  children,  or  is  incapable  of  valuation,  or 
is  expressly  created  to  run  with  the  land.^^'     It  is  declared  that 

1  See  §§  677,  678.  7  Stricklin  v.  Cooper.  55  Miss.  f,24. 

'  Kirk  V.  Williiim.s,  24  Fctl.  Rep.  4.37.  »  Stratton  v.  Gold,  40  Miss  778  ;  Peters 

*  Thompson  V.  Ileffner,  11   IJusIi  (Ky.),  v.  ClemontH,  46  Tex.  114;    Ma.stersoii  v. 
353.  Cohen,  40  Tex.  520. 

*  Parsons  v.  Iloyt,  24  Iow;i,  154.  '■'  Hutchinson  v.  Patrick,  22  Tex.  318. 

^  Iliilc  V.  Baker,  GO  Tex.  217.  ">  Strauss's  App.  49  Pa.  St.  353  ;  Hies- 

"  Hale  V.  Raker,  supra.  tcr  v.  Groen,  48  Ih.  96  ;  Bear  v.  Whisler, 

1.55 


§§  225,  226.]     vendor's  lien  by  contract  or  reservation. 

the  doctrine  of  equitable  liens  was  never  admitted  into  the  juris- 
prudence of  this  state.  Moreover,  the  policy  of  the  law  is  that 
judicial  sales  shall  pass  property  clear  of  all  liens,  and  the  courts 
have  yielded  with  reluctance  to  making  the  exceptions  above 
named.  Accordingly,  it  is  held  that  a  recital  in  a  deed  that  the 
purchase  money  remains  unpaid,  and  is  to  be  paid  annually,  does 
not  create  a  lien  which  a  subsequent  judicial  sale  will  not  divest.^ 
Neither  does  a  recital  that  the  deed  is  made  subject  to  a  mortgage 
hgld  by  a  person  named  for  a  specified  sum  create  such  a  lien, 
when  there  was  in  fact  no  mortgage,  but  a  judgment  which  sub- 
sequently expired.  It  was  urged  that  the  deed  created  a  chai'ge 
upon  the  land,  and  that,  as  this  charge  appeared  upon  the  face  of 
the  title,  a  subsequent  mortgagee  had  notice  of  it,  and  took  sub- 
ject to  it.  But  it  was  held,  inasmuch  as  this  recital  did  not 
amount  to  a  condition,  and  inasmuch  as  the  charge  was  not  within 
either  of  the  exceptions  named,  it  was  divested  and  destroyed  by 
a  sheriff's  sale  under  a  subsequent  mortgage.  The  remedy  after 
such  sale,  if  there  be  any,  is  upon  the  fund  created  by  the  sale.*^ 

225.  A  married  -wonian  is  bound  by  a  contract  to  pur- 
cliase,^  or  a  contract  in  the  nature  of  a  mortgage  for  purchase 
money  of  land  conveyed  to  her,  and  created  by  the  vendor's  re- 
serving in  the  deed  to  her  a  lien  upon  the  land  for  the  secu- 
rity of  her  note,  given  for  such  purchase  money.*  Her  mortgage 
for  purchase  money,  although  invalid  by  reason  of  her  husband 
not  joining  in  its  execution,  has  been  regarded  as  a  declaration 
preserving  a  vendor's  lien,  or  as  a  declaration  of  a  trust  in  favor 
of  the  vendor.^  Even  where  the  note  of  a  married  woman  im- 
poses no  personal  obligation  upon  her,  she  can  be  put  to  her 
election,  under  a  sale  to  iier  by  title  bond,  either  to  pay  her  note 
for  the  purchase  money,  or  to  surrender  the  land  and  all  claim 
to  it.6 

226.  Waiver  of  the  lien.  —  A  lien  reserved  by  contract,  or 
existing  in  the  vendor  by  reason  of  his  not  having  parted  with 

7  Watts  (Pa.),  144;  Stewartson  v.  Watts,     829,  831  ;  Radford  v.  Carwile,  13  W.  Va. 

8  lb.  392.  573 ;  Jackson  v.  Rutledge,  3  Lea  (Tenn.), 

1  Hiester  v.  Green,  48  Pa.  St.  9G.  626;  Bedford  v.  Burton,  106  U.  S.  338; 

2  Pierce  i\  Gardner,  83  Pa.  St.  211.  Chilton  v.  Braiden,  2  Black,  458. 

8  In  North  Carolina,  when  entered  into  °  Morrison  v.  Brown,  83  III.  562. 

according    to     requirements    of    statute.  ^  Hendrick    v.   Poote,    57    Miss.    117  ; 

Johnston  v.  Cochrane,  84  N.  C.  446.  Johnson  v.  Jones,  51  Miss.  860;  Willing- 

*  See    Carpenter    v.    Mitchell,   54   111.  ham  v.  Leake,  7  Bax.  (Tenn.)  453. 
126;    Weinberg  v.   Rempe,    15    W.   Va. 
156 


NATURE  AND  EXTENT   OF   THE   LIEN.  [§  226. 

the  legal  title,  having  given  only  a  bond  or  contract  of  sale,  is  of 
course  not  lost  or  waived  as  an  implied  lien  is  by  accepting  other 
security .1  Neither  does  a  change  of  notes,  nor  the  substitution  of 
the  notes  of  another  person,  as,  for  instance,  those  of  a  subsequent 
purchaser,  nor  the  reducing  the  notes  to  judgment,  affect  the 
lien  ;  ^  nor  does  the  taking  of  new  notes  by  an  assignee  in  his 
own  name,  and  extending  the  time  of  payment.^  It  is  not  waived 
by  taking  under  duress  depreciated  currency  in  payment  of  the 
debt.*  It  is  not  waived  by  a  judgment  and  sale  upon  execution 
of  the  interest  of  the  vendee  in  the  land.^  The  burden  of  proof 
is  upon  the  vendee  to  show  a  waiver.'' 

The  vendor  who  has  an  express  lien  may  by  his  acts  or  decla- 
rations waive  it,  as,  for  instance,  by  inducing  another  to  buy  the 
propert}^  as  unincumbered  ;  or  by  permitting  and  encouraging  the 
administrator  of  the  vendee  to  sell  the  property  to  satisfy  the 
lien,  and  bidding  at  the  sale.  Such  bidding  at  the  sale  could 
properly  be  interpreted  b}'^  the  purchaser  as  a  waiver  of  the  lien, 
and  as  an  acknowledgment  that  he  was  looking  solely  to  the  pro- 
ceeds of  the  sale,  and  not  to  the  land  itself,  for  the  satisfaction  of 
his  claim." 

The  taking  of  other  security  is  not  a  waiver  of  a  vendor's  lien 
reserved,  as  is  the  case  with  an  implied  lien,  unless  it  be  shown 
by  direct  evidence,  or  by  the  circumstances  of  the  case,  that  the 
vendor  relied  wholly  on  such  other  security.^ 

1  Kentucky :  Lusk  v.  Hopper,  3  Bush,  ble,  58  Tenn.    78 ;  Coles  v.   Withers,  33 

179;  Bnidley  f.  Curtis,  79  Ky.  327  ;  Lewis  Gratt.  (Va.)  186;  Woodward  v.  Echols, 

V.  I'usey,  8  Bush,  615.    Tennessee  :  White-  58  Ala.  665. 

hurst  V.  Yandali,  7  Bax.  228  ;  Sehorn  v.  ^  Conner  v.  Banks,  18  Ala.  42. 

McWhirter,  6  lb.  313;  Fogg  v.  Rogers,  2  *  Luddington  v.  Gabbert,  5  W.  Va.  330. 

Coldw.  290;  Ilines  v.  Perkins,  2   lieisk.  The  vendor  was  comjjelled  in  this  case  to 

395.     Indiana :  McCasIin  v.  State,  44  Ind.  receive  Confederate  treasury  notes  during 

151  ;    Huffman  v.   Cauble,   86   Ind.   591.  the  Rebellion. 

Alabama:  Bozeinan  v.  Ivey,  49  Ala.  75.  *»  Lewis  y.  Chapman,  59  Mo.  371  ;  Dick- 
Missouri:  Strickland  v.  Suminerviile,  55  ason  v.  Eby,  73  Mo.  133,  per  Norton,  J.; 
-Mo.  1(',4;  Adams  I'.  Cowherd,  30  Mo.  458.  Carter  County  Court  v.  Butler,  81  Ky. 
Maryland  :   Hurley  v.  Holiyday,  35  Md.  597. 

469;  Scliwarz  v.  Stein,  29  Md.  112,  119;  "  Sehorn  v.  McWiiirter,  8  Bax.  (Tenn.) 

Magruder  v.  Peter,  U  G.  &  J.  217.     Vir-  201  ;  S.  C.  6  lb.  311  ;  Whitehuri>t  r.  Vau- 

ginia:  Hatcher  v.  Hatcher,  1   Rand.  53;  dull,  supra. 

Kiiisoly /'.  Willianih,  3   Gratt.  2G5.    West  '  Butler  y.  Williains,  5   Hei.sk.   (Tenn.) 

Virginia  :   Dunlap  v.  Shanklin,  20  W.  Va.  241. 

W-2.     Texas:  I'rice  v.  Lauve,  49  Tex.  74.  "  Warren  v.  Branch,  15  W.  Va.  21,22; 

Hawkins  v.  Thurinan,  1   Idaho.  598,  to  Daniels  v.  Moses,  12  S.  C.  130;  Fru/.ier  v. 

the  contrary,  not  good  law.  Hendren,   80   Va.   265  ;  Byrns  v.  Wood- 

-  Bozeman  v.  Ivey,  lu/ira;  Bradford  u.  ward,  10  Lea  (Tenn.),  444. 

Harper,  25  Ala.  337  ;  Cliitwood  v.  Trim-  157 


§§  227,  228.]     vendor's  lien  by  contract  or  reservation. 

Tbe  vendor  remaining  clothed  with  the  legal  title,  it  is  pre- 
sumed that  he  retained  it  as  an  absolute  security  for  the  pur- 
chase monej^,  and  a  waiver  or  abandonment  of  the  lien  can  hardly 
be  shown. ^  A  bond,  with  personal  security  taken  for  the  pur- 
chase money,  does  not  imply  a  waiver  of  the  lien  under  a  con- 
tract for  sale  which  makes  no  provision  about  the  reservation  of 
a  lien.  It  may  be  shown,  howevei',  by  direct  evidence,  or  by  the 
circumstances  of  the  case,  that  the  vendor  relied  only  on  the  bond 
and  security,  and  in  that  case  he  would  be  required  to  execute  a 
deed  without  reserving  a  vendor's  lien.^  A  lien  reserved  in  the 
deed  of  sale  is  not  lost  by  the  recovery  of  a  judgment  for  the 
debt,  and  the  issuing  of  an  execution  thereon.  This  lien  is  equiv- 
alent to  a  mortgage,  and,  as  is  the  case  with  a  mortgage,  a  judg- 
ment does  not  affect  the  lien.  It  is  discharged  only  by  payment, 
or  an  express  release.^ 

227.  Order  of  liability  of  parcels  sold.  —  Purchasers  of  land, 
subject  to  a  lien  by  contract  for  the  payment  of  purchase  money, 
have  the  same  equities  as  between  themselves  as  purchasers  sub- 
ject to  a  formal  mortgage.  The  rule  of  contribution  in  the  ad- 
verse order  of  sale  applies  where  the  same  rule  applies  in  the  case 
of  mortgages.  Simultaneous  purchasers  should  contribute  pro 
rata.^  And,  as  in  the  case  of  mortgages,  the  vendor,  in  making 
sale  of  the  land  to  enforce  his  lien,  should  first  sell  the  lot  last 
sold  by  the  vendee,  and  so  on  in  the  inverse  order  until  satisfac- 
tion is  obtained.^  If  the  vendee  sells  a  portion  of  the  land  to 
various  sub-purchasers,  and  retains  a  portion  himself,  this  should 
be  first  subjected  to  the  lien  ;  and  if  the  vendor  releases  this  por- 
tion, and  it  is  of  sufficient  value  to  pay  the  whole  amount  of  the 
lien,  he  cannot  subject  any  part  of  the  land  conveyed  to  sub-pur- 
chasers to  the  lien.  The  value  of  the  part  released  is  to  be  esti- 
mated as  of  the  date  of  the  release,  without  regard  to  the  increase 
of  the  value  of  this  portion  after  the  purchase,  or  after  the  decree 
of  sale  to  enforce  the  lien.^ 

228.  Account  of  vendor  in  possession.  —  When  a  vendor, 
after  giving  a  bond  or  contract  of  sale,  remains  in  possession,  and 

1  Sehorn  v.  McWhirter,8  Bax.  (Tenn.)  71 ;  Mulherrin  v.  Hill,  5  lb.  58;  Hines  v. 
201  ;  Rogers  v.  Blum,  56  Tex.  1.  Perkins,  2  lb.  395. 

2  Warren  i'.  Branch,   15  W.  Va.  21.  *  Wilkes  v  Smith,  4  Heisk.  (Tenn.)  86; 

3  Bank  v.  Bradley,  15  Lea  (Tenn.),  279;  Dukes  v.  Turner,  44  Iowa,  575. 

By rns  u.  Woodward,  10  lb.  444  ;  Stephens         ^  Alabama  v.  Stanton,  5  Lea  (Tenn.), 
V.  Greene  Co.  Iron  Co.  11  Heisk.  (Tenn.)     423 ;  Whitten  v.  Saunders,  75  Va.  563. 

6  Boyce  v.  Stanton,  15   Lea   (Tenn.), 
158  346. 


TRANSFER   AND   ENFORCEMENT   OF   THE  LIEN. 


[§  229. 


there  is  delay  in  making  the  conveyance  beyond  the  time  set  for 
it,  the  vendee  should  be  credited  with  a  share  of  the  rents  and 
profits  received  from  the  use  and  enjoyment  of  the  property,  pro- 
portioned to  the  amount  he  may  have  paid  on  his  purchase.^ 


ir.  Transfer  and  Enforcement  of  the  Lien. 
229.  An  assignee  of  a  note  or  bond  given  for  purchase 
money  by  one  who  has  taken  a  contract  of  sale,  or  who  has 
taken  a  conveyance  in  which  a  lien  upon  the  land  is  expressly 
reserved,  like  the  assignee  of  a  note  secured  by  mortgage,  is 
entitled  to  the  benefit  of  the  securit}^  and  may  enforce  specific 
performance  of  the  contract  of  sale,  or  may  enforce  the  lien  re- 
served.2      The  lien  is  regarded  as  incident  to  the  debt.^      If  a 


1  Grove  v.  Miles,  71  111.  376. 

2  Ober  V.  Gallagher,  93  U.  S.  199.  Illi- 
nois:  "Wright  V.  Troutman,  81  111.  374; 
Steinkemejer  v.  Gillespie,  82  III.  253  ; 
Carpenter  v.  Mitchell,  54  111.  126 ;  Blais- 
dell  V.  Smith,  3  Bradw,  150;  Markoe  v. 
Andras,  67  111.  34.  Kansas  :  Walkenhorst 
V.  Lewis,  24  Ivans.  420  ;  Stevens  v.  Chad- 
wick,  10  Ivans.  406,  and  cases  cited.  Vir- 
ginia :  McClintic  v.  Wise,  25  Gratt.  448. 
Mississippi :  Hobson  v.  Edwards,  57  Miss. 
128;  Hendrickr.Foote,  lb.  117;  Stratton 
V.  Gold,  40  Miss.  778 ;  Kimbrough  v.  Cur- 
tis, 50  Miss.  117  ;  Dollahite  v.  Orne,  2  Sm. 
&  M.  590 ;  Tanner  v.  Hicks,  4  lb.  294,  299  ; 
Moore  v.  Lackey,  53  Miss.  85 ;  Terry  v. 
George,  37  Miss.  539 ;  Robinson  v.  Har- 
bour, 42  Miss.  795.  Alabama:  Wells  v. 
Morrow,  38  Ala.  125  ;  Kelly  v.  Payne,  18 
Ala.  371 ;  Roper  v.  McCook,  7  Ala.  318  ; 
Hall  V.  Click,  5  Ala.  363  ;  Wolffe  v.  Nail, 
62  Ala.  24 ;  Hall  v.  Mobile  &  Mont.  Ry. 
Co.  58  Ala.  10;  Roper  v.  Day,  48  Ala. 
509  ;  Lowery  v.  Peterson,  75  Ala.  103. 
Kentucky  :  Bradley  v.  Curtis,  79  Ky.  327  ; 
Duncan  v.  Louisville,  13  Bush,  378  ;  For- 
wood  V.  Dehoney,  5  Bush,  174  ;  Lusk 
V.  Hopper,  3  lb.  179.  South  Carolina: 
Walker  v.  Ke*',  16  S.  C.  76.  Arkansas : 
Sheppard  v.  Thomas,  26  Ark.  617,  626; 
the  last  case  to  the  contrary  overruled  by 
Campbell  v.  Rankin,  28  Ark.  401  ;  Talie- 
ferruy.  Barneit,  37  Ark.  511  ;  McConnell 
V.  Beattic,34  Ark.  113 ;  Moore  v.  Anders, 


14  Ark.  628,  634 ;  Shall  v.  Biscoe,  18  Ark. 
142  ;  Rogers  v.  James,  33  Ark.  77 ;  Mar- 
tin V.  O'Bannon,  35  Ark.  62.  Tennessee : 
Tharpe  v.  Dunlap,  4  Heisk.  674  ;  Osborne 
V.  Royer,  1  Lea,  217  ;  Cleveland  v.  Mar- 
tin, 2  Head,  128.  Iowa:  Rakestraw  v. 
Hamilton,  14  Iowa,  147  ;  Blair  v.  Marsh, 
8  Iowa,  144  ;  Bills  v.  Mason,  42  Iowa, 
329  ;  Reynolds  i'.  Morse,  52  Iowa,  155. 
Missouri :  Adams  v.  Cowherd,  30  Mo. 
458.  Indiana  :  Felton  v.  Smith,  84  Ind. 
485.  North  Carolina  :  Hadley  v.  Nash,  69 
N.  C.  162. 

The  cases  seem  to  be  uniform  upon  this 
point,  with  the  exception  of  those  in  Ohio. 

By  statute  in  Arkansas,  1873,  Acts, 
p.  217;  Dig.  1874,  §  564;  Dig.  1884, 
§  474,  the  lien,  when  reserved  in  the  deed, 
is  made  assignable  by  a  transfer  of  the 
note  or  other  obligation  for  the  debt,  pro- 
vided the  lien  is  expressed  upon  the  face 
of  the  deed  of  conveyance.  See  Campbell 
V.  Rankin,  28  Ark.  401,  407;  Richardson 
i;.  Hamlett,  33  Ark.  237  ;  Stephens  v.  An- 
thony, 37  Ark.  571  ;  Tulicferro  i-.  Barnett, 
supra. 

In  California  it  is  provided  that  where 
a  buyer  of  real  property  gives  to  the  seller 
a  written  contract  for  tiie  payment  of  all 
or  part  of  the  price,  an  absolute  transfer 
of  such  contract  by  the  seller  waives  his 
lien  to  the  extent  of  the  sum  payable  un- 
der the  contract ;  but  a  transfer  of  such 
contract  in  trust  to  pay  debts,  and  return 


8  Chitwood  V.  Trimble,  2  Bax.  (Tunn.)  78  ;  Lowery  r.  Peterson,  75  Ala.  109. 

159 


§  230.]      vendor's  lien  by  contract  or  reservation. 

vendor  who  retains  the  legal  title  for  his  security  assigns  the 
notes  taken  for  the  purchase  money,  he  then  holds  the  legal  title 
as  trustee  for  the  holder  of  the  notes,  and  he  cannot  properly  do 
anything  to  defeat  the  rights  of  such  holder.  If,  regardless  of 
the  trust,  he  conveys  the  land  to  a  stranger,  who  purchases  in 
good  faith,  the  vendor  then  becomes  a  trustee  of  the  purchase 
money  which  he  has  realized,  for  the  benefit  of  the  holder  of  the 
notes  he  assigned.^  The  assignment  of  a  note  which  upon  its 
face  shows  that  it  was  given  in  consideration  of  the  purchase 
money  of  land,  or  expressly  reserves  a  lien  upon  it,  passes  the 
lien  to  the  assignee,  who  may  enforce  it.^  Though  there  has 
been  a  partial  failure  of  the  consideration  for  the  assignment,  the 
assignor  cannot  subsequently  seek  to  enforce  the  lien  before  such 
assignment  has  been  declared  void.^ 

One  who  takes  title  from  the  vendor,  with  knowledge  of  an 
outstanding  note  for  the  purchase  money  previously  assigned  by 
the  vendor,  takes  subject  to  the  lien  of  such  note,^  unless  the  note 
was  transferred  after  maturity,  or  in  such  manner  that  it  is  sub- 
ject in  the  hands  of  the  holder  to  all  equities  the  maker  may  have 
against  it.^  As  against  his  assignee,  the  vendor  cannot  be  heard 
to  dispute  his  own  title  to  the  land,  or  to  aver  that  he  has  not  an 
estate  coextensive  with  that  he  has  contracted  to  convey.^ 

230.  Order  of  payment  of  several  notes.  —  In  case  there 
are  several  notes  or  bonds  secured  in  this  way,  the  same  equi- 
table rule  is  applied  as  to  the  order  of  payment  of  such  notes  or 
bonds  that  is  applied  when  they  are  secured  by  a  formal  mort- 

the  surplus,  is  not  a  waiver  of  the  lien,  property.     Neal  v  Murphey,  60  Ga.  388; 

Civil  Code  1872,  §  3047.  McGregor  v.  Matthis,  32  Ga.  417  ;  Car- 

In  Georgia  it  is  provided  that  when  a  hart  v.  Reviere,  1    So.  East.  Eep.  (Ga.) 

person  holds  property  under  a  bond  for  222. 

titles,   and  the  purchase  money  has  been  ^  Cummings  v.  Oglesby,  50  Miss.  153; 

partially  paid,  the  same  may  be  levied  on  Pitts  v.  Parker,  44  Miss.  247,  252  ;  Parker 

under  judgments  against  such  person,  and  v.  Kelly,  10  S.   &  M.  (Miss.)  184,  191; 

the  entire  interest  stipulated  in  the  bond  Skaggs  v.  Nelson,  25  Miss.  88  ;  Conner  v. 

shall  be   sold.     The  proceeds  of  the  sale  Banks,  18  Ala.  42. 

shall  be  appropriated,  first,  to  the  payment  2  Bailey  v.  Smock,  61  Mo.  213;  Mur- 

of  the  balance  of  the  purchase  money,  and  ray  v.   Able,    19    Tex.  213;  Osborne  v. 

the  remainder  to  the  judgment  liens  ac-  Royer,  1  Lea  (Tenn.),  217. 

cording  to  date.     Code  1882,  §  3586.    Un-  ^  Green  v.  Betts,  1  Fed.  Rep.  289. 

der  this  statute,  if  a  note  for  the  purchase  *  Young   v.  Atkins,   4   Heisk.  (Tenn.) 

money  be  transferred  without  indorsement  529. 

or  guaranty,   the   purchaser's  equity  be-  ^  Shinn  v.  Fredericks,  56  111.  439. 

comes  complete  as  against  the  vendor,  and  ®  Lowery  v.  Peterson,  75  Ala.  109. 
the  land  is  subject  to  levy  and  sale  as  his 

160 


TRANSFER   AND   ENFORCEMENT   OF   THE  LIEN.       [§§  231,  232. 

gage  01*  trust  deed  ;  that  which  was  first  assigned  carries  so  much 
of  the  lien  as  is  necessary  to  pay  it,  unless  there  be  an  express 
agreement  otherwise,^  or  some  equity  in  favor  of  the  vendor.'^ 
Such  assignee,  moreover,  is  entitled  to  all  the  remedies  of  the 
vendor  to  enforce  the  lien  ;  and  the  latter  cannot,  by  any  act  of 
his,  deprive  the  assignee  of  these  remedies.^ 

231.  If  the  deed  which  retains  a  lien  for  purchase  money 
does  not  refer  to  any  note  or  bond  for  such  purchase  money, 
a  subsequent  purchaser  is  not  bound  to  make  inquiry  for  it,  and 
is  not  affected  by  any  equity  in  favor  of  the  assignee  of  the  note 
or  bond.  A  vendor  who  had  taken  a  negotiable  note  for  the  pur- 
chase money  of  land  conveyed  by  a  deed  which  reserved  a  lien 
for  the  purchase  money,  but  did  not  refer  to  the  note,  afterwards 
indorsed  the  note  to  one  person,  and  contracted  to  sell  the  land  to 
another,  who  paid  the  purchase  money,  and  thereupon  took  from 
the  first  vendee  a  conveyance  of  the  property.  The  second  ven- 
dee was  ignorant  of  the  existence  of  the  outstanding  note,  and  of 
any  claim  by  the  holder  of  it  to  the  purchase  money.  It  was 
held  that  the  second  vendee  took  the  property  unaffected  by 
any  lien  in  favor  of  the  holder  of  the  note.*  The  assignee  of  the 
note  in  such  case  does  not  stand  upon  the  same  ground  with 
the  assignee  of  a  mortgage  note,  where  the  latter  is  described  in 
the  mortgage.  The  giving  of  a  note  for  the  purchase  money 
secured  by  a  vendor's  lien  is  not  so  universal  a  practice  as  to 
make  it  incumbent  upon  a  sub-purcliaser,  in  the  absence  of  any 
reference  to  the  note  in  the  deed,  to  make  inquiry  for  such  a 
note.  And  so  where  a  note  given  in  consideration  of  a  contract 
for  the  conveyance  of  land  was  transferred  to  a  third  person,  and 
the  contract  was  afterwards  cancelled  by  the  parties  to  it,  and  the 
land  conveyed  to  others,  it  was  held  that  the  holder  of  the  note 
had  no  lien  upon  the  property.^ 

232.  Subrogation  to  the  lien.  —  A  surety  upon  a  note  given 

1  McClintic   v.  Wise,   25    Gratt.   (Vsi.)  v.   Warner,   62   Miss.  370 ;    Christian   v. 

448;  Menken  v.  Taylor,  4  Lea  (Teiin.),  Clark,  10  Lea  (Tenn.),  630;  Forwood  v. 

445.     Oiherwise   in   Texas,  unless   it  ap-  Delioney,  .'j  Bush  (Ky),  174. 

pears  tlmt  it  was  the  intcniion  tliat  the  ^  Grubbs   v.  Wysor.s,   32    Gratt.   (Vn.) 

assi-^nee  should  be  first  paid.     Salmon  v.  127. 

Downs,  .5.')  Tex.  243.     A  later  deeision  in  '  McClintic  v.  Wise,  supra. 

this  state  pliices  the  rule  pretty  miieli  in  *  National  Valley  IJank  v.  Ilarman,  7.') 

accord  with  tlie  (general  rule.     Wiiitehead  Va  r)()4. 

V.  Fihher,  64  Tex.  r..i«.  6  McMillen  v.  Rose,  54  Iowa,  .522. 

Ah  10  the  rule  in  Mississippi,  soo  Aaron 

voui.  n  iQi 


§§  233-235.]     vendor's  lien  by  contract  or  reservation. 

to  the  vendor  for  the  purchase  money,  upon  paying  the  note  is 
subrogated  to  the  vendor's  lien  for  the  purchase  money,  if  no 
equity  in  favor  of  the  vendor  would  thereby  be  displaced.  But 
a  surety  upon  the  first  of  three  notes  given  for  the  purchase 
money,  upon  paying  such  note,  is  not  entitled  to  be  subrogated  to 
the  vendor's  lien  in  respect  to  that  note,  when  the  result  of  such 
subrogation  would  be  to  displace  the  vendor  to  his  prejudice  in 
respect  to  his  lien  for  the  security  of  the  other  notes  for  the  pur- 
chase money,  as  would  be  the  case  if  the  land  were  an  inadequate 
security  for  the  payment  of  all  the  notes.^  A  surety  can  have  no 
subrogation  until  he  has  paid  the  entire  debt.^ 

233.  Statute  of  limitations.  —  A  lien  founded  upon  contract 
may  be  enforced,  although  the  debt  be  barred  by  the  statute  of 
limitations.^  The  relation  of  a  purchaser  by  title  bond  to  his 
vendor  is  similar  to  that  of  mortgagor  to  mortgagee,  and  his  pos- 
session is  in  like  manner  consistent  with  his  obligation  to  pay  tlie 
money  secured,  and  does  not  become  adverse  except  under  circum- 
stances which  would  make  a  mortgagor's  possession  adverse.* 

A  vendor's  lien  under  an  agreement  or  bond  to  convey,  where 
the  purchaser  enters  into  possession  without  receiving  a  convey- 
ance, is  not  barred  by  the  statute  of  limitations  until  the  lapse 
of  twenty  years  without  the  payment  of  interest,  or  other  recog- 
nition of  the  indebtedness  on  the  part  of  the  purchaser.  Yet 
payment  may  be  established  by  circumstances  such  as  would 
satisfy  a  jury  that  the  continued  existence  of  the  debt  was  highly 
improbable.^ 

234.  The  obligation  first  to  exhaust  the  personal  remedy, 
which  is  a  rule  of  equity  adopted  by  some  courts  as  to  liens  aris- 
ing by  implication  of  law,  has  no  application  when  the  lien  is 
created  by  express  coijtract.^ 

235.  Proceedings  to  enforce  such  lien.  —  To  enforce  a  lien 

1  Grubbs  v.  Wysors,  32  Gratt.  (Va.)  (Tenu.)  570,  overruling  Raj^  v.  Goodman, 
127.  1  Sneed  (Tenn.),  586;  Daniels  v.  Moses, 

2  McConnell  v.  Beattie,  34  Ark.  113;  12  S.  C.  130;  Adair  y.  Adair,  78  Mo.  630; 
Menken  v.  Taylor,  4  Lea  (Tenn),  445.  Lewis  v.  McDowell,  88  N.  C.  261. 

3  Driver  v.  Hudspeth,  16  Ala.  348;  ^  Phillips  r.  Adams,  78  Ala.  225 ;  May 
Bizzell  V.  Nix,  60  Ala.  281 ;  Coldcleugh  v.  Wilkinson,  76  Ala.  543 ;  Hardin  v. 
V.  Johnson,  34  Ark.  312;  White  v.  Blake-  Boyd,  113  U.  S.  756. 

more,  8  Lea  (Tenn.),  49;  Waddellv.  Car-  «  Smith    v.   Eowland,    13   Kans.   245; 

lock,  41  Ark.  523.  Sparks  v.  Hess,  15  Cal.  186,  193  ;  McCas- 

*  Butler  v.  Douglass,  1  McCrary,  630 ;  lin   v.    State,   44   Ind.    151;    Huffman   v. 

S.  C.  3  Fed.  Rep.  612  ;  Lewis  v.  Hawkins,  Cauble,  86  Ind.  591.     See,  however,  Bry- 

23  WalL  119 ;  Gudger  v.  Barnes,  4  Heisk.  ant  v.  Stephens,  58  Ala.  636. 
162 


TRANSFER   AND  ENFORCEMENT   OF   THE  LIEN.  [§  236. 

for  the  purchase  money  reserved  by  the  vendor  in  his  deed,  the 
same  proceedings  are  had  as  in  case  of  a  formal  mortgage.  The 
same  persons  must  be  made  parties.^  If  the  vendee  has  sold  any 
part  or  the  whole  of  his  interest,  his  grantee  must  be  made  a 
party  ;  and  so  must  any  one  who  has  acquired  a  lien  upon  the 
property  through  him.^  "The  rights  of  the  vendee,"  says  Mr. 
Justice  Bradley,^  "  being  the  same  as  those  of  a  mortgagor,  they 
must  be  extinguished  in  the  same  way.  They  are  vested  and  well 
defined  in  the  law.  They  constitute  an  estate  called,  it  is  true, 
by  the  name  of  an  equity  of  redemption  ;  but  still  an  estate  which 
may  be  conveyed  incumbered,  and  laid  under  other  liens.  And 
the  heirs  and  assigns  of  the  vendee,  and  subsequent  holders  of 
liens  on  the  property  against  him,  cannot  be  disregarded  or 
ignored  by  the  original  vendor  or  his  assigns,  when  they  desire  to 
extinguish  this  estate." 

As  in  the  case  of  a  suit  to  foreclose  a  mortgage,  a  person  claim- 
ing adversely  to  the  mortgage  title  should  not  be  made  a  party, 
so  to  a  bill  to  enforce  a  vendor's  lien  under  a  title  bond  a  person 
claiming  adversely  to  the  title  should  not  be  made  a  party,  be- 
cause the  rights  of  such  a  claimant  cannot  be  litigated  and  settled 
in  such  proceeding.* 

Neither  is  it  necessary,  before  entering  a  decree  of  sale  under 
a  lien,  to  ascertain  the  existence  and  amount  of  other  liens  upon 
the  property  and  their  priorities,  or  to  make  the  lienors  parties.^ 

236.    Moreover,  the  vendor,  like  a  mortgagee,  has  several 

^  Wells  V.  Francis,  7  Colo.  396.  In  Tennessee  it  is  provided  by  stat- 
2  Jones  on  Liens,  §§  1449,  1.541  ;  King  ute  that  liens  on  realty  retained  in  favor 
V.  Young  Men's  Ass'n,  1  Woods,  386 ;  of  vendors  on  the  face  of  a  deed,  also 
Gaston  v.  White,  46  Mo.  486.  mortgages,  deeds  of  trust,  and  assign- 
In  Iowa  it  is  provided  by  statute  that  inents  of  realty  executed  to  secure  debts, 
the  vendor  of  real  estate,  who  has  given  a  shall  be  barred  and  the  liens  discharged, 
bond  or  other  writing  to  convey  it,  and  unless  suits  to  enforce  the  same  lie  brouglit 
part  or  all  the  purchase  money  remains  within  ten  years  from  the  maturity  of  the 
unpaid  after  the  day  fixed  for  payment,  debt,  provided  that  this  statute  shall  not 
whether  the  time  is  or  is  not  the  essence  run  against  existing  liens  only  from  the 
of  the  contract,  may  file  his  petition  ask-  date  of  the  passage  of  tbis  act.  Acts  1885, 
ing  the  court  to  recjuire  the  purchaser  to  ch.  9. 

perform  his  contract,  or  to  foreclose  and  -^  King  i'.  Young  Men's  Ass'n,  supra, 

sell  his  inierest  in  the  property.     The  ven-  •»  Wells  v,  Francis,  supra;  Moreland  v. 

dee  in  such  cases,  for  the  purpose  of  the  Mitz,  24  W.  Va.  119. 

foreclosure,  is  treated  as  a  mortgagor  of  "^  Cuiiningliam  r.  Iledrick,  23  W.  Va. 

the   property   purciiased,   and    his   riglits  579 ;    Neeley  v.   Kuleys,  26   W.  Va.  686, 

may   be  foreclosed  in  a  similar  manner.  088. 
§§  .3329,  3.3.30,  Revision   1873;  Dukes  v. 

Turner,  44  Iowa,  575.  IDtJ 


§  236.]      vendor's  lien  by  contract  or  reservation. 

remedies,  and  may  pursue  all  of  them  concurrently ;  he  may 
bring  an  action  at  law  to  recover  the  debt,  an  action  of  trespass 
or  ejectment  for  the  possession  of  the  land,  and  a  suit  in  equity 
to  enforce  the  lien.^  The  vendor  seeking  to  enforce  the  lien 
should  set  forth  the  terms  of  the  agreement,  and,  if  the  title  is 
still  in  him,  he  should  aver  his  ability  and  willingness  to  convey 
the  land  according  to  the  terms  of  sale,  if  the  payment  of  the 
purchase  money  and  the  execution  of  the  conveyance  are  intended 
by  the  contract  to  be  concurrent  and  contemporaneous  acts,  or  the 
contract  makes  the  purchase  money  due  and  payable  only  on  the 
tender  of  a  deed  of  conveyance.^  But  if  the  purcliase  money  be 
made  payable  on  a  day  certain,  the  payment  of  this  is  not  depen- 
dent upon  the  making  of  title  ;  and  in  such  case  it  is  not  necessary 
for  the  vendor,  in  a  bill  to  enforce  the  lien,  to  aver  an  offer  on  his 
part  to  convey,  or  to  aver  his  readiness  to  make  title.^  The  ven- 
dee who  has  secured  possession  under  his  contract,  and  insists  upon 
maintaining  possession,  is  not  permitted  to  deny  his  liability  on 
the  note,  bond,  or  contract  for  the  purchase  money.  If  he  resists 
payment  of  the  purchase  money,  he  must  offer  to  restore  the  pos- 
session of  the  land  to  the  vendor.^  An  averment  also  of  the 
amount  of  purchase  money  remaining  unpaid  is  necessary  to  sus- 
tain a  judgment  for  a  sale  of  the  land  to  satisfy  the  amount  due 
upon  the  contract.^  In  some  states  a  strict  foreclosure  of  such  a 
lien  is  allowed.^  But  a  strict  foreclosure  is  not  generally  allowed 
where  such  a  decree  is  not  made  in  the  foreclosure  of  mortgages.'^ 
A  decree  foreclosing  this  right  of  the  vendee  to  purchase  should 
give  him  a  definite  time  within  which  to  perform  his  contract.^ 
■  Where  a  lien  is  reserved  for  the  security  of  a  bond  for  purcliase 
money,  the  lien  may  be  enforced  in  equity  though  the  bond  be 
lost.9  A  purchaser  under  a  contract  of  purchase  cannot  maintain 
a  suit  for  specific  performance  after  he  has  assigned  to  another  his 

1  Micou  V.  Ashurst,  55  Ala.  607  ;  Pal-     Wis.  588 ;   Brock  v.  Hidy,   13  Ohio  St. 
mer  v.  Harris,  100  111.  276;  McConnell  v.     306. 

Beatiie,  34  Ark.  113.  ^  Calvin  v.  Duncan,  12  Bush  (Ky.),  101. 

2  McKleroy  v.  Tulane,  34  Ala.  78.  See  Johnston  v.  Cochrane,  84  N.  C.  446. 

3  Burkett   v.   Munford,    70  Ala.   423;  6  Vail  v.  Drexel,  9   Bradw.   (111.)  439. 
Munford  o.  Pearce.Ib.  452  ;  May  v.  Lewis,  See  §  1451. 

22  Ala.  646  ;  Reeve  v.  Downs,  22  Ivans.  '^  Fitzhugh  v.  Maxwell,  34  Mich.  138. 

330.  8  Keller  v.  Lewis,  53  Cal.  113  ;  VaU  i;. 

*  Harvey  v.  Morris,  63  Mo.  475 ;  Reeve  Drexel,  supra. 

V.  Boyvns,  supra ;  Mclndoe  v.  Morman,  26  ^  Robinson  v.  Dix,  18  W.  Va.  528. 
164 


TRANSFER   AND   ENFORCEMENT   OF   THE   LIEN.       [§§  287,  238. 

right  to  receive  the  conveyance,  for  he  has  then  no  cause  of  action 
unless  it  be  as  trustee  for  his  assignee.! 

237.  Tender  of  performance.  —  It  is  no  defence  to  an  equi- 
table action  to  enforce  a  lien  under  a  contract  for  unpaid  purchase 
money,  that  the  vendor  did  not  tender  a  deed  before  bringing 
suit.2  After  the  time  for  the  performance  of  the  contract  has 
passed,  without  any  offer  by  either  party  to  perform  on  that  day, 
there  can  be  no  action  at  law  upon  it  by  either,  but  either  may 
claim  a  specific  performance  in  equity,  making  an  offer  of  per- 
formance in  the  bill.^  If  no  tender  was  made  before  bringing 
suit,  the  complainant  must  aver  a  readiness  and  willingness  to 
execute  a  deed  that  will  vest  the  title  in  the  purchaser.  In  Indi- 
ana it  is  held  that  the  tender  must  be  kept  good  by  bringing  the 
deed  into  court,*  but  generally  an  offer  to  deliver  the  deed  is  suf- 
ficient. If  an  action  to  foreclose  the  lien  be  brought,  not  by  the 
vendor,  but  by  his  personal  representatives,  they  should  show  that 
they  are  able  and  willing  to  give  a  deed,  or  else  make  the  heir  or 
devisee  who  holds  the  legal  title  in  trust  for  the  purchaser  a  party 
to  tlie  suit,  so  that  he  will  be  bound  by  it.^ 

238.  A  vendor  exhausts  his  lien  by  a  foreclosure  sale.  If 
a  vendor,  who  has  entered  into  a  contract  to  convey  upon  the  pay- 
ment of  the  purchase  money,  elects  to  foreclose  his  contract  of 
sale,  he  cannot,  after  the  land  has  been  sold  and  bid  in  by  him 
for  a  part  only  of  the  judgment,  and  then  redeemed  by  the  pur- 
chaser, still  claim  to  have  a  vendor's  lien  upon  the  land  for  the 
balance  of  the  purchase  money .*^ 

The  decree  must  conform  to  the  pleadings.  If  the  bill  asks 
for  a  sale  of  the  land  under  the  lien,  or  for  a  rescission  of  the  con- 
tract of  sale,  a  decree  cannot  be  entered  for  the  satisfaction  of 
the  purchaser's  note  for  the  unpaid  purchase  money  ;  that  the 
vendor  retain  the  moneys  received  by  him  ;  and  that  the  pur- 
chaser retain  possession  of  the  land,  and  that  the  title  be  vested 

1  Green  v.  Belts,  1  McCrary,  72.  venson  v.  Maxwell,  2  N.  Y.  408.     And  see 

2  Freeson  i;.  Bisscli,  63  N.  Y.  168.  See,  Mc Williams  v.  Biookens,  39  Wis.  334  ; 
however,  McCaslin  v.  State,  44  Ind.  1.51  ;  Watson  v.  Bell,  45  Ala.  452. 
McKeuzie  v.  Baldiidfre,  49  Ala.  564  ;  Tur-  *  Goodwine  u.Morey  (Ind.)  12  N.  East, 
neri;.  La.-siter,  27  Ark.  662;  Wakefield  v  Rep.  82;  Melton  v.  Cotfelt,  .59  Ind.  310; 
.Johnson,  26  Ark.  506  ;  Paschal  v.  Bran-  Smith  v.  'J'lirner,  50  Ind.  367  ;  Sowlo  v. 
don,  79  N,  C.  .504;  Evans  i;.  Feeny,  81  Iloldridge,  63  Ind.  213  ;  Overly  v.  Tipton, 
Ind.    532;    Munford    v.    Tearce,    70  Ala.  68  Ind.  410. 

'*''''^-  ''  Thomson  v.  Smith,  63  N.  V.  30. 

»  Bruce  v.  Tihon,  25  N.  Y.  194;    Ste-         <>  Todd  v.  Davey,  60  Iowa,  532. 

105 


§§  239,  240..]     vendor's  lien  by  contract  or  reservation. 

in  him.     The  decree   should  either  enforce  the  vendor's  lien  or 
rescind  the  contract,^ 

239.  A  sale  of  the  land  under  order  of  court  to  satisfy 
the  lien  passes  the  growing  crops,  unless  they  are  reserved  in 
the  order  of  sale.^  But  the  vendor's  lien  is  subordinate  to  any 
lawful  lien  existing  upon  the  crops  at  the  time  it  is  sought  to 
charge  them  with  the  vendor's  lien.^  Before  the  vendor,  however, 
can  resort  to  the  rents  and  profits  of  the  land  sold  in  payment  of 
the  debt  for  purchase  money,  he  must  allege  in  his  bill  or  prove 
that  the  land  itself  is  insufficient  to  pay  the  debt,  the  land  being 
the  primary  fund  for  its  satisfaction,  and  the  rents  and  profits 
only  an  incidental  fund.'^ 

240.  A  purchaser  in  possession  under  a  contract  of  sale 
may  be  restrained  fron^  impairing  the  vendor's  lien  by  the  re- 
moval of  buildings  or  otherwise.  If  the  vendee  sell  the  buildings 
to  one  who  buys  with  knowledge  of  a  fraudulent  intent  to  impair 
the  vendor's  lien,  no  title  passes  as  against  the  vendor,  who  may, 
under  a  judgment  obtained  against  the  vendee  for  purchase 
money,  levy  on  and  sell  the  house  in  the  hands  of  the  purchaser. 
But,  inasmuch  as  the  vendee  in  possession  is  the  equitable  owner, 
he  may  properly  remove  buildings  and  fences,  if  this  does  not  im- 
pair the  vendor's  security ;  thus,  he  may  remove  them  for  the 
purpose  of  erecting  better  ones  in  the  place  of  those  removed. 
The  vendor  in  such  case  would  have  no  right  to  interfere.  He 
could  not  maintain  replevin  for  the  house  removed,  or  for  the 
timbers  composing  the  house. ^ 

1  Baldwin  v.  Whaley,  78  Mo.  186.  3  Wooten  v.  Bellinger,  17  Fla.  289. 

2  Yates  V.  Smith,  11  Bradvv.  (Ill)  459 ;         *  Moore  v.  Knight,  6  Lea  (Tenn.j,  427. 
Smith  V.  Hague,  25  Kans.  246;  Johnston         8  Weed  v.  Hall,  101  Pa.  St.  592. 

V.  Smith,  70  Ala.   108.     See  §§  658,  676, 
699,  780. 

166 


CHAPTER  VII. 

ABSOLUTE  DEED  AND   AGREEMENT   TO   RECONVEY. 


PART    I. 


When  they  constitute  a  Mortgage,  241-255. 


PART   II. 


When   they  constitute  a  Conditional  Sale, 
256-281. 


PART  I. 

WHEN   THEY   CONSTITUTE   A   MORTGAGE. 

241.  A  defeasance  is  an  essential  requisite  of  a  mortgage.^ 
It  may  be  in  the  instrument  of  conveyance,  or  in  a  separate  writ- 
ing, or  it  may  exist  in  parol  merel}^  ;  but  it  must,  nevertheless, 
exist  in  some  form.  The  grantor  must  have  a  conditional  right 
to  have  the  property  restored  to  him.  There  must  be  a  valid  and 
binding  agreement  of  some  sort  on  the  part  of  the  grantee  to 
yield  up  the  property  received  by  him,  when  the  conditions  upon 
which  the  conveyance  was  made  have  been  performed,  else  there 
is  lacking  an  element  indispensable  to  a  mortgage.  The  defea- 
sance must  be  in  favor  of  the  grantor  himself,  and  not  in  favor  of 
any  third  person.  It  does  not  avail  anything  that  the  convey- 
ance contains  a  condition  for  a  reconveyance,  if  the  reconveyance 
is  to  be  made  to  some  one  other  than  the  grantor  ;  whatever  else 
such  an  instrument  may  be,  it  is  not  a  mortgage.^ 

In  equity  the  rule  is  different,  and  the  transaction  is  a  mort- 
gage, although  the  defeasance  be  to  some  one  other  than  the 
grantor;  thus,  for  instance,  it  may  be  in  the  form  of  an  agree- 
ment by  one  person  to  purchase  property  at  a  foreclosure  sale,  or 

^  Defeasance    "is    fetched     from    the  land,  23  Me.  234;  Marvin  v.   Titsworth, 

French   word   defaire,   i.   e.,  to  defeat  or  10  Wis.   320;  Carr  v.  Kisinf^,  62  III.  14, 

undo;  infectum   reddere  quod  factum  est."  19  ;  Stephenson  v.  Thompson,  13  111.  186  ; 

Co.  Litt.  237  a.  Mat,aiu.sson  v.  Jolmson,  73  111.  156  ;  Flagg 

2  Tayne  v.  Patterson,  77  Pa.  St.  134  ;  v.  Mann,  14  Tick.  (Mass.)  467,  479;  Bick- 

I'enn.   Life  Ins.  Co.  v.  Austin,  42  Pa.   St.  ford  v.  Daniels,  2  N.  H.  71  ;  Hill  o.  Grant, 

257  ;  Sliaw  v.  Erskinc,  43  Me.  371 ;  War-  46  N  Y.  496  ;  Low  v.  Henry,  9  Cal.  538  ; 

ren  v.  Lovis,  53  Mc.  463 ;  Treat  v.  Strick-  Micou  v.  Ashurst,  55  Ala.  607. 

167 


§  242.]       ABSOLUTE  DEED   AND   AGREEMENT   TO   RECONVEY. 

other  public  sale,  and  to  hold  it  until  the  purchase  money  be  re- 
paid by  the  party  who  receives  the  agreement.^ 

At  law,  to  constitute  a  mortgage  the  conveyance  must  be  made 
by  the  mortgagor,  and  the  defeasance  by  the  mortgagee.  A 
bond,  therefore,  made  by  the  grantee  to  his  grantor,  in  considera- 
tion of  the  conveyance,  and  conditioned  to  support  his  grantor  for 
life,  and  in  case  of  neglect  to  reconvey  the  land,  does  not  consti- 
tute a  mortgage.  If  the  deed  be  made  by  the  person  by  whom 
the  conditions  are  to  be  performed,  and  he  take  back  a  bond  for 
a  reconveyance  on  the  performance  of  the  conditions,  the  transac- 
tion may  be  a  mortgage.  But  in  the  above  case  the  deed  is  to 
the  person  by  whom  the  conditions  are  to  be  performed,  and  his 
bond  is  simply  a  covenant  to  reconvey,  which  may  be  specifically 
enforced  in  equity.  There  is  no  conveyance  from  the  supposed 
mortgagor  to  the  supposed  mortgagee.  Although  such  a  trans- 
action is  not  a  legal  mortgage,  the  bond  may  be  enforced  in  equity 
by  a  decree  for  reconveyance.^ 

242.  The  usual  proviso  in  a  legal  mortgage  is,  that  upon 
the  payment  of  the  debt,  or  performance  of  the  duty  named, 
"  then  this  deed  shall  be  void."  But  any  equivalent  expression 
may  be  used.^  If  it  appear  from  the  whole  instrument  that  it 
was  intended  to  be  a  security  for  the  payment  of  a  debt  or  the 
performance  of  a  duty,  it  is  a  mortgage,  although  there  be  no 
express  provision  that  upon  the  fulfilment  of  the  condition  the 
deed  shall  be  void.^     The  substance  and  not  the  form  of  the  ex- 

1  See  §§  268,  331.  New  York :  Weed  v.  consiu  Cent.  R.  R.  Co  v.  Wisconsin  River 
Stevenson,  Clarlve,  166  ;  UrafreviUey.  Kee-  Land  Co.  (Wis.)  36 N.  W.  Rep.  837  ;  Iloyt 
ler,  1  Thomp.  &  C.  486 ;  Barton  v.  May,  3  v.  Fass,  64  Wis.  273,  279 ;  25  N.  W. 
Sandf.  Ch.  450;  Sahler  v.  Signer,  37  Rep.  45;  Bernstein  t;.  Humes,  71  Fla.  260, 
Barb.  329 ;  S.  C.  44  lb.  606 ;  McBurney  265. 

V.  Wellman,  42  lb.  390 ;  Spicer  v.  Hunter,         The  following  clause  in  a  deed,  "Never- 

14  Abb.  Pr.  4;  Ryan  v.  Dox,  34  N.  Y.  theless,  this  deed  of  conveyance  is  null  and 

307.    Illinois :  Reigard  v.  McNeil,  38  111.  void  and  of  no  effect  until  all  the  pur- 

400.     Maine:  Stinchfield  v.  Milliken,  71  chase  money  is   paid,  then   of  full  force 

Me.  567.     Michigan  :  Jeffery  v.  Hursh,  58  and  effect,"  is  merely  a  lien  or  mortgage 

Mich.  246.   Florida :  Lindsay  i'.  Matthews,  to   secure    the   unpaid    purchase   money. 

17  Fla.  575,  588  ;  First  Nat.  Bank  v.  Ash-  The  deed  does  not  become  void  absolutely 

mead,  2  So.  Rep.  657.   Minnesota ;  Martin  upon  a  non-compliance  with   the   condi- 

«;.  Pond,  30  Fed.  Rep.  15.  tion.     Miskelly  v    Pitts,  9  Bax.  (Tenn.) 

2  Robinson  v.  Robinson,  9  Gray  (Mass.),  193. 

447.     But  see  Chase  v.  Peck,  21  N.  Y.  581,  *  Steel  v.  Steel,  4  Allen  (Mass.),  417  ; 

where   the  grantee  in  such  case  pledged  Lanfair  v.  Laufair,  18  Pick.  (Mass.)  299  ; 

the  land  and  the  produce  of  it.  Pearce  v.  Wilson,  HI  Pa.  St.  14. 
8  Adams  v.  Stevens,  49  Me.  362  ;  Wis- 

168 


WHEN   THEY    CONSTITUTE   A   MORTGAGE.  [§  243. 

pression  is  chiefly  to  be  regarded  ;  and  an  enlarged  and  liberal 
view  is  taken  to  ascertain  and  carry  into  effect  the  intention  of 
the  parties.  If  there  be  in  the  deed  itself,  or  in  any  separate 
deed  executed  at  the  same  time,  and  constituting  with  the  con- 
veyance one  transaction,  a  provision  that  the  estate  shall  be  re- 
conveyed  upon  the  payment  of  the  debt,  such  stipulation  consti- 
tutes a  defeasance  as  much  as  if  the  words,  "  on  condition,"  or 
"  provided,  however,"  wei'e  used.^  Thus,  a  reservation  by  a 
grantor  of  the  privilege  of  "  redeeming  "  within  a  specified  time, 
creates  a  mortgage  if  the  deed  was  given  to  secure  a  debt.^ 

Upon  thjs  principle  a  lease  for  years,  in  which  the  lessor  ac- 
knowledges the  receipt  in  advance  of  a  sum  in  full  for  the  rent 
of  the  premises  during  the  term,  and  in  which  "  the  lessee  cove- 
nants, promises,  and  agrees  to  reconvey  said  premises  to  the  lessor, 
upon  the  payment  of  the  aforesaid  sum  and  interest  thereon,"  is 
a  mortgage,  and  the  relation  of  the  parties  is  that  of  mortgagor 
and  mortgagee.-^  If  the  lessee  receives  rents  and  profits,  before 
the  term  expires,  to  the  amount  of  the  sum  advanced  by  him,  and 
interest  thereon,  his  estate  for  years  is  thereupon  defeated,  and 
the  lessor  is  in  of  his  old  estate. 

The  condition  of  defeasance  need  not  necessarily  be  inserted  in 
the  body  of  the  deed.  It  has  the  same  effect  when  added  under- 
neath in  such  a  way  as  to  be  part  of  the  deed,  or  when  executed 
separately.*  A  condition  written  upon  the  back  of  a  mortgage 
and  not  signed  may  be  held  to  be  a  part  of  the  deed,  and  there- 
fore together  wdtli  it  may  constitute  a  mortgage.^ 

243.  Objections  to  a  separate  defeasance.  —  It  is  sometimes 
for  the  convenience  of  the  parties  to  make  the  defeasance  b}'  a 
separate  instrument,  so  that  the  grantee,  in  the  absence  of  a  rec- 
ord of  this  instrument,  is  apparently  the  absolute  owner.  This 
form  of  mortgage  has  been  used  sometimes  to  the  prejudice  of 
the  mortgagor,  and  the  courts  have  at  times  discouraged  the  use 
of  it  as  much  as  possible.     Thus  at  an  early  date  Lord  Chancel- 

1  Taylor  v.   Weld,  5  Mass.  109;  Scott  2  Stryker  u.  Ilersliy,  38  Ark.  264  ;  Mel- 

V.   iMcFarland.  1.3  Ma.«H.  309;    Austin  v.  Ion  v.  Lemmon,  III  Pa.  St.  5G. 

Downer,  2.5  Vt.  .'5.58;    Oldhani  r.  Ilalley,  "  Nu(,'ent  v.  Kiloy,  1  Met.  (Ma.rs.)  117. 

2  J.  J.  Marsii.  (Ky.)  113.     And  see  Fer-  ••  Perkins  v  DihI.lc,  10  Ohio,  433;  Kent 

puson  V.  Miller,  4  Cal.  97  ;  Whitcoml)  v.  v.  Allbritain,  .'i  Miss.  (4  How.)  317  ;   Hald- 

Sntherland,    18  111.  578.     But  the  instru-  win  ;;.  Jenkins,  23  Miss.  200. 

ment  is  not  a  mortgage  unless  equivalent  ''  Whitney  v.  French,  25  Vt.  063. 
words  are  used.     Goddard  v.  Coo,  55  Me. 
385. 

169 


§  244.]        ABSOLUTE  DEED   AND   AGREEMENT   TO  RECONVEY. 

lor  Talbot  observed  :  ^  "  In  the  northern  parts  it  is  the  custom  in 
drawing  mortgages  to  make  an  absolute  deed,  with  a  defeasance 
separate  from  it ;  but  I  think  it  a  wrong  way,  and  to  me  it  will 
always  appear  with  a  face  of  fraud,  for  the  defeasance  may  be 
lost,  and  then  an  absolute  conveyance  is  set  up.  I  would  dis- 
courage the  practice  as  much  as  possible."  In  another  case.  Lord 
Chancellor  Hardwicke  declared  it  to  be  an  imposition  upon  the 
mortgagor  not  to  insert  the  provision  for  reconveyance  in  the 
deed  itself.^ 

244.  At  law  an  absolute  deed  and  separate  defeasance  or 
agreement  to  reconvey,  executed  at  the  same  time,  amount  to  a 
mortgage.^     Such  a  deed  and  agreement   to  reconvey  the  estate 

1  In  Cotterell  y.  Purchase,  Cas.  Temp.  105;  Enos  v.  Sutherland,  11  Mich.  538. 
Talbot,  61.  Minnesota :  Hill  v.  Edwards,  11  Minn.  22  ; 

2  Baker  v.  Wind,  1  Ves.  Sen.  160.  Benton  v.  Nicoll,  24  Minn.  221  ;  Archam- 

3  Lanahan  u.  Sears,  102  U.S. 318;  Dow  bau  v.  Green,  21  Minn.  520;  Martin  v. 
u.  Chamberlin,  5  McLean,  281;  Teal  v.  Pond,  30  Fed.  Kep.  15  ;  Batman  v.  James, 
Walker,  111  U.  S.  242.  Alabama:  Free-  34  Minn.  547.  Missouri:  Sharkey  v. 
man  v.  Baldwin,  13  Ala.  246 ;  Sims  v.  Sharkey,  47  Mo.  543  ;  Copeland  v.  Yoa- 
Gaines,  64  Ala.  392  ;  Cosby  v.  Buchanan,  kum,  38  Mo.  349.  Nebraska:  Connolly  w. 
1  So.  Rep.  898.  Colorado :  Walker  v.  Tif-  Giddings,  37  N.  W.  Rep.  939.  New  Jer- 
fin  Mining  Co.  2  Colo.  89.  Connecticut,  sey :  Vliet  v.  Young,  34  N.  J.  Eq.  15. 
Gunn's  App.  10  Atl.  Rep.  498.  Georgia.  New  York:  Decker  v.  Leonard,  6  Lans. 
Clark  U.Lyon,  46  Ga.  202;  Morrison  t-.  264;  Lane  ?;.  Shears,  1  Wend.  433;  Peter- 
Markham,  1  S.  E.  Rep.  425.  Illinois:  son  v.  Clark,  15  Johns.  205;  Clark  v. 
Preschbaker  v.  Feaman,  32  111.  475 ;  Henry,  2  Cow.  324 ;  Henry  v.  Davis,  7 
Ewart  V.  Walling,  42  111.  453 ;  Bearss  v.  Johns.  Ch.  40 ;  Brown  v.  Dean,  3  Wend. 
Ford,  108  111.  16.  Indiana:  Harbison  v.  208;  Hall  v.  Van  Cleve,  11  N.  Y.  Leg. 
Lemon,  3  Blackf.  51 ;  Watkins  r.  Gregory,  Obs.  281;  Weed  v.  Stevenson,  Clarke, 
6  lb.  113;  Crassen  t'.  Swoveland,  22  Ind.  166.  North  Carolina:  Robinson  v.  Wil- 
427  ;  Lentz  v.  Martin,  75  Ind.  228.  Iowa:  loughby,  65  N.  C.  520;  Mason  v.  Hearne, 
Caruthers  v.  Hunt,  18  Iowa,  576;  Rad-  1  Busb.  Eq.  88.  Ohio:  Marshall;;.  Stew- 
ford  V.  Folsom,  58  Iowa,  473.  Kansas:  art,  17  Ohio,  356.  Pennsylvania:  Fried- 
Overstreet  v.  Baxter,  30  Kans.  55.  Ken-  ley  v.  Hamilton,  17  S.  &  R.  70;  Manufac- 
tucky :  Ogden  i\  Grant,  6  Dana,  473  ;  Ed-  turers',  &c.  Bank  v.  Bank  of  Pa.  7  W.  &  S. 
rington  v.  Harper,  3  J.  J.  Marsh.  353 ;  335 ;  Guthrie  v.  Kahle,  46  Pa.  St.  331 ; 
Honore  v.  Hutchings,  8  Bush,  687  ;  Frey  Houser  v.  Lamont,  55  Pa.  St.  311 ;  Kerr  v. 
V.  Campbell,  3  S.  W.  Eep.  368.  Maine  :  Gilmore,  6  AVatts,  405 ;  Colwell  v.  Woods, 
Shaw  V.  Erskine,  43  Me.  371 ;  Warren  v.  3  lb.  188 ;  Stoever  v.  Stoever,  9  S.  &  R. 
Lovis,  53  Me.  463;  Blaney  v.  Bearce,  2  434;  John.ston  t-.  Gray,  16  lb.  361  ;  Jaques 
Me.  132;  Mills  v.  Darling,  43  Me.  565;  i>.  Weeks,  7  Watts,  261.  Tennessee  :  Ham- 
Clement  V.  Bennett,  70  Me.  207  ;  Bunker  monds  v.  Hopkins,  3  Y'erg.  525 ;  Blizzard 
V.  Barron,  8  Atl.  Rep.  253  ;  Stowe  v.  Mer-  v.  Craigmiles,  7  Lea,  693.  Texas  :  Baxter 
rill,  77  Me.  550.  Maryland:  Gaither  v.  r.  Dear,  24  Tex.  17  ;  Moores  ?;.  Wills,  5 
Clark,  8  Atl.  Rep.  740.  Massachusetts  :  S.  W.  Rep.  675.  Vermont :  Reynolds  v. 
Bayley  v.  Bailey,  5  Gray,  405 ;  Judd  v.  Scott,  Brayt.  75.  West  Virginia :  Hof£- 
Flint,  4  lb.  557;  Murphy  v.  Galley,  1  man  v.  Ryan,  21  W.  Va.  415.  Wiscon- 
Allen,  107.  Michigan:  Jeffery  d.  Hursh,  sin:  Plato  v.  Roe,  14  Wis.  4.53;  Second 
58  Mich.  246;  Ferris  y.  Wilcox,  51  Mich.-  Ward   Bank  v.   Upmann,   12  Wis.  499; 

170 


WHEN   THEY   CONSTITUTE  A   MORTGAGE.  [§  244. 

upon  payment  of  a  certain  sum  of  money,  or  upon  the  perform- 
ance of  some  other  condition,  have  always  been  held  to  constitute 
a  legal  mortgage,  if  the  instruments  are  of  the  same  date,  or 
were  executed  and  delivered  at  the  same  time,  and  as  one  trans- 
action.^ It  is  sufficient  that  the  deed  and  defeasance  are  substan- 
tially contemporaneous  and  were  manifestly  meant  to  constitute 
a  mortgage.^  A  defeasance  made  after  the  record  of  the  deed  is 
sufficient  where  the  deed  was  made  without  the  knowledge  of  the 
grantee,  and  the  obligation  to  reconvey  was  made  upon  his  being 
informed  of  it.^  When  the  deed  and  defeasance  are  executed  at 
the  same  time,  or  are  agreed  upon  at  the  same  time,  it  is  a  con- 
clusion of  law  that  they  constitute  a  legal  mortgage.* 

The  instrument  of  defeasance  must  be  of  as  high  a  nature  as  the 
deed  itself ;  and  consequently  a  written  agreement  to  reconvey  not 
under  seal,  though  made  at  the  same  time  with  the  deed,  does  not 
at  law  constitute  a  mortgage.^  If  not  under  seal,  the  agreement 
will  constitute  a  mortgage  only  in  equity.^  The  defeasance  must 
also  be  absolute.  A  contract  which  gives  the  grantee  the  option 
to  reconvey,  or  pay  a  sum  of  money,  is  not  a  defeasance  which,  in 
connection  with  the  deed,  will  constitute  a  mortgage.  The  fee  is 
absolute  in  the  grantee  if  he  so  elect. ^ 

An  absolute  deed  with  a  defeasance  passes  the  legal  title  to  the 
property  even  in  states  in  which  it  is  held  that  a  mortgage  in  the 
usual  form  does  not  pass  the  title. '^ 

Knowlton  v.  Walker,  13  Wis.  264 ;  Brink-  *  Wilson   v.   Shoenberger,   31    Pa.    St. 

man  v.  Jones,  44  Wis.  498.  295 ;  Keitenbaugh  v.  Ludwick,  31  Pa.  St. 

In  Georgia  it  is  now  provided  that  aeon-  131 ;  Jeffrey  v.  Hursh,  supra. 

veyance  to  secure  a  debt,  with  a  bond  to  ^  Murphy   v.   Galley,   1  Allen  (Mass.), 

reconvey,  shall  be  held  by  the  courts  to  be  107;   Kelleran  v.   Brown,   4   Mass.  443; 

an  absolute  conveyance  and  not  a  mort-  Flint  v.  Sheldon,  13  Mass.  443  ;  Cutler  v. 

gage.     Code  1882,  §  1969.     Such  a  con-  Dickinson,  8  Pick.  (Mass.)  386;  Flaggy, 

veyance  cannot  be  foreclosed  as  an  equi-  Maun,  14  lb.  467;  Scituate  v.  Hanover, 

table  mortgage.     Broach  v.  Smith,  75  Ga.  16  lb.  222;  Jewett  v.  Bailey,  5  Me.  87; 

159.     See  §  292.  French  v.  Sturdivant,  8  Me.  246  ;  Warren 

1  Nugent  V.  Riley,  1  Met.  (Mass.)  117;  v.  Lovis,  53  Me.  463.  See,  however,  Ilar- 
Erskine  v.  Townsend,  2  Mass.  493;  Tay-  risou  v.  Phillips  Academy,  stipra ;  Runlet 
lor  V.  Weld,  5  Mass.  109 ;  Scott  v.  McFar-  v.  Otis,  2  N.  H.  167. 

land,  13  Mass.  ."JOS;  Newhall  v.   Burt,  7  "  I^'lagg  r.  Maun,  14  Pick.  (Mass.)  467; 

Pick.  (Mass.)  157  ;  Stocking  i;.  Fairchild,  Eaton   v.    Green,   22   lb.    526;    Cuiler  u. 

5  lb.  181  ;  Eaton   v.  Whiting,  3  lb.  484;  Dickinson,  8  lb.  386;  Kelleran  v.  Brown, 

Lanfair  v.  Larfair,  18  lb.  299.  4  Mass.  443. 

2  Jeffery  v.  Hursh,  58  Mich.  246.  T  Fuller  i'.  Pratt,  10  Me.  197. 

'  Harrison    v.    Phillips    Academy,    12         *  Tliaxton  v.  Roberts,  66  Ga.  704;  Mc- 


Mus8.  456. 


171 


§§  245,  246.]      ABSOLUTE  DEED   AND   AGREEMENT   TO   RECONVEY. 

245.  At  law  the  deed  and  defeasance  must  be  part  of  the 
same  transaction,  and  must  take  effect  at  the  same  time.^  A 
subsequent  defeasance  cannot  be  allowed  to  affect  the  prior  con- 
veyance. The  transaction  must  be  a  mortgage  at  its  inception, 
and  cannot  become  so  afterwards.  The  defeasance  must  be  such 
that  it  may  be  considered  as  if  it  were  annexed  to,  or  inserted  in, 
the  same  deed,  and  construed  as  containing  the  condition  upon 
the  performance  of  which  the  estate  may  be  defeated.^ 

If  at  the  time  of  executing  an  absohite  deed  the  parties  verbally 
agree  that  a  defeasance  shall  be  executed  subsequently,  on  re- 
quest, such  defeasance,  when  executed,  will  relate  back  to  the 
deed  and  make  it  a  mortgage.^ 

It  is  not  necessary  that  the  deed  and  bond  of  defeasance  should 
both  bear  the  same  date.*  If  these  have  once  been  given,  and  a 
reconveyance  made  in  accordance  with  the  terms  of  the  bond,  and 
subsequently  the  premises  are  reconveyed  to  the  obligor,  under  an 
agreement  that  the  same  bond  shall  continue  in  force  for  another 
reconveyance,  this  amounts  to  a  redelivery  of  the  bond,  and  makes 
the  transaction  a  mortgage.^  Where  the  defeasance  is  of  a  dif- 
ferent date  from  the  deed,  parol  evidence  is  admissible  to  prove 
that  they  were  delivered  at  the  same  time,  and  are  part  of  the 
same  transaction.^  It  is  not  necessary  that  the  deed  and  defea- 
sance should  in  terms  refer  to  each  other.  Their  connection  may 
be  established  by  parol  evidence.*^ 

246.  The  defeasance  must  be  executed  and  delivered  at 
the  same  time  with  the  deed  to  which  it  refers.  Although  it  is 
not  material  that  the  instruments  should  bear  the  same  date,  it  is 
essential  that  they  be  delivered  at  the  same  time.^  In  equity, 
however,  it  is  immaterial  that  the  deeds  and  the  agreement  to 
reconvey  be  executed  at  different  times ;  and,  as  will  be  noticed 
elsewhere,  it  is  immaterial  that  there  be  any  bond  or  agreement 

Lareni'.   Clark   (Ga.),  7  S.  E.  Rep.  230;  *  Harrison    v.    Phillips    Academy,    12. 

Jay  r.  Welchel  (Ga),  3  S,  E.  Rep.  906.  Mass.   456;     Newhall    v.    Burt,   7    Pick. 

Otherwise  in  Florida:  First  Nat.  Bank  (Mass.)  157. 

V.  Ashmead,  2  So.  Rep.  657,  660.  *  Mclntier  v.  Shaw,  6    Allen  (Mass.), 

1  Bennock  v.  Whipple,  12  Me.  346  5  83.  See  Judd  v.  Flint,  4  Gray  (Mass.), 
McLaughlin  v.  Shepherd,  32  Me.  143.  557. 

2  Murphy  v.  Galley,   1  Allen    (Mass.),  6  Brown  v.  Holyoke,  53  Me.  9. 

107,  and  cases  cited.  "  Preschbaker  v.  Feaman,  32  111.  475. 

3  Levering  v.  Fogg,  18  Pick.  (Mass.)  ^  gge  §  277;  Kelleran  v.  Brown,  4 
540;  and  see  Scott  v.  Henry,  13  Ark.  112.  Mass.  443;  Kelly  v.  Thompson,  7  Watts 
Conira,  Lund  u.  Lund,  1  N.  H.  39;  Cosby  (Pa.),  401;  Haines  v.  Thomson,  70  Pa. 
V.  Buchanan,  81  Ala.  574.  St.  434  ;  Cotton  v.  McKee,  68  Me.  486. 

172 


WHEN   THEY   CONSTITUTE   A  MORTGAGE.      [§§  247,  248. 

to  reconvey,  parol  evidence  being  sufficient  to  prove  the  transac- 
tion to  be  a  mortgage.^  When  made  subsequently,  it  must  be 
based  on  a  sufficient  consideration,  unless  it  be  professedly  exe- 
cuted in  explanation  of  the  intention  of  the  parties  at  the  time  of 
the  conveyance,  and  of  the  true  chai'acter  of  the  instrument.  A 
mere  voluntary  agreement  to  reconvey  cannot  be  enforced.^ 

247.  If  the  agreement  to  reconvey  be  delivered  as  an  es- 
crow, to  be  delivered  to  the  obligee  upon  the  repayment  of  the 
money  within  a  certain  time,  it  is  not  executed  and  delivered  at 
the  same  time  with  the  deed,  so  as  to  constitute  part  of  the  same 
transaction,  and  therefore  the  transaction  is  not  a  mortgage.^  A 
conveyance  absolute  on  its  face  was  made  to  one  who  advanced 
money  to  the  grantor,  and  at  the  same  time  executed  an  agree- 
ment to  reconvey  the  land,  upon  repayment  of  the  money  ad- 
vanced, within  thirty  days ;  and  both  instruments  were  placed  in 
the  hands  of  a  third  person,  with  instructions  that,  if  repayment 
was  not  so  made,  to  deliver  both  instruments  to  the  grantee.  The 
money  not  being  repaid,  both  instruments,  after  the  default,  were 
delivered  to  the  grantee,  the  grantor  so  directing.  It  was  held 
that  the  deed,  on  its  delivery  to  the  grantee,  conveyed  the  land 
to  him  absolutely,  and  was  not  a  mortgage.  The  maxim,  "  Once 
a  mortgage,  always  a  mortgage,"  was  declared  inapplicable  to  the 
case,  because  the  conveyance  never  was  a  mortgage.  The  trans- 
action was  to  the  effect,  that  if  the  advance  was  repaid  in  thirty 
days  it  should  be  a  loan  ;  but  if  not  repaid  in  that  time,  it  should 
be  the  consideration  for  an  absolute  conveyance  of  the  land  in 
question.* 

248.  Parol  evidence  is  admissible  to  connect  the  deed  and 
defeasance,  —  to  show  that  they  are  parts  of  the  same  transac- 
tion, and  that  together  they  were  intended  to  constitute  a  mort- 
gage.^    If  the  instruments  themselves  show  tlieir  connection,  and 

'  See  chapter  viii.;   Walker  v.  Tiffin  conditions;    but  in  Bodwell    v.   "Webster, 

Minin}^  Co.  2  Colo.  89;  Scott  y.  Henry,  13  supra,  the   bond  having  been  delivered  in 

Ark.    112;   Brinkman   v.  Jones,  44  Wis.  escrow,  and    the  conditions   never    being 

498.  performed,  it  was  never  delivered  to  the 

2  Vasser  v.  Viisser,  23  Miss.  378.  obligee.     See  Exton  v.  Scott,  G  Sim.  31. 

8  Bodwell  fc'.  Webster,  13  Pick.  (Mass.)  *  Glendenning    v.   Johnston,   33    Wis. 

411.     The  case   of  Carey  v.   Kawson,  8  347.     See  Le^'gett  y.  Edwards,  Ilopk.  (N. 

Mass.  159,  in  ajiparent  conflict  with  the  Y.)  530;  Henley  v.  llotaling,  41  Cal.  22, 

above,  is  explained  on  the   ground  that  28. 

the  deed  in  that  case  was  not  considered  ''  Gay  u.  Hamilton,  33  Cal.  686  ;  Presch- 

M  an  escrow,  but  as  a  deed  taking  effict  baker  v.  Feaman,  32  Hi.  475 ;  Till.-on  v. 

presently,  without  the  performance  of  the  Moulton,  23  111.  648  ;  Kelly  i>.  Thompson, 

173 


§§  249,  250.]    ABSOLUTE  DEED  AND  AGREEMENT  TO  RECONVEY. 

that  the  purpose  of  the  transaction  was  to  secure  a  debt,  no  parol 
proof  is  necessai'y.^  Such  proof  is  introduced,  not  to  contradict 
or  vary  the  writings,  but  to  show  that  they  are  really  one  ai'range- 
ment,  and  were  agreed  upon  at  the  same  time.^  It  is  also  admis- 
sible to  show  that  the  defeasance  has  been  lost  or  desti'oyed  by 
fraud  or  mistake.^ 

The  legal  effect  of  the  deed  and  bond  to  reconvey,  when  the 
instruments  are  not  ambiguous,  is  a  matter  of  \a,vi'  for  tlie  court.^ 

When  the  conveyance  and  the  agreement  to  reconvey  on  pay- 
ment of  the  purchase  money  are  on  their  face  of  even  date,  the 
transaction 'is  necessarily  a  mortgage,  and  parol  evidence  of  a  dif- 
ferent understanding  by  the  parties  will  not  be  received  to  con- 
vert it  into  a  conditional  sale.°  When  the  two  instruments  are 
of  different  dates,  such  evidence  is  admissible.  If  the  agreement 
recite  that  the  deed  was  delivered  on  the  same  day  with  the  agree- 
ment, although  the  dates  are  different,  primd  facie  the  transac- 
tion is  a  mortgage  ;  but  evidence  is  admissible  to  account  for  the 
discrepancy  between  the  dates  and  the  execution  of  the  paper ; 
and  such  evidence  may  show  that  the  deed  was  executed  upon  a 
sale,  and  not  as  security.^  If  it  be  acknowledged  or  proved  that 
it  was  in  the  beginning  a  sale,  the  burden  of  proof  is  upon  the 
grantor  to  establish  a  change  in  its  character^ 

249.  If  the  defeasance  express  a  condition  that  is  illegal, 
or  contrary  to  public  policy,  as  where  the  grantee  stipulated  that 
if  he  should  not  procure  two  witnesses  to  testify  to  a  certain  state 
of  facts  the  deed  should  be  null  and  void,  the  transaction  will  not 
be  held  to  constitute  a  mortgage,  because  the  legal  estate  having 
once  vested  in  the  grantee,  it  cannot  be  divested  by  his  failure  to 
perform  the  illegal  stipulation,  but  the  deed  to  him  becomes  and 
remains  absolute.^ 

250.  When  it  is  once  established  that  the  separate  instru- 
ment is  a  defeasance,  the  conveyance  assumes  the  character  of  a 

7  Watts  (Pa.),  401  ;  Franklin  v.  Ayer,  22  Brown  v.  Nickle,  6  Pa.  St.  390.     In  the 

Fla.  654 ;   First    Nat.   Bank  r.  Ashmead  latter  case  it  was  remarked  that  Kerr  v. 

(Fla.),  2  So.  Rep.  657.  Gilmore  "pushed  the  doctrine  to  its  ut- 

1  First  Xat.  Bank  v.  Ashmead,  supra.  most  verge."     Voss  v.  Eller,  109  Ind.  260 ; 

2  Reitenbaugh  v.  Ludwick,  31  Pa.  St.  Proctor  v.  Cole,  66  Ind.  576. 

131,  138;  Wilson  v.  Shoenberger,  lb.  295;  ^  Haines  v.  Thomson,  70  Pa.  St.  434. 

Umbenhower  y.  Miller.  101  Pa.  St.  71.  See  Baisch    r.   Oakeley,   68   Pa.    St.  92; 

3  Marks  v.  Pell,  1  Johns.  (N.  Y.)  Ch.  Gubbings  v.  Harper,  7  Phil.  (Pa.)  276. 
594.  '  Haines  v.  Thomson,  supra. 

*  Keith  V.  Catchings,  64  Ga.  773.  *  Patterson  v.  Donner,  48  Cal.  369. 

6  Kerr  v.  Gilmore,  6  Watts  (Pa.),  405 ; 

174 


WHEN   THEY   CONSTITUTE   A   MORTGAGE. 


[§  250. 


mortgage  with  the  inseparable  incident  of  redemption,  which  no 
agreement  of  the  parties  that  the  estate  shall  be  absolute,  if  the 
money  be  not  paid  at  the  day  fixed,  can  waive.  The  intent  of 
the  parties  contrary  to  the  rules  of  law  avails  nothing.  The 
right  of  redemption,  therefore,  cannot  be  affected  by  receipts  and 
accounts  given  by  the  grantor  to  the  grantee,  mentioning  the 
deed  as  an  absolute  conveyance.^  In  all  cases,  a  condition  ex- 
pi-ess  or  implied  that  the  deed  shall  be  void  if  payment  be  made 
at  the  day,  is  in  equity  regarded  as  substantially  performed  by 
a  subsequent  payment,  and  thereupon  reconveyance  may  be  en- 
forced.2 

Neither  can  the  right  of  redemption  be  restricted  to  the  mort- 
gagee personally,  as  such  a  restriction  is  inconsistent  with  the  na- 
ture of  a  mortgage,  and  void.^, 

A  deed  absolute  in  form,  with  an  agreement  under  seal  made 
by  the  grantee  at  the  same  time,  promising  to  reconvey  within  a 
specified  time,  upon  repayment  of  the  sum  paid  for  the  deed,  with 
interest,  constitutes  a  mortgage,  although  it  is  stipulated  that,  if 
the  grantor  fails  to  repay  the  sum  within  the  time  specified,  the 
agreement  shall  be  void  and  the  deed  absolute,  "  with  no  right  of 


1  Bayley  i-.  Bailey,  5  Gray  (Mass.),  505. 

2  Arkansas  :  Authony  v.  Anthony,  23 
Ark.  479.  Florida  :  Endel  v.  Walls,  16 
Fla.  786;  Lindsay  v.  Matthews,  17  Fla. 
57.5.  Georgia  :  Clark  v.  Lyon,  46  Ga.  202. 
Illinois  :  Hunter  v.  Hatch,  45  111.  178; 
Ewart  V.  Walling,  42  111.  453  ;  Reigard  v. 
McNeil,  38  III.  400 ;  Tillson  v.  Moulton, 
23  111.  648 ;  Clark  v.  Finlon,  90  111.  245. 
Indiana  :  Church  v.  Cole,  36  Ind.  34. 
Iowa:  Wilson  v.  Patrick,  34  Iowa,  362; 
Holliday  v.  Arthur,  25  Iowa,  19  ;  Richard- 
son I'.  Barrick,  16  Iowa,  407  ;  Scott  v.  Me- 
whirter,  49  Iowa,  487  ;  Brush  v.  Peterson, 
54  Iowa,  243.  Kansas  :  Moore  v.  Wade,  8 
Kau8.  380,  Maine  :  Howe  v.  Russell,  36 
Me.  115.  Maryland:  Baiigher  v.  Merry- 
man,  32  Md.  185.  Massachusetts  :  Moln- 
tier  V.  Shaw,  6  Alien,  83  ;  Parks  v.  Hall, 
2  I'ick.  206,  211;  Steel  v.  Steel,  4  Alien, 
417.  Minnesota:  Phfxiiiix  v.  Gardner,  13 
Minn  430.  Mississippi :  Vasser  v.  Vasscr, 
23  MisH  378.  Missouri  :  Davis  v.  Clay,  2 
Mo.  161  ;  Wilson  ;;.  Drnmrite,  21  Mo.  325. 
Hevada  :  Bin:.' hum  v.  'riiuinp--on,  4  Nev. 
224.    New  Hampshire  :  Soaieraworth  Sav- 


ings Bank  v.  Roberts,  38  N.  H.  22.  New 
Jersey  :  Sweet  v.  Parker,  22  N.  J.  Eq.453  ; 
Judge  V.  Reese,  24  N.  J.  Eq.  387  ;  De  Camp 
V-  Crane,  19  N.  J.  Eq.  166;  Vanderhaise 
V.  Hugues,  13  N.  J.  Eq.  244,  410.  New 
York:  Simon  v.  Schmidt,  41  Hun,  318; 
Miller  v.  McGuckin,  15  Abb.  N.  C.  204. 
Ohio  :  Cotterell  v.  Long,  20  Oliio,  464  ; 
Miami  Exporting  Co.  v.  Bank  of  U.  S., 
Wright,  249.  Pennsylvania  :  Swectser's 
App.  71  Pa.  St.  264  ;  Danzdsen's  Aj)p.  73 
lb.  65;  Harper's  App.  64  lb.  315;  Oden- 
baugh  V.  Bradfori],  67  Pa.  St.  96  ;  Halo  v. 
Schick,  57  Pa.  St.  319.  Rhode  Island  : 
Nichols  V.  Reynolds,  I  R.  1.  30.  Tennes- 
see: Bennett  v.  Union  Bank,  5  Humph. 
612  ;  McGan  v.  Marshall,  7  lb.  121;  Webb 
V.  Patterson,  7  Ii>.  431  ;  Ilinson  v.  Partee, 
11  lb.  587.  Vermont  :  Wright  v.  Bates,  13 
Vt.  341;  Molt  V.  Harrington,  12  Vt.  199. 
Wisconsin:  Yates  v.  Yates,  21  Wis.  473; 
Ro-an  V.  Walker,  1  Wis.  527. 

«  Johnston  v.  Gray,  16  S.  &.  R.  (Pa.) 
361  ;  and  sec  McClurkan  d.  Thompson,  69 
I'a.  St.  305. 

175 


§§  251,  252.]      ABSOLUTE   DEED   AND   AGREEMENT   TO   RECONVEY. 

redemption."  This  latter  provision  is,  in  fact,  regarded  as  quite 
decisive  of  the  understanding  of  the  parties  that  the  transaction 
was  a  conveyance  of  the  estate,  defeasible  upon  the  payment  of 
money. ^ 

The  right  to  redeem  and  the  right  to  foreclose  are  reciprocal. 
The  mortgagee  ma}'  demand  the  payment  of  the  debt,  and  may 
foreclose  the  mortgage  whenever  the  mortgagor  has  the  right  to 
redeem.^ 

251.  The  mortgagor  is  not  allowed  to  renounce  beforehand 
his  privilege  of  redemjjtion.  Generally,  every  one  may  renounce 
any  privilege  or  surrender  any  right  he  has ;  but  an  exception  is 
made  in  favor  of  debtors  who  have  mortgaged  their  property,  for 
the  reason  that  their  necessities  often  drive  them  to  make  ruinous 
concessions  in  order  to  raise  money.  When  one  borrows  money 
upon  the  security  of  his  property  he  is  not  allowed  by  any  form 
of  words  to  preclude  himself  from  redeeming.^  He  cannot  agree 
that  upon  default  his  mortgage  shall  become  an  absolute  convey- 
ance. A  subsequent  agreement  that  what  was  originally  a  mort- 
gage shall  be  regarded  as  an  absolute  conveyance  is  open  to  the 
same  objection,  and  will  not  be  sustained  unless  fairly  made,  and 
no  undue  advantage  is  taken  by  the  creditor.*  The  burden  is 
therefore  upon  the  creditor  to  show  that  the  right  of  redemption 
was  given  up  deliberately  and  for  an  adequate  consideration.^ 
Generally,  when  the  consideration  of  the  conveyance  was  an  ex- 
isting debt,  a  provision  that  if  the  amount  required  for  a  repur- 
chase be  not  paid  at  the  time  specified,  the  agreement  for  repur- 
chase shall  be  null  and  void,  or  that  there  shall  be  no  redemption 
afterwards,  is  looked  upon  as  a  device  to  deprive  the  debtor  of 
his  right  of  redemption,  and  is  therefore  disregarded.^ 

252.  Cancellation  of  defeasance.  —  A  deed  of  defeasance, 
made  at  the  same  time  with  an  absolute  deed,  may  afterwards, 
upon  sufficient  consideration,  be  cancelled,  so  as  to  give  an  abso- 

1  Murphy  v.  Galley,  1  Allen    (Mass.),     pie  f.  Lowe  (Ind.),  15  N.  W.  Rep.  834; 
107,  and  cases  cited.  Simon  v.  Schmidt,  41  Hun  (X.  Y,),  318. 

2  Taylor  v.  McClain,  60  Cal.  651.  *  Henry  v.  Davis,  7  Johns.  (N.  Y.)  Ch. 
8  §  1045  ;  Clark  r.  Henry,  3  Cow.  (N.  Y.)     40;  Wright  v.  Bates,  13   Vt.  341;  Mills 

324;  Rankin  v.  Mortimere,  7  Watts  (Pa.),  v.  Mills,  26  Conn.  213. 
372;  Cherry  v.  Bowen,  4  Sneed  (Tenn),  £■  Villa  v.  Rodriguez,  12  Wall.  323; 
41.5;  Pierce  v.  Robinson,  13  Cal.  116,  Locke  y.  Palmer,  26  Ala.  312;  Brown  v. 
125  ;  Robinson  v.  Farrelly,  16  Ala.  472;  Gaffney  28  111.  149;  Baugher  v  Merry- 
Clark  V.  Condit,  18  N.  J.  Eq.  358;  Youle  man,  32  Md.  185  ;  Shaw  v.  Walbridge,  33 
V.  Richards,  1  N.  J.  Eq.  (Sax.)  534 ;  Tur-  Ohio  St.  1  ;  Bearss  v.  Ford,  108  111.  16. 

6  Enos  V.  Sutherland,   11    Mich.   538; 

176  Batty  V.  Snook,  5  Mich.  231. 


WHEN   THEY   CONSTITUTE   A   MORTGAGE.  [§  252. 

lute  title  to  the  mortgagee,  if  no  rights  of  third  parties  have  in- 
tervened ;  but  no  agreement  can  be  made  at  the  time  of  creating 
the  mortgage  that  will  entitle  the  mortgagee,  at  his  election,  to 
hold  the  estate  free  from  condition,  and  not  subject  to  redemp- 
tion.i  Thus,  if  it  be  agreed  that  the  grantee,  whenever  he  shall 
be  compelled  to  pay  certain  liabilities  against  which  the  deed  was 
given  as  security,  may  then  take  immediate  possession  of  the  es- 
tates, according  to  certain  estimated  values,  to  such  an  extent  as 
shall  be  equal  to  the  debt  or  liability  so  paid  by  him,  this  stipu- 
lation does  not  change  the  nature  of  the  transaction,  which  must 
still  be  treated  as  a  mortgage.^ 

If  the  original  bond  of  defeasance,  which  was  given  at  the  time 
of  taking  the  deed,  be  surrendered  and  destroyed  at  the  expira- 
tion of  the  time  limited  therein,  and  a  new  bond  be  given  upon  a 
consideration  partly  new,  by  which  the  grantee  agrees  to  recon- 
vey  the  premises  upon  the  payment,  within  an  additional  time, 
of  a  larger  sum,  the  grantor  thereby  surrenders  his  title  as  mort- 
gagor, and  the  grantee  becomes  the  owner  in  fee  of  the  land.^  If 
the  original  bond  be  given  up,  and  a  new  bond  to  a  third  person 
be  executed  in  place  of  it,  the  transaction  loses  its  character  of  a 
mortgage. 

When  once  the  defeasance  has  been  delivered  up  for  a  valid 
consideration  to  be  cancelled,  and  the  original  transaction  is  thus 
confirmed  as  a  sale,  and  is  treated  as  such  by  the  grantor  or  his 
heirs,  it  cannot  afterwards  be  treated  as  a  mortgage  and  fore- 
closed.* 

But  in  states  where  a  mortgage,  whatever  its  form  may  be, 
creates  merely  a  lien  in  the  mortgagee  while  the  legal  title  re- 
mains in  the  mortgagor,  the  surrender  or  cancellation  of  the  de- 
feasance is  insufficient  to  restore  the  title  to  the  mortgagee.'^  And 
especially  if  the  contract  for  reconveyance  be  surrendered  upon 
the  express  agreement  of  the  grantee  to  reconvey  upon  the  gran- 
tor's paying  a  certain  sum  then  found  to  be  due,  the  surrender 
will  not  prevent  the  mortgagor's  redeeming  upon  the  terms  agreed 
upon.'' 

'  Trull   V.   Skinner,    17   Pick.    (Mass.)  29   111.   39,   42;  Carpenter   v.   Carpenter, 

213;   Harrison    v.    Pliillips   Academy,   12  70  111.457;  Kice  i'.  ]{icc,  4   Tick.    (Muss.) 

MasH.  4.^)6.  349^  350,  note. 

*  Waters   v.    Randall,  C    Met.    (Mass.)  *  Sliubcrt  v.  Stanley,  52  Ind.  40. 

*"'•'•  f"  IJrinkman  v.  Jones,  44  Wis.  498. 

^  Falls  V.  Conway  Miit.  Kire  In.s.  Co.  7  o  cl^rk  v.  Finlon,  90  111.  245. 
Allen  (Mjiiis  ),  40  ;    Ma.xfield  v.  Tatclien, 

vou  I.            12  "I^YT 


§  253.]         ABSOLUTE  DEED   AND   AGREEMENT   TO   RECONVEY. 

253.  Recording  of  separate  defeasance.  —  In  several  states 
it  is  provided  by  statute  that  a  bond  of  defeasance  shall  not  de- 
feat an  absolute  estate  against  any  one  other  than  the  maker,  his 
heirs,  devisees,  or  persons  having  actual  notice  thereof,  unless  it 
be  recorded.^  If  the  bond  be  not  recorded,  a  person  having  no 
knowledge  of  it  may,  of  course,  purchase  the  propert}^  or  attach  it 
as  belonging  absolutely  to  the  grantee  ;  but  if  he  has  actual  no- 
tice of  the  bond  as  constituting  a  part  of  the  transaction  of  the 
conveyance,  any  right  he  acquires  in  the  property  is  subject  to 
the  mortgage  created  by  the  bond.^  If  the  defeasance  recorded 
be  an  instrument  not  entitled  to  be  recorded,  as,  for  instance, 
when  it  has  not  been  acknowledged,  the  record  of  it  is  not  con- 
structive notice,  and  a  purchaser  from  the  grantee  without  notice 
of  the  defeasance  will  acquire  a  good  title  notwithstanding  such 
recorded  defeasance.^  The  recording  of  the  defeasance  is  not  nec- 
essary in  order  to  give  it  full  effect  as  between  the  parties  them- 
selves,^ but  only  as  against  other  persons  ;  and  as  against  them  it 
is  not  necessary  when  the  conveyance  on  its  face  does  not  pur- 
port to  be  absolute.^  Under  such  statutes  it  is  held  that  a  sep- 
arate defeasance  not  recorded  cannot  be  introduced  in  evidence 
to  show  that  an  absolute  conveyance  is  a  mortgage,  for  the  court 
cannot  assume  or  know  that  it  ever  would  be  recorded  ;  but  it 
will  have  that  effect  if  recorded  at  any  time  before  it  is  intro- 
duced in  evidence.^  Notice  of  the  existence  of  a  bond  of  defea- 
sance is  not  to  be  inferred  from  the  fact  alone  that  the  grantor 
continues  in  possession  after  the  deed  given  by  him  has  been  re- 
corded.'^ To  constitute  notice  of  a  legal  mortgage  as  distinguished 
from  one  that  is  equitable  merely,  a  purchaser  must  have  reason 
to  believe  that  the  conveyance  and  bond  were  executed  and  de- 
livered so  as  to  form  one  transaction.^ 

There  is  a  difference  of  opinion  as  to  the  meaning  of  the  words 
"  actual  notice,"  in  these  statutes.     On  the  one  hand  a  strict  con- 

1  See  §§  482-526,  548.  3  Cogan  v.  Cook,  22  Minn.  137. 

2  See    §§    482-526,    648;    Newhall   v.  «  Bayley  v.  Bailey,  5  Gray  (Mass.),  505, 
Pierce,  5  Pick.  (Mass.)  450;   Newhall  v.  510;  Jackson  r.  Ford,  40  Me.  381. 
Burt,  7  Pick.  (Mass.)  157  ;  Tufts  v.  Tap-  5  Russell  v.  Waite,  Walk.  (Mich.)  Ch. 
ley,  129  Mass.  380;  Purrington  v.  Pierce,  31. 

38  Me.  447  ;  Friedley  v.  Hamilton,  17  S.  ^  Tomlinson  v.  Monmouth  Mut.  F.  Ins. 

&  R.  (Pa.)  70  ;  Manufacturers',  &c.  Bank  Co.   47   Me.   232  ;    Smith   v.   Monmouth 

V.  Bank  of  Pa.  7    W.  &  S.    (Pa.)   335 ;  Mut.  F.  Ins.  Co.  50  Me.  96. 

Corpman  v.   Baccastow,  84  Pa.  St.  363 ;  '  Newhall  v.  Pierce,  supra. 

Catlin  r.  Bennatt,  47  Tex.  165;  Butman  ^  Newhall  r.  Burt,  supra. 
V.  James,  34  Minn.  547. 

178 


WHEN   THEY   CONSTITUTE  A   MORTGAGE.  [§  254. 

struction  is  given  them,  making  actual  knowledge  of  the  defea- 
sance necessary  to  charge  third  persons  with  actual  notice.  Thus, 
for  instance,  actual  notice  is  not  to  be  implied  from  knowledge 
that  the  grantor  has  remained  in  open  and  visible  possession  after 
his  conveyance  of  the  land  by  absolute  deed.^  But  on  the  other 
hand  it  is  held  that  knowledge  of  such  possession  on  the  part  of  a 
subsequent  purchaser  is  evidence  to  be  considered  upon  the  ques- 
tion of  actual  notice  of  the  grantor's  rights.  "  Actual  notice  "  is 
distinguished  from  mere  "  notice "  by  holding  that  no  construc- 
tive knowledge  can  be  imputed  to  the  purchaser  as  a  ground  of 
notice;  for  example,  actual,  open,  and  visible  occupation,  whether 
known  to  the  purchaser  or  not,  would  not  impute  actual  notice  to 
the  purchaser  of  the  rights  of  the  occupant,  but  would  be  evidence 
of  such  notice  if  the  occupation  were  known  to  the  purchaser. 
The  rule  is  stated  to  be,  that  notice  must  be  held  to  be  actual 
when  the  subsequent  purchaser  has  actual  knowledge  of  such  facts 
as  would  put  a  prudent  man  upon  inquiry,  which,  if  prosecuted 
with  ordinary  diligence,  would  lead  to  actual  notice  of  the  right 
or  title  in  conflict  with  that  which  he  is  about  to  purchase.^ 

These  provisions  do  not  require  that  every  conveyance  of  land 
accompanied  by  a  conditional  agreement  shall  be  recorded  as  a 
mortgage ;  but  only  when  the  agreement  is  analogous  to  that  of 
the  usual  condition  in  a  mortgage,  as,  for  instance,  an  agreement 
providing  that  if  certain  acts  are  performed,  the  deed  shall  not 
operate,  but  shall  become  void.-^ 

254.  Whether  the  record  furnishes  notice  of  the  nature 
of  the  transaction  depends  upon  attendant  circumstances.  Al- 
though the  instruments  may  in  fact  constitute  a  moi'tgage  as  be- 
tween the  parties,  yet,  if  they  do  not  of  themselves  show  that 
they  are  parts  of  one  transaction,  but  were  executed  on  different 
days,  and  each  is  complete  in  itself,  and  independent  of  the  other, 
the  record  of  them  is  not  notice  to  a  subsequent  purchaser  that 
they  constitute  a  mortgage.  He  is  bound  only  by  what  appears 
of  record,  and  he  has  a  right  to  assume,  from  the  record  in  such 
case,  that  there  was  an  absolute  sale  merely,  with  a  subsequent 
agreement  for  repurchase.*     It  is  usual,  howevei',  to  make  such 

^  §579;  Story's  Eq.  Jur.  §  399 ;  Lamb  scr,  5  Orcg.  313;    Wilson   v.   Miller,   16 

V.  Pierce,  113  Mass.  72;  White  v.  Foster,  lowu,  111  ;  Maupin  v.  Emmons,  47   Mo. 

102  Muss.  375;  Crasscn  v.  Swoveland,  22  304;  Porter  v.  Sevey,  43  Me.  519.     See 

Ind.  427,  434.  §  339. 

'^  Brinkman  i-.  Jones,  44  Wis.  498,  519;  »  Maeaulay  v.  Porter,  71  N.  Y.  173. 

per  Taylor,  J.;  and  see  Musgrove  v.  Bon-  *  Weide  v.  Gehl,  21  Minn.  449. 

179 


§§  255,  256.]      ABSOLUTE  DEED   AND   AGREEMENT   TO  RECONVEY. 

reference  in  the  bond  to  the  debt  secured,  or  to  the  deed  or  con- 
veyance, that  it  is  apparent  from  the  construction  of  these  in- 
struments alone  that  the  transaction  was  a  mortgage,  and  a  pur- 
chaser is  then  bound  accordingly.^  In  1736,  land  was  conveyed 
by  an  absolute  deed,  and  the  grantee,  in  1742,  conveyed  the  land 
by  a  deed  in  which  it  was  recited  that  his  grantee  had  purchased 
the  first  grantor's  right  of  redemption.  This  recital,  however, 
was  held  to  be  no  ground  for  presuming  that  the  first  deed  was  a 
mortgage.^ 

255.  Notice  by  possession.^ — When  the  mortgage  is  effected 
by  an  absolute  deed  accompanied  by  a  separate  defeasance,  pos- 
session and  actual  occupation  by  the  mortgagor  is  sufficient  to  put 
a  purchaser  from  the  grantee  upon  inquiry,  and  to  charge  him 
with  notice  of  the  mortgagor's  rights.*  Such  possesion  is  notice 
to  all  the  world  of  any  claim  which  he  who  is  in  possession  has 
upon  the  land.  It  is  not  to  be  supposed  that  any  man  who  wishes 
in  good  faith  to  purchase  the  land  will  do  so  without  knowing 
what  are  the  claims  of  a  person  who  is  in  open  possession.  He  is 
chargeable,  therefore,  with  knowledge  of  such  claims.^  But  pos- 
session by  a  person  other  than  the  vendor  is  not  sufficient  to 
charge  the  purchaser  with  notice,  if  the  vendor  delivers  posses- 
sion to  him  on  demand.^ 

A  conveyance  of  the  premises  by  the  mortgagee  to  a  third  per- 
son amounts  to  an  assignment  of  the  mortgage  only  if  the  grantee 
has  notice  in  any  way  of  the  defeasance." 

PART  II. 

WHEN   THEY   CONSTITUTE   A    CONDITIONAL   SALE. 

256.  The  advantage  of  considering  the  transaction  a  mort- 
gage is  not  all  on  the  side  of  the  grantor;  and  as  between  a  mort- 
gage and  a  conditional  sale,  the  latter  may  be  the  more  for  his 
benefit.  In  this  way  he  avoids  the  continuance,  or  the  incurring, 
of  a  debt.  If  at  the  close  of  the  time  limited  for  i-econveyance 
he  is  not  in  condition  to  perform  the  contract,  or  does  not  desire 

1  Hill  V.  Edwards,  11  Minn.  22.  New  v.  Wheaton,  24  Minn.  406;  Brown 

2  King  V.  Little,  1  Cush.  (Mass.)  436.         v.  Gaffney,  28  111.  149. 

8  See  §§  600,  601.  6  Paucake  v.   Cauffman  (Pa.),   7   Atl. 

4  Daubenspeck  v.  Piatt,  22  Cal.  330.  Rep.  67. 

s  Pritchard   v.   Brown,    4   N.  H.  397  ;         ^  Halsey  v.  Martin,  22  Cal.  645 ;  Ber- 

dell  V.  Berdell,  20  N.  Y.  Week.  Dig.  81. 

180 


WHEN   THEY   CONSTITUTE   A   CONDITIONAL   SALE.      [§§  257,  258. 

to,  there  is  no  obligation  resting  upon  him  to  do  so.  It  is  his  op- 
tion to  repurchase  or  not.  But  if  the  transaction  be  a  mortgage 
in  tlie  beginning  it  is  always  a  mortgage.  The  grantor  is  not 
allowed  to  speculate  upon  the  chances  attending  the  transaction, 
and  upon  finding  that  the  property  is  not  worth  the  amount  of  the 
debt  to  call  a  mortgage  a  conditional  sale ;  or,  on  the  other  hand, 
when  he  finds  that  the  property  has  increased  in  value,  and  that 
there  would  be  an  advantage  in  redeeming,  to  call  what  was  act- 
ually a  conditional  sale  a  mortgage.  The  character  of  the  trans- 
action is  fixed  at  its  inception. 

257.  Cases  involving  the  distinction  between  mortgages 
and  conditional  sales  are  usually  brought  before  courts  of  equity 
for  adjudication.  At  law,  as  has  already  been  noticed,  an  agree- 
ment for  a  reconveyance,  to  constitute  a  defeasance  and  make  the 
transaction  a  mortgage,  must  be  executed  at  the  same  time  with 
the  conveyance,  and  as  a  part  of  the  same  transaction,  and  must 
be  under  seal ;  while  in  equity  any  evidence,  whether  it  be  in 
writing  or  merely  parol,  which  clearly  shows  that  the  conveyance 
was  in  fact  intended  only  as  a  security,  will  make  the  transaction 
a  mortgage  ;  and  if  there  be  a  written  agreement  for  reconvey- 
ance, it  matters  not  how  informal  it  may  be,  or  when  it  was 
executed.!  It  follows,  therefore,  that  a  court  of  equity  will  often 
pronounce  that  to  be  an  equitable  mortgage  which  at  law  would 
be  considered  a  conditional  sale.  A  court  of  equity  is  not  con- 
cluded by  the  form  of  the  transaction  whether  this  seems  to  indi- 
cate a  mortgage  or  a  conditional  sale,  but  will  have  regard  to  the 
actual  facts.2  "  A  court  of  law,"  says  Judge  Story ,3  "  may  be 
compelled,  in  many  cases,  to  say  that  there  is  no  mortgage,  when 
a  court  of  equity  would  not  hesitate  a  moment  in  pronouncing 
that  there  is  an  equitable  mortgage." 

258.  Intention  the  criterion.  —  Whether  a  conveyance  be  a 
mortgage  or  a  conditional  sale  must  be  determined  by  a  consid- 
eration of  the  peculiar  circumstances  of  each  case.*  "  A  glance 
at  the  numerous  adjudications  in  controversies  of  this  kind  will 
suffice  to  show  that  each  case  must  be  decided  in  view  of  the 
peculiar  circumstances  which  belong  to  it  and  mark  its  character, 

1  Flafrg  V.  Mann,  2  Sumn.  486  ;  Dough-  144  ;  Hughes  v.  Sheaff,  19  Iowa,  335  ;  Ed- 
crty  V.  McColgan,  6  Gill  &  J.  (Md.)  275;  rington  v.  liarpor,  3  J.  J.  Marsli.  (Ivy.) 
Pearson  »;.  Seay,  38  Ala.  643.  353,  354  ;  Davis  v.  Stonestreet,  4  Iiul.  101  ; 

2  McNamura  v.  Culver,  22  Kans.  6C1.         Heath  v.  WilliainH,  30  Ind.  495 ;  Stephens 
"  In  Flagg  V.  Mann,  supra.  v.  Allen,  II  Oreg.  188. 

♦  See  §  325  ;  Ilorbach  v.  Hill,  1 12  U.  S. 

181 


§  259.]  ABSOLUTE  DEED   AND   AGREEMENT   TO  RECONVEY. 

and  that  the  only  safe  criterion  is  the  intention  of  the  parties,  to 
be  ascertained  by  considering  their  situation  and  the  surrounding 
facts,  as  well  as  the  written  memorials  of  the  transaction."  ^  The 
intention  of  the  parties  is  the  only  true  and  infallible  test,  and 
this  intention  is  to  be  gathered  from  the  circumstances  attending 
the  transaction  and  the  conduct  of  the  parties,  as  well  as  from  the 
face  of  the  written  contract.^ 

While  in  all  doubtful  cases  the  courts  will  construe  the  contract 
to  be  a  mortgage  rather  than  a  conditional  sale,^  yet,  when  a  con- 
ditional sale  is  clearly  established,  it  will  be  enforced.*  If  the 
relation  of  debtor  and  creditor  in  any  given  case  existed  in  the 
beginning,  and  the  debt  still  subsists  as  to  the  consideration  of 
the  conveyance,  the  transaction  will  be  treated  as  a  mortgage.^ 
If,  however,  the  debt  was  extinguished  by  a  fair  agreement,  and 
the  grantor  has  the  privilege  merely  of  refunding  if  he  pleases, 
by  a  given  time,  and  thereby  entitle  himself  to  a  reconveyance, 
the  transaction  is  a  conditional  sale,  and  the  equity  of  redemption 
does  not  continue.^  The  grantor  who  neglects  to  perform  the 
condition  on  which  the  privilege  of  repurchasing  depends  will  not 
be  relieved.^ 

259.  Conway  v.  Alexander.  —  This  matter  was  carefully  con- 
sidered by  the  Supreme  Court  of  the  United  States  in  Conway  v. 
Alexander.^     Land  had  been  conveyed  to  a  third  person  in  trust, 

1  Cornell  v.  Hall,  22  Mich.  377,  383,  138;  S.  C.  6  Paige  (N.  Y.),  480  ;  Holmes 
per  Graves,  J.  v.   Grant,  8  lb.  243  ;    Brown   v.  Dewey, 

2  Smith  V.  Crosby,  47  Wis.  160;  Henley  2  Barb.  (N.  Y.)  28  ;  S.CA  Sandf.  (N.  Y.) 
V.  Hotaling,  41  Cal.  22 ;  Hughes  v.  Sheaff,  Ch.  56. 

19  Iowa,  335;  Burnside  v.  Terry,  46  Ga.  ^  Hughes  v.  Sheaff,  supra;   Saxton  v. 

621.  Hikhcock,  47  Barb.  (N.  Y.)  220;  Wood- 

3  §  279 ;  King  v.  Newman,  2  Munf.  worth  v.  Morris,  56  lb.  97  ;  "Whitney  v. 
(Va.)  40;  Robertson  v.  Campbell,  2  Call  Townsend,  2  Lans.  (N.  Y.)  249. 

(Va.),  421  ;  Sears  v.  Dixon,  33  Cal.  326;  «  7  Crunch,  218.     "In  this  case,"  said 

Skinner  v.  Miller,  5   Litt.  (Ky.)  84,  86 ;  Chief  Justice  Marshall,  "  the  form  of  the 

Poindexter  v.  McCannon,  1  Dev.  (N.  C.)  deed   is   not,   in   itself,   conclusive  either 

Eq.  377  ;  Conway  v.  Alexander,  7  Cranch,  way.     The  want  of  a  covenant  to  repay 

218;  Cosby  v.  Buchanan,  81   Ala.  574;  1  the  money  is  not  complete  evidence  that 

So.  Rep.  898 ;  Mitchell  v.   Wellman,  80  a  conditional  sale  was  intended,  but  is  a 

Ala.  16.  circumstance  of  no  inconsiderable  impor- 

*  Davis  V.  Thomas,  1  Russ.  &  M.  506  ;  tance.     If  the  vendee  must  be  restrained 

Goodman  v.  Grierson,  2  Ball  &  B.   274,  to  his  principal  and  interest,  that  principal 

278  ;  Pennington  y.  Hanby,  4  Munf.  (Va.)  and  interest  ought   to  be  secure.     It  is, 

140 ;  Bloodgood  v.  Zeily,  2  Caines  (N.  Y.),  therefore,  a  necessary  ingredient  in  a  mort- 

Cas.  124.  gage,  that  the  mortgagee   should  have  a 

5  Voss  V.  Eller,  1 09  Ind.  260.  remedy  against  the  person  of  the  debtor. 

fi  Robinson  v.  Cropsey,  2  Edw.  (N.  Y.)  If  this  remedy  really  exists,  its  not  being 

182 


WHEN  THEY   CONSTITUTE   A   CONDITIONAL   SALE.  [§  260. 

to  reconvey  to  the  grantor  if  he  should  repay  the  purchase  money 
before  a  day  named,  and,  if  not,  then  to  convey  to  his  creditor. 
The  grantor  brought  a  bill  to  redeem,  whereupon  the  court  held 
that,  in  the  absence  of  a  bond,  note,  or  other  evidence  of  indebt- 
edness, the  transaction  must  be  regarded  as  a  conditional  sale  ; 
and  as  the  complainant  had  not  tendered  the  money  at  the  time 
provided,  that  the  bill  should  be  dismissed.  Chief  Justice  Mar- 
shall, delivering  the  opinion  of  the  court,  said  :  "  To  deny  the 
power  of  two  individuals,  capable  of  acting  for  themselves,  to 
make  a  contract  for  the  purchase  and  sale  of  lands  defeasible  by 
the  payment  of  money  at  a  future  day,  or,  in  other  words,  to 
make  a  sale  with  a  reservation  to  the  vendor  of  a  right  to  repur- 
chase the  same  land  at  a  fixed  price  and  at  a  specified  time,  would 
be  to  transfer  to  the  courts  of  chancery,  in  a  considerable  degree, 
the  guardianship  of  adults  as  well  as  infants.  Such  contracts  are 
certainly  not  prohibited  either  by  the  letter  or  the  policy  of  the 
law.  But  the  policy  of  the  law  does  prohibit  the  conversion  of  a 
real  mortgage  into  a  sale  ;  and  as  lenders  of  money  are  less  under 
the  pressure  of  circumstances  which  control  the  perfect  and  free 
exercise  of  the  judgment  than  borrowers,  the  effort  is  frequently 
made  by  persons  of  this  description  to  avail  themselves  of  the 
advantage  of  this  superiority,  in  order  to  obtain  inequitable  ad- 
vantages. For  this  reason  the  leaning  of  courts  has  been  against 
them,  and  doubtful  cases  have  generally  been  decided  to  be  mort- 
gages. But  as  a  conditional  sale,  if  really  intended,  is  valid,  the 
inquiry  in  every  case  must  be,  whether  the  contract  in  the  spe- 
cific case  is  a  security  for  the  repayment  of  money  or  an  actual 
sale." 

260.  In  order  to  convert  what  appears  to  be  a  conditional 
sale  into  a  mortgage,  the  evidence  should  be  so  clear  as  to 
leave  no  doubt  that  the  real  intention  of  the  parties  was  to  exe- 
cute a  mortgage.  It  may  well  be  that  a  person  buys  lands  in  sat- 
isfaction of  a  precedent  debt,  or  for  a  consideration  then  paid,  and 

reserved  in  terms  will  not  affect  the  case,  not  have  been  sustained  ;  and  if,  to  a  l)ill 

But  it   must  exist  in  order  to  justify  a  in  chancery  prayinj;  a  sale  of  the  piem- 

construction  width  overrules  the  express  ises,  and  a  decree  for  so  much  money  as 

words  of  the  instrument.     Its  existence,  might  remain  due,  Robert  Alexander  had 

in  this  case,  is  certainly  not  to  be  collected  answered  that  this  was  a  sale  and  not  a 

from  the  deed.     There  is  no  acknowled}^-  mortga^'e,  clear  proof  to  the  contrary  must 

ment  of  a  preiixisting  debt,  nor  any  cove-  have   been    produced    to  justify  a  decree 

nant  for  repayment.    An  action  at  law  for  against  him." 
the  recovery  of  the  money  certainly  could 

183 


§  261.]         ABSOLUTE   DEED   AND   AGREEMENT   TO   RECONVEY. 

at  the  same  time  contracts  to  reconvey  the  lands  upon  the  pay- 
ment of  a  certain  sum,  and  there  is  no  intention  on  the  part  of 
either  party  that  the  transaction  should  be,  in  effect,  a  mortgage. 
The  covenant  or  agreement  to  reconvey  is  not  necessarily  either 
at  law  or  in  equity  a  defeasance.  It  is  one  fact  which  may,  in 
connection  witli  other  facts,  go  to  show  that  the  parties  really 
intended  the  deed  to  operate  as  a  mortgnge  ;  but  standing  alone 
t  does  not  produce  that  result.  Something  more  is  necessary  ; 
and  an  indispensable  thing  is  a  debt  by  the  grantor  to  the  grantee 
for  which  the  conveyance  is  security.^ 

261.  A  contract  of  repurchase  may  upon  its  face  show  that 
the  parties  really  intended  an  absolute  sale,  with  the  privilege 
to  the  vendor  of  repurchasing  on  the  terms  named.  It  will  be  so 
interpreted  when  the  provisions  of  the  contract  are  inconsistent 
with  the  idea  that  a  mortgage  to  secure  an  indebtedness  was  in- 
tended.2  The  agreement  upon  its  face  may  be  either  an  agree- 
ment to  I'econvey  merely,  or  may  amount  with  the  deed  to  a 
mortgage,^  in  which  case  a  resort  to  evidence  outside  of  these 
instruments  may  be  necessary  to  determine  the  character  of  the 
transaction.^  An  express  provision  that  the  contract  for  recon- 
veyance should  be  regarded  only  as  a  contract  to  reconvey,  and 
not  as  an  acknowledgment  that  the  deed  was  intended  as  a  mort- 


1  Henley  v.  Hotaling,  41  Cat.  22  ;  Hay- 
nie  V.  Robertson,  58  Ala.  37  ;  Kerr  v.  Hill, 
27  W.  Va.  576 ;  Edrington  v.  Harper,  3 
J.  J.  Mar.  (Ky )  353,  355;  Eckert  v.  Mc- 
Bee,  27  Kims.  232  ;  Perdue  v.  Bell  (Ala.), 
3  So.  Rep.  698 ;  Buse  v.  Page,  32  Minn. 
Ill  ;  Rue  V.  Dole,  107  111.  275  ;  Bearss  v. 
Ford,  108  111.  16;  Calhoun  v.  Lumpkin, 
60  Te.x.  185;  Horbach  v.  Hill,  112  U.  S. 
144;  Butman  v.  James,  34  Minn.  547  ; 
Callahan's  Est.  13  Phila.  (Pa.)  381. 

"  The  owner  of  the  lands  may  be  will- 
ing to  sell  at  the  price  agreed  upon,  and 
the  purchaser  may  also  be  willing  to  give 
his  vendor  the  right  to  repurchase  upon 
specified  terms;  and  if  such  appears  to  be 
the  intention  of  the  parties,  it  is  not  the 
duty  of  the  court  to  attribute  to  them  a 
different  intention.  Such  a  contract  is 
not  opposed  to  public  policy,  nor  is  it  in 
any  sense  illegal  ;  and  courts  would  de- 
part from  the  line  of  their  duties  should 
they,  in  disregard  of  the  real  intention  of 

184 


the  parties,  declare  it  to  be  a  mortgage." 
Per  Chief  Justice  Rhodes,  in  Henley  v. 
Hotaling,  supra.  ^ 

2  Hanford  v.  Blessing,  80  111.  188; 
Smith  V.  Crosby,  47  Wis.  160;  Hays  v. 
Carr,  83  Ind.  275;  Voss  v.  Eller,  109  Ind. 
260. 

3  Hickox  V.  Lowe,  10  Cal.  197.  In 
this  case  a  debtor  conveyed  to  his  creditor, 
and  took  back  an  agreement  to  reconvey 
whenever  the  grantor  should  repay  the 
consideration,  with  a  stipulated  sum  per 
month  for  the  use  of  the  money,  with  a 
provision  that  if  the  net  rents  per  month 
should  exceed  that  sum,  the  grantee 
should  apply  them  to  the  payment  of  the 
consideration. 

*  Rich  V.  Doane,  35  Vt.  125  ;  Bishop  v. 
Williams,  18  111.  101;  Snyder  v.  Gris- 
wold,  37  111.  216 ;  Parish  v.  Gates,  29  Ala. 
254;  McCarron  v.  Cassidy,  18  Ark.  34; 
McNamara  v.  Culver,  22  Kans.  661,  670. 


WHEN   THEY   CONSTITUTE   A    CONDITIONAL    SALE.  [§  262. 

gage,  should  be  given  effect  to  if  consistent  with  the  whole  trans- 
action, as  declaring  the  intention  of  the  parties  that  it  should  not 
ci'eate  a  mortcjao-e.^  If  an  instrument  declares  that  it  is  a  condi- 
tional  deed  and  not  a  mortgage,  and  is  to  be  absolute  upon  the 
non-payment  of  a  sum  mentioned  at  a  time  specified,  it  is  to  be 
construed  as  a  conditional  deed  and  not  a  mortgage.^  Sometimes 
the  terras  of  the  agreement  for  reconveyance  may  not  be  conclu- 
sive that  a  sale  was  intended  with  the  privilege  of  repurchasing, 
but  may  be  so  inconsistent  with  any  other  theory  that  very  little 
further  evidence  to  the  same  effect  will  lead  to  this  determina- 
tion.^ On  the  other  hand,  an  absolute  deed  of  land,  which  con- 
tains a  recital  that  it  was  executed  to  secure  the  payment  of  a 
loan  of  money,  shows  upon  its  face  that  it  is  a  mortgage."* 

262.  A  purchaser  is  entitled  to  have  an  actual  sale  en- 
forced. When  there  is,  in  fact,  a  sale  instead  of  a  mortgage,  but 
the  grantor  subsequently  claims  the  transaction  to  be  a  mortgage, 
the  grantee  may  maintain  a  bill  in  equity  to  have  it  decreed  a 
sale.^  A  purchaser  is  as  much  entitled  to  have  his  rights  pro- 
tected as  is  a  mortgagor.  A  sale  in  connection  with  an  agree- 
ment  for  repurchase  comes  very  near  in  form  and  substance  to  a 
mortgage,  but  the  rights  of  the  parties  under  these  instruments 
are  very  different.^  While  a  mortgage  may  be  redeemed  at  any 
time  before  the  right  is  cut  off  by  foreclosure,  there  can  be  no  re- 
demption under  a  conditional  sale  after  the  day  appointed.  But 
this  is  the  contract  of  the  parties,  and  either  one  of  them  is  en- 
titled to  have  it  enforced  according  to  its  terms.'     The  option  to 

1  Ford  V.  Irwin,  18  Cal.  117  ;  Henley  v.  P.  C.  149  ;  Terry  v.  Mcddowcrof  t,  4  Beav. 

Hotalin-.',  41   Cal.  22;    Hays  v.  Carr,  83  197.     New   York:    Holmes  v.    Grant,    8 

Ind.  275 ;    Chicago,  B.  &    Q.  11.  K.  Co.  Paige,  243  ;  Brown  v.  Dewey,  2  Barb.  2S  ; 

r.  Watson,  113  III.  195.  Glover   v.  Payn,    19   Wend.  518.     Iowa: 

■■^  Biirn.side  r.  Terry,  45  Ga.  621.  Trucks  v.  Lindsay,   18  Iowa,  504.     Vir- 

8  Hanford  v.  Blesiing,  80  111.  188.  ginia :    Moss   v.   Green,    10   Leigh,   251; 

*  Montgomery    v.   Chadwick,   7   Iowa,  Hansone   v.   Frayser,    lb.    592.      Illinois : 

114.  Hanford  v.  Blessing,  s»;^ra  ;  Pitts  i-.  Ca- 

^  Rich  V.  Doane,  35  Vt.  125;  Manasse  ble,  44  111.   103;    Carr  v.  Rising,  62   111. 

V.  Diiikelspiel,  68  Cal,  404.  14  ;  Dwen  v.  Blake,  44  III.  135;  Shays  v. 

^   Conway    v.    Alexander,    7    Cranch,  Norton,  48  111.  100.     Michigan:  Cornell 

218;   Flagg   v.   Mann,    14   Pick.  (Mass.)  v.  Hall,  22  Mich.  377.     California :  People 

407.  V.  Irwin,  14  Cal.  428;   18  Ih.  117;  Henley 

"  Joy  V.  Birch,  4  CI.  &  F.  57  ;  Pegg  v.  v.   Hotaling,   supra.     New  Jersey  :    Mer- 

Wisden,  16  Beav.  239;  Biirrell  v.  Sabine,  ritt  v.  Brown,  19  N.J.  E<i.  2S7.   Vermont: 

1  Vern.  208  ;  St.  John  v.  Wareham,  cited  Rich    v.    Doano,    .su/>ra.     Pennsylvania  : 

in    Thornborough    v.    Buker,   3   Swanst.  Haines  v.  Thom.son,  70  Pa.  St.  4.'U.     Coa- 

Gi8,   631;    ICnsworth   v.   Grilliths,  1    Bro.  necticut :    Piiipps    r.    Mnnson,    50    Conn. 

185 


§§  263,  264.]      ABSOLUTE   DEED   AND   AGREEMENT   TO  RECONVEY. 

repurchase  may  be  a  personal  privilege  whicli  cannot  be  enforced 
in  case  of  the  death  of  the  obligee  during  the  continuance  of  the 
option.^ 

A  mortgagor,  upon  being  notified  that  the  mortgagee  would 
proceed  to  foreclose  the  mortgage  for  non-payment  of  interest, 
which  had  been  due  for  several  years,  replied  that  he  preferred  to 
make  a  deed  of  the  property  rather  than  to  have  a  sale  made  un- 
der the  mortgage ;  and  accordingly  he  executed  a  deed  absolute 
in  form,  and  took  back  a  contract  for  the  conveyance  of  the  hind 
to  him  upon  the  payment  of  a  sum  agreed  upon  within  one  year. 
His  notes  were  surrendered,  and  he  executed  no  new  obligation 
to  pay  the  mortgage  debt.  It  was  held  that  the  transaction  was 
a  conditional  sale,  and  not  a  mortgage.^ 

263.  The  character  of  the  transaction  is  fixed  at  the  incep- 
tion of  it,  and  is  what  the  intention  of  the  parties  makes  it. 
The  form  of  the  transaction  and  the  circumstances  attending  it 
are  the  means  of  finding  out  the  intention.  If  it  was  a  mortgage 
in  the  beginning  it  remains  so ;  and  if  it  was  a  conditional  sale 
at  the  start  no  lapse  of  time  will  make  a  mortgage  of  it.  The 
recording  of  the  conveyance  as  a  mortgage,  if  it  was  intended  as 
a  sale  with  a  right  of  repurchase  at  the  option  of  the  grantor,  does 
not  make  it  a  mortgage.  If  not  a  security  in  the  beginning,  but 
an  absolute  sale  or  a  conditional  sale,  no  subsequent  event,  short 
of  a  new  agreement  between  the  parties,  can  convert  it  into  a 
mortgage.^ 

264.  If  intended  by  the  parties  as  a  security  for  money,  an 
absolute  conveyance  is  in  equity  a  mortgage.  Different  instru- 
ments executed  at  the  same  time,  constituting  one  transaction, 
are  to  be  read  together,  in  order  to  ascertain  the  intent  of  the 
parties.  Of  course  it  is  entirely  competent  for  persons  capable 
of  acting  for  themselves  to  make  a  sale  with  a  reservation  to  the 
vendor  of  a  right  to  repurchase  the  same  land  at  a  fixed  price, 
and  at  a  specified  time;  and  the  inquiry  in  every  case  therefore 
is,  whether  the  contract  is  a  security  for  the  repayment  of  money* 
or  an  actual  or  conditional  sale.* 


267.     Wisconsin  :  Schriber  v.  Le  Clair,  66     324  ;  Buse  v.  Page,  32  Minn.  Ill  ;  Heed  v. 

Wis.  579,  599.  Reed,  75  Me.  264,  272;  Finck  v.  Adams, 

1  Newton  v.  Newton,  11  R.  I.  390.  36  N.  J.  Eq.  188. 

2  Rue  V.  Dole,  107  111.  275  4  Minnesota:    Holton   v.   Meighen,    15 

3  Kearney  v.   Macomb,    16   N.   J.  Eq.     Minn.  69;  Hill  y.  Edwards,  11  Minn.  22; 
189;    Clark   v.   Henry,   2  Cow.   (N.  Y.)     Weide  v.  Gehl,  21   Minn.  449;    Buse  v. 

186 


WHEN   THEY   CONSTITUTE   A   CONDITIONAL   SALE. 


[§  264. 


The  rights  of  the  parties  to  the  conveyance  must  be  reciprocal. 
If  the  transaction  be  in  the  nature  of  a  mortgage,  so  that  the 
grantor  may  insist  upon  a  reconveyance,  the  grantee  at  the  same 
time  may  insist  upon  repayment;  but  if  it  be  a  conditional  sale, 
so  that  the  grantor  need  not  repurchase  except  at  his  option,  the 
grantee  cannot  insist  npon  repayment,^ 

An  absolute  deed  was  made,  with  an  agreement  by  the  grantee 
executed  at  the  same  time,  whereby  it  was  stipulated  that  the 
grantor  might  at  his  election  repurchase  the  lands  for  a  certain 
sum  in  three  months,  and  for  certain  other  and  greater  sums  in 
six  and  twelve  months  respectivel}^  provided  he  would  so  elect 
at  the  expiration  of  six  months  from  the  date  of  the  agreement, 
which  sums  Avere  largely  in  excess  of  the  consideration  expressed 
in  the  deed,  and  six  per  cent,  interest  thereon.  The  election  to 
repurchase  not  having  been  made  within  the  time  stipulated,  the 
purchaser  refused  to  allow  a  repurchase,  and  claimed  that  the 
sale  and  deed  were  absolute :  the  evidence  showing  that  the  trans- 
action was  really  a  loan,  it  was  held  that  the  grantor  might  re- 
deem upon  the  payment  of  the  consideration  expressed  in  the 
deed,  with  interest.''^ 


Page,  32  Minn.  Ill ;  Maryland  :  Hicks  v. 
Hicks,  5  G.  &  J.  75.  Pennsylvania :  Cole  v. 
Bolard, 22  Pa.  St. 431 ;  Whceland  v. Swartz, 
1  Yeates,  579.  Georgia  :  Spence  v.  Stead- 
man,  49  Ga.  133  ;  Clark  v.  Lyon,  46  Ga. 
202.  Nevada :  Leahiyh  v.  White,  8  Nev. 
147.  Wisconsin :  Schribcr  v.  Le  Clair, 
66  Wis.  579  ;  Iloile  v.  Bailey,  58  Wis. 
434,  448.  Illinois  :  Bearss  v.  Ford,  108 
111.  16. 

In  Robinson  V.  Cropsey,  2  Edw.  (N.  Y.) 
138,  143,  the  court  say:  "If  a  deed  or 
conveyance  be  accompanied  by  a  condition 
or  matter  of  defeasance  expressed  in  the 
deed,  or  even  contained  in  a  separate  in- 
strument, or  exist  merely  in  parol,  let  the 
consideration  for  it  have  been  a  jireii.xist- 
in(?  debt  or  a  present  advance  of  money 
to  the  grantor,  the  only  incjuiry  necessary 
to  be  made  is,  whether  the  relation  of 
debtor  and  creditor  remains,  and  a  debt 
HtiU  subsists  between  the  jiarlics  ;  for  if  it 
docs,  then  the  conveyance  must  lo  re- 
garded a«  a  security  for  the  {layment,  and 
be  treated  in  all  resjiects  as  a  mortgage. 
On  the  other  hand,  where  the  debt  form- 


ing the  consideration  for  the  conveyance 
is  extinguished  at  the  time  by  the  express 
agreement  of  the  parties,  or  the  money 
advanced  is  not  paid  by  way  of  loan,  so 
as  to  constitute  a  debt  and  liability  to  re- 
pay it,  but  by  the  terms  of  the  agreement 
the  grantor  has  the  privilege  of  refunding 
or  not  at  his  election,  then  it  must  be  pur- 
chase money,  and  the  transaction  will  be 
a  sale  upon  condition,  which  the  grantor 
can  defeat  only  by  a  repurchase,  or  per- 
formance of  the  condition  on  his  part 
within  the  time  limited  for  the  purchase, 
and  in  this  way  entitle  himself  to  a  recon- 
veyance of  the  property." 

1  Williams  V.  Owen,  10  Sim.  386;  Da- 
vis V.  Thomas,  1  lluss.  &  M.  506 ;  Shaw 
V.  Jeffery,  13  Moore  P.  C.  432  ;  Goodman 
V.  Grierson,  2  Ball  &  B.  274  ;  Alderson  v. 
White,  2  De  G.  &  J.  97 ;  Tapply  v. 
Sheather,  8  Jur.  N.  S.  1163. 

Text  quoted  with  approval  in  McNa- 
mnra  i-.  Culver,  22  Kans.  661,  669,  and 
Eckert  v.  M<15ee,,  27  Kans.  232. 

'^  Klinck  V.  Price,  4  West  Va.  4. 

187 


§  265.]        ABSOLUTE  DEED   AND   AGREEMENT   TO   RECONVEY. 

265.  The  existence  of  a  debt  is  the  test.  If  an  absolute 
conveyance  be  made  and  accepted  in  payment  of  an  existing  debt, 
and  not  merely  as  security  for  it,  an  agreement  by  the  grantee  to 
reconvey  the  land  to  the  grantor  upon  receiving  a  certain  sum 
within  a  specified  time  does  not  create  a  mortgage,  but  a  condi- 
tional sale,  and  the  grantee  holds  the  premises  subject  only  to  the 
right  of  the  grantor  to  demand  a  reconveyance  according  to  the 
terms  of  the  agreement.^  A  debt  either  preexisting  or  created  at 
the  time,  or  contracted  to  be  created,  is  an  essential  requisite  of  a 
mortgage.^  The  absolute  deed  may  secure  advances  to  be  made, 
and  in  that  case  the  mortgage  becomes  effectual  when  the  ad- 
vances are  made.^  "  Where  there  is  no  debt  and  no  loan,  it 
is  impossible  to  say  that  an  agreement  to  resell  will  change  an 
absolute  deed  into  a  mortgage."  *  The  debt  may  not  be  evi- 
denced by  any  bond  or  note,  or  covenant  to  pay  it ;  so  that  the 
facts  and  circumstances  of  the  transaction  must  be  inquired  into 
in  order  to  ascertain  whether  the  consideration  of  the  deed  was 
really  a  debt  or  loan  ;  if  not  one  or  the  other,  the  deed  can  hardly 
be  a  mortgage.^  It  is  not  material  that  there  should  be  any  note 
or  bond  or  other  written  evidence  of  debt,  nor  is  it  material  that 
the  indebtedness  should  have  arisen  in  any  particular  manner. 
It  is  only  material  that  there  should  be  a  bond  fide  debt.^ 

1  See  §  325.    Maine:  Stinchfield  v.  Mil-  v.  Steadman,49  Ga.  133;  Murphy  v.  Pu- 

liken,  71  Me.  567 ;  French  v.  Sturdivant,  rifoy,  52  Ga.  480.     Virginia  :  Snavely  r. 

8  Me.   246 ;   Reed  v.  Reed,  75  Me.  264.  Pickle,  29  Gratt.  27.     Arkansas :  Stryker 

New    York  :  Morrison  v.  Brand,  5  Daly,  v.  Hershy,  38  Ark.  264.   Wisconsin  :  Smith 

40;   Glover  v.  Payn,  19  Wend.  518.     Mis-  v.  Crosby,  47  Wis.  160  ;  Hoile  v.  Bailey, 

souri:  O'Neill    v.   Capelle,   62   Mo.    202;  58  Wis.   434.      West  Virginia:    Kerr  v. 

Slowey  V.  McMurray,  27  Mo.  113.    Iowa:  Hill,  27  W.  Va.  576;    Hoffman  v.  Eyan, 

Hall  V.  Savill,  3  Greene,   37;  Bridges  v.  21  W.  Va.  415,  429;  Davis  v.  Demming, 

Linder,    60    Iowa,    190,    quoting     text;  12  W.  Va.  246,  281.     See  Wells  r.  Mor- 

Hnghes  iJ.  Sheaff,  19  Iowa,   335.     Texas:  row,  38  Ala.  125,  for  circumstances  ren- 

Ruffier  V.  Womack,  30  Tex.  332.     Ken-  dering  the  transaction  a  mortgage, 

tucky  :  Honore  v.  Hutchings,  8  Bush,  687.  2  McNamara  v.  Culver,  22  Kans.   661, 

Illinois :    Magnusson  v.  Johnson,  73  111  668 ;   Eckert  v.   McBee,   27    Kans.   232 ;, 

156 ;  Union  Mut.  Life  Ins.  Co.  v.  Slee,  110  Bridges  v.  Linder,  supra,  quoting  text. 

111.  35 ;  Rue  v.  Dole,  107  111.  275  ;  Pitts  v.  3  Bull  v.  Coe  (Cal.),  18  Pac.  Rep.  808. 

Cable,   44    111.   103.     Indiana:  Rogers  v.  *  per  Bronson,  J.,  in  Glover  u.  Payn, 

Beach,  17   N.  E.  Rep.  609;  Voss  v.  Eller,  su/ira. 

109  Ind.  260;    10  N.  E.   Rep.   74.     Ala-  ^  Conway  jj.  Alexander,  7  Cranch,  218; 

bama :    West   v.   Hendrix,   28  Ala.  22G ;  Flagg  v.  Mann,    14    Pick.    (Mass.)    467  ; 

Haynie  v.  Robertson,  58  Ala.  37  ;  Mobile  Lund   v.   Lund,   1    N.   H.   39 ;  Henley  v. 

Building  &  Loan  Asso.  v.  Robertson,  65  Hotaling,  41   Cal.  22 ;  Gait  v.  Jackson,  9 

Ala.  382.     Connecticut:  Hillhouse  v.  Dun-  Ga.  151  ;  Reed  v.  Reed,  su/va. 

ning,  7  Conn.  139,  143.    Georgia:  Spence  6  Qverstreet  v.  Baxter,  30  Kans.  55. 

188 


WHEN   THEY   CONSTITUTE  A   CONDITIONAL   SALE.  [§  266. 

An  agreement  by  the  grantee  in  an  absolute  conveyance,  tliat 
if  the  grantor  should,  within  a  certain  time,  bring  him  the 
amount  of  the  consideration  of  the  deed  with  interest,  he  would 
deliver  up  the  deed,  but  otherwise  the  grantor  should  forfeit  all 
claim  to  such  deed,  was  held  not  to  be  a  defeasance  of  a  mort- 
gage, as  there  was  no  debt  secured,  but  merely  a  contract  to  re- 
convey  on  certain  terms. ^  But  whenever  a  debt  is  recognized  by 
the  parties  or  established  by  evidence,  such  an  agreement  serves 
to  make  a  mortgage  of  the  conveyance  ;  ^  as  where  a  grantee,  a 
year  after  the  making  of  the  deed  to  him,  gave  a  bond  reciting 
that  there  had  been  a  loan,  and  that  the  conveyance  was  made  to 
secure  it,  the  transaction  was  a  mortgage,  although  the  bond  con- 
tained a  condition  that  if  the  money  was  not  paid  on  a  day  named 
fhe  obligation  should  be  void.^  And  so  where  a  grantee  executed 
a  bond  to  the  grantor  reciting  the  deed  to  him  and  the  grantor's 
indebtedness,  and  providing  that  if  the  debt  should  be  paid  on  or 
before  a  certain  day  the  bond  should  be  void,  but  that  the  bond 
should  remain  in  force  if  the  grantee  after  payment  should  neg- 
lect or  refuse  to  reconvey  the  land,  the  transaction  was  held  to  be 
a  mortgage.^ 

In  a  case  before  the  Supreme  Court  of  California,^  the  agree- 
ment was  that  the  grantee  should  execute  a  bond  to  reconvey  the 
premises ;  but  the  grantor  did  not  agree  to  repurchase,  and  the 
bond  was  delivered  as  an  escrow,  and  it  remained  an  escrow  until 
after  the  time  therein  mentioned  for  the  execution  of  the  deed, 
and  was  then  cancelled.  If  the  deed  was  intended  as  a  mortirafre, 
say  the  court,  the  mortgagee  would  have  a  right  of  action  to  fore- 
close the  mortgage  ;  but  if  he  had  brought  such  an  action,  the 
answer  that  there  was  no  promise,  either  express  or  implied,  on 
the  part  of  the  alleged  mortgagor  to  repay  the  purchase  money, 
would  have  been  a  complete  bar. 

266.  When  an  absolute  conveyance  has  been  made  upon 

'  Reading    v.    Weston,    7   Conn.    143;  33  Cal.  320,  in    tlie  important  particular 

I'earson  i;.  Seay,  35  Ala.  612  ;  Bridges  v.  that   in    that   case   the   mortgagor  covc- 

Linder,  CO  Iowa,  190.  nanted  to  repay  the  purcha.se  money  at 

■^  Alstin  V.  Cunditr,  52  Tex.  453;  Reed  a  fixed  time,  and,  under  the  name  of  rent, 

V.  Iteed,  (5  Me.  204.  to    pay    interest    thereon    at   a  stipiilnied 

*  Montgomery    v.    fhadwick,    7    Iowa,  rate;  and  the  court  also  found  tliat  the 
''^-  parties  intended  to  execute  a  mortgage; 

*  Van  Wagner  v.  Van  Wagner,  7  N.  J.  but  in  this  case  the  court  found  that  the 
Eq.  (.'}  HalHt.)  27.     ■  parties  intended  tlio  deed  to  be  in  fact,  as 

'  Henley  v.  Ilotaling,  41  Cal.  22,  28.  it  was  in  fdrtn,  an  absolute  conveyance. 

"  This  case  differs  from  Scars  v.  Dixon,     And  see  §  247. 

189 


§  267.]    ABSOLUTE  DEED  AND  AGREEMENT  TO  RECONVEY. 

an  application  for  a  loan,  and  an  agreement  is  made  to  recon- 
vey  upon  payment  of  the  money  advanced,  as  a  general  rule  the 
transaction  is  adjudged  to  constitute  a  mortgage.^  In  each  case 
the  purpose  of  the  grantor  was  in  the  beginning  to  borrow  money  ; 
and  unless  a  change  be  shown  in  his  intentions  it  is  presumed  that 
any  use  he  may  have  made  of  his  real  estate,  in  connection  with 
it,  was  merely  as  a  pledge  to  secure  a  loan.^ 

The  parties  having  originally  met  upon  the  footing  of  borrow- 
ing and  lending,  although  a  different  consideration  be  recited  in 
the  deed,  it  will  be  considered  a  mortgage  until  it  be  shown  that 
the  parties  afterwards  bargained  for  the  property  independently 
of  the  loan.^  But  an  application  for  a  loan  may  in  any  case  re- 
sult in  a  sale  of  land  absolutely  or  conditionally,  and  because  the 
transaction  began  with  such  an  application  it  is  not  to  be  con- 
cluded that  it  necessarily  ended  in  a  loan.  The  language  of  the 
courts,  in  some  cases,  would  seem  to  imply  that  a  court  of  equity 
would  always  allow  redemption  in  such  case  ;  but  although  such 
transactions  should  be  carefully  scrutinized,  when  it  appears  that 
the  negotiations  resulted  in  a  sale  absolute  or  conditional  this  will 
be  supported.* 

The  terms  of  a  contract,  to  the  effect  that  the  grantee  would 
reconvey  upon  the  payment  of  a  certain  sum  and  interest,  less 
the  rents  he  might  receive,  tend  to  show  that  the  debt,  whether 
preexisting  or  created  at  the  time,  was  not  extinguished,  although 
it  be  declared  in  the  contract  that  it  is  merely  an  agreement  to 
reconvey,  and  not  an  acknowledgment  of  a  mortgage.^ 

267.  An  absolute  deed  delivered  in  payment  of  a  debt  is 
not  converted  into  a  mortgage  merely  because  the  grantee  therein 

1  Russell  V.  Southard,  12  How.  139;  see,  also,  Dvven  v.  Blake,  44  111.  135; 
Miller  i;.  Thomas,  14  111.  428;  Parmelee  y.  Smith  v.  Doyle,  46  111.  451;  Phillips  v. 
Lawrence,  44  111.  405  ;  Wheeler  v.  Huston,  Hulsizer,  20  N.  J.  Eq.  308  ;  Crews  v. 
19  Ind.  334;  Cross  v.  Hepner,  7  Ind.  359  ;  Threadgill,  35  Ala.  334;  Sweetzer's  Ap- 
Crassen  v.  Swoveland,  22  111.  427  ;  Brown  peal,  71  Pa.  St.  264  ;  Tibbs  v.  Morris,  44 
y.  Nickle,  6  Pa.  St.  390 ;  Kellura  r.  Smith,  Barb.  (N.  Y.)  138;  Marvin  v.  Prentice, 
33  Pa.  St.  158;  Holmes  v.  Grant,  8  Paige  49  How.  (N.  Y.)  Pr.  385;  Fiedler  v.  Dar- 
(N.  Y.),  243;  Davis  v.  Deraming,  12  W.  rin,  50  N.  Y.  437,  441  ;  S.  C.  59  Barb. 
Va.  246  ;  HoflFman  v.  Ryan,  21  W.  Va.  (N.  Y.)  651  ;  Leahigh  v.  White,  8  Nev. 
415.  147;  Knowlton  v.  Walker,  13  Wis.  264; 

2  Anon.  2  Hayw.  (N.  C.)  26 ;  Crews  v.  Richardson  v.  Barrick,  16  Iowa,  407. 
Threadgill,  35  Ala.  334  ;  Davis  v.  Hemen-  *  Flagg  t\  Mann,  14  Pick.  (Mass.)  467  ; 
way,  27  Vt.  589  ;  Mobile  Building  &  Loan  Holmes  v.  Fresh,  9  Mo.  201,  206  ;  Turner 
Asso.  I'.  Robertson,  65  Ala.  382  ;  Vangilder  v.  Kerr,  44  Mo.  429 ;  McDonald  v.  Mc- 
V.  Hoffman,  22  W.  Va.  1  ;  Kerr  v.  Hill,  27  Leod,  1  Ired.  (N.  C.)  Eq.  221 ;  Hanford  v. 
W.  Va.  576.  Blessing,  80  111.  188. 

8  Morris  v.  Nixon,  1    How.  118;  and        ^  People  v.  Irwin,  14  Cal.  428. 

190 


WHEN   THEY    CONSTITUTE   A   CONDITIONAL   SALE.         [§  267. 

gives  a  contemporaneous  stipulation,  binding  him  to  reconvey  on 
being  reimbursed,  within  an  agreed  period,  an  amount  equal  to 
the  debt  and  the  interest  thereon.  If  the  conveyance  extin- 
guishes the  debt,  and  the  parties  so  intend,  so  that  a  plea  of  pay- 
ment would  bar  an  action  thereon,  the  transaction  will  be  held 
an  absolute  or  conditional  sale  notwithstanding.'  And  so  if  there 
was  in  fact  a  sale,  an  agreement  by  the  purchaser  to  resell  the 
property  within  a  limited  time,  at  the  same  price,  does  not  con- 
vert it  into  a  mortgage.^  A  farmer  agreed  with  another  that  he 
might  sell  the  farm  and  have  all  he  could  obtain  above  $2,000 ; 
and  to  give  effect  to  this  agreement  the  farmer  conveyed  to  him 
the  land,  and  took  back  a  reconveyance,  on  condition  that  the 
reconveyance  should  be  void  upon  payment  of  |2,000.  The  trans- 
action was  of  course  held  to  be  a  conditional  sale.^ 

But  if  the  indebtedness  be  not  cancelled,  equity  will  regard  the 
conveyance  as  a  mortgage,  whether  the  grantee  so  regard  it  or 
not.  He  cannot  at  the  same  time  hold  the  land  absolutely  and 
retain  the  right  to  enforce  payment  of  the  debt  on  account  of 
which  the  conveyance  was  made.  The  test,  therefore,  in  cases  of 
this  sort,  by  which  to  determine  whether  the  conveyance  is  a  sale 
or  a  mortgage,  is  to  be  found  in  the  question  whether  the  debt 
was  discharged  or  not  by  the  conveyance.*  If  in  the  subsequent 
transactions  of  the  parties  there  is  no  recognition  in  any  way  of 
the  relation  of  debtor  and  creditor,  and  the  vendee  for  a  consider- 
able period  holds  possession  without  paying  interest  or  rent,  these 
facts  go  to  show  that  there  is  only  an  agreement  for  repurchase 
and  not  a  mortgage.^ 

1  See  §  326;  Turner  v.  Kerr,  44  Mo.  2  Mason  y.  Moody,  26  Miss.  184;  Eckert 

429  ;  Farmer  v.  Grose,  42  Cal.  169  ;  Page  v.  McBee,  27  Kans.  232. 

V.  Vilhac,  42  Cal.  75  ;  Baugher  v.  Merry-  ^  §  270 ;  Porter  v.  Nelson,  4  N.  II.  130. 

man,  32  Mtl.  185 ;  Weathersly  v.  Weathers-  •*  Siitphen  v.  Cusbmau,  35  111.  186 ;  Voss 

ly,  40   Miss.  462 ;  Iloopes    v.  Bailey,   28  v.  Eller,  supra. 

Miss.  328;   Morrison    v.   Brand,   5   Daly  ^  O'Reilly  i^.  O'Donoghuc,  Ir.  Rep.  10 

(N.  Y.),  40;  Phipps  v.  Munson,  50  Conn.  Eq.  73.     The  Master  of  tlie  Rolls  acted 

iiC7  ;    Perdue  v.  Bell   (Ala.),  3  So.  Rep.  upon  this  principle  in  a  transaction  held 

698 ;  Rogers  v.  Beach  (Ind.),  17  N.  E.  Rep.  to  bo  a  sale  where  the  agreement  for  re- 

609;  Rue  V.  Dole,    107  111.  275,  quoting  purchase  was  founded  upon  tiie  following 

and  approving  te.\t ;  Bcarss  v.  Foid,  108  letter:  "At  any  time  within  the  next  ten 

III.  16;  Bridges  v.  Linder,  60  Iowa,  190;  j  ears  you  come  forward  and  pay  me  £160, 

\  OKs   V.   Eilcr,   109    Ind.   260;    Knaus  v.  provided  you  want  it  for  yourself  or  any 

Dreber  (Ala.),   4   So.    Rep.   287;    Calla-  of  your  children.  ...    I  will    hand   you 

ban's  Est.  13  Phila.  (Pa.)  381  ;  Randall  v.  possession  of  tho  same  with  plcnsnre,  and 

Sanders,  87  N.  Y.  578;  Coburn  v.  Ander-  become  your  yearly  tenant." 
son,  62  How.  (N.  Y.)  268  ;  Howe  v.  Austin 

(La.),  4  So.  Rep.  315.  191 


§§  268,  269.]      ABSOLUTE   DEED   AND   AGREEMENT   TO   RECONVEY. 

The  fact  that  the  piirties  agreed  that,  in  case  the  gi-antee  should 
sell  the  property  for  a  price  above  the  purchase  price,  the  grantor 
should  have  the  excess,  is  not  sufficient  to  convert  the  deed  into  a 
mortgage.^ 

268.  Where  one  induces  a  third  person  to  become  the  pur- 
chaser, and  the  latter  agrees  to  reconvey  the  land  to  the  grantor 
if  certain  payments  are  made  to  him  within  a  specified  time,  in 
default  of  payment  there  is  no  right  of  redemption  afterwards.^ 
If  the  relation  of  debtor  and  creditor  is  not  created  between  the 
parties,  the  transaction  is  not  a  mortgage  but  a  conditional  sale.^ 
This  is  the  test  to  be  applied  in  every  case.  It  is  a  question  of 
fact,  for  the  determination  of  which  equity  allows  a  wide  range 
of  inquiry  into  the  relations  of  the  parties  and  the  circumstances 
of  the  case  ;  and  from  the  facts  the  law  deduces  the  inference, 
either  that  there  was  a  sale  absolutely  or  upon  condition,  or  else 
that  the  transaction  was  a  mortgage.* 

When  a  person  advances  money,  and  at  the  same  time  receives 
a  deed  and  gives  back  to  the  grantor  a  bond  to  reconvey,  these 
facts  incline  to  the  belief  that  the  transaction  is  a  loan  and  a 
security.  But  the  case  is  different  when  the  obligation  to  convey 
is  given  to  a  person  other  than  the  grantor.^ 

269.  That  there  is  no  continuing  debt  is  a  strong  circum- 
stance to  show  that  the  transaction  is  a  contract  for  repurchase. 
If  the  proof  establishes  that  the  consideration  money  was  a  loan, 
and  the  party  receiving  it  is  personally  liable  for  its  repayment, 
that  constitutes  it  a  debt ;  it  does  not  require  a  writing  to  make 
it  such,  nor  is  it  extinguished  by  or  merged  in  a  mortgage  taken 
for  security.^  Unless  the  relation  of  debtor  and  creditor  existed 
between  the  parties  in  the  beginning  in  reference  to  the  consid- 

1  Rogers  v.  Beach  (Ind.),  17  N.  E.  Rep.  Maderia,  3  W.  &  S.  (Pa.)  384;  Robinson 
609.  V.  Willoiighby,  65  N.  C.  520;   Goulding 

2  See  §  331;  Hill  v.  Grant,  46  N.  Y.  v.  Bunster,  9  Wis.  513;  Turner  v.  Kerr, 
496;  Stephenson  v.  Thompson,  13  111.  44  Mo.  429 ;  McNees  i-.  Swanej',  50  Mo. 
186;  Roberts  v.  McMahan,  4  Greene  388;  Micou  v.  Ashurst,  55  Ala.  607; 
(Iowa),  34;  Hull  v.  McCall,  13  Iowa,  467.  Stiuchfield  v.  Milliken,  71  Me.  567. 

3  Gait  V.  Jackson,  9  Ga.  151;  Chap-  &  Carr  w.  Rising,  62  111.  14.  See  Smith 
man  v.  Ogden,  30  111.  515;  Humphreys  t?.  Sackett,  15  111.  528;  Davis  n.  Hopkins, 
V.  Snyder,  1  Morris  (Iowa),  263.  See  lb.  519,  for  cases  where  a  third  party  fur- 
§  272.  nished  the  money,  but  was  not  a  party  to 

*  Rice   V.   Rice,   4   Pick.    (Mass.)   349;  the  transaction.     Also  §  331. 
Henry  v.  Davis,  7  Johns.  (N.  Y.)  Ch.  40;         ^  phillips  v.  Hulszier,  20  N.  J.  Eq.  308; 

Sweetzer's  Appeal,  71  Pa.  St.  264;  Todd  Porter  v.  Clements,  3  Ark.  364;  Farmer 

V.  Campbell,  32  Pa.  St.  250;  Hiester  v.  v.  Grose,  42  Cal.  169. 

192 


WHEN   THEY   CONSTITUTE   A   CONDITIONAL   SALE.         [§  270. 

eration  of  the  conveyance,  and  the  relation  continues  so  that  the 
gra,ntee  would  have  the  right  to  call  upon  the  grantor  to  supply 
any  deficiency  that  might  arise  in  case  of  a  foreclosui'e  and  sale 
of  the  premises,  the  agreement  to  reconvey  in  connection  with  the 
deed  constitutes  a  conditional  sale.^  If  there  was  no  loan  in  the 
beginning,  or  if  a  prior  debt  was  extinguished  by  the  conveyance, 
and  the  grantor  merely  has  the  privilege  of  repaying  if  he  pleases, 
by  a  given  time,  and  of  receiving  a  reconveyance,  the  transaction 
is  a  conditional  sale.^ 

There  can  be  no  mortgage  without  a  debt.  There  may  be 
agreements  for  the  performance  of  obligations  other  than  the  pay- 
ment of  money  ;  but  leaving  these  out  of  view,  it  is  essential  that 
there  be  an  agreement,  either  express  or  implied,  on  the  part  of 
the  mortgagor,  or  some  one  in  whose  behalf  he  executes  the  mort- 
gage, to  pay  to  the  mortgagee  a  sum  of  money  either  on  account 
of  a  preexisting  debt  or  a  present  loan.'^ 

270.  An  agreement  that  the  grantee  may  buy  the  property 
absolutely,  after  a  specified  time,  is  regarded  as  a  circumstance 
tending  to  show  that  the  transaction  is  a  conditional  sale.  Thus 
where  the  grantee's  covenant,  executed  at  the  same  time  with  an 
absolute  conveyance  to  him,  recited  that  this  was  made  for  the 
purpose  of  paying  a  certain  sura  of  money,  and  stipulated  that  he 
would  not  convey  the  premises  within  one  year  without  the  con- 
sent of  the  grantor,  and,  if  the  grantor  within  that  time  should 
find  a  purchaser,  the  grantee  would  convey  the  land  on  receiving 
the  amount  with  interest  for  which  the  land -had  been  conveyed 
to  him  ;  and  that  in  case  such  sale  should  not  be  made  within  the 
year,  it  should  then  be  submitted  to  certain  persons  named,  to 
determine  w^hat  additional  sum  the  grantee  should  pay  for  the 
land,  which  sum  he  covenanted  to  pay,  the  transaction  was  held 
not  to  be  a  mortgage,  but  a  conditional  sale,  giving  the  grantee 
the  right  to  recover  possession  of  the  land,  after  the  expiration 
of  the  year,  in  ejectment  against  the  grantor.*  In  like  manner 
an  agreement  by  the  grantee,  made  as  a  part  of  the  transaction 

1  Robinson  v.  Cropsey,  2  Edw.  (N.  Y.)  »  Ilenloy  „    Ilotaling,  41   CaL  22,  28, 

138 ;  Sjixtori  v.  Ilitclicock,  47  IJarl).  (N.  Y.)  per  Rhodes,  C.  J. ;  and  sec  Usher  «•.  Liv- 

220;  Sluwey  v.  Mc.Murray,  27  Mo.  113;  crmore,  2  Iowa,  117;  Klein  v.  McNamara, 

Iloopes  V.  IJailey,  28  Miss.  328;  Johnson  54  Miss.  90;  Voss  v.  Kller,  100  LkL  2G0; 

V.  Clark,  .■>  Ark.  321  ;   Blnkcniorc  v.  Hyrn-  10  N.  E.  Rep.  74.     Also,  sec  §  272. 

Hide,  7  Ark.  WK),  50'J ;  De  Hruhl  v.  Maas,  *  Baker  v.  Tliraslier,   4  Den.   (N.  Y.) 

54  Tex.  4G4.  493. 

^  iJe  Bruhl  i;.  Maas,  supra. 

VOL.  I.                        13  193 


§§  271,  272.]      ABSOLUTE   DEED   AND   AGREEMENT   TO   RECONVEY. 

whereby  he  is  to  account  to  the  grantor  for  a  portion  of  the 
profits  which  may  be  reahzed  on  a  resale  of  the  premises  if  made 
within  a  specified  time,  and  requiring  him  to  sell  if  a  specified 
price  can  be  obtained,  is  not  inconsistent  with  the  vesting  of  the 
title.i 

271.  On  the  other  hand,  an  agreement  that  the  grantee 
may  sell  all  the  property  for  the  best  possible  price  and  retain 
from  the  proceeds  the  amount  due  him,  paying  the  residue  to  the 
grantor,  shows  that  the  transaction  is  a  mortgage,^  until  the  power 
of  sale  is  executed.^  In  case  the  land  should  sell  for  a  legs  sum 
than  the  debt,  the  gi'antee  is  entitled  to  recover  the  deficiency.* 
And  so  a  conveyance  to  a  trustee  with  power  to  sell  the  land, 
pay  the  creditor  from  the  proceeds,  and  deliver  the  balance  to  the 
grantor  on  his  failure  to  pay  the  debt,  is  a  mortgage,  and  subject 
to  the  provisions  of  a  registry  law  relating  to  mortgages.^  But  a 
stipulation  that  if  the  grantor  can,  within  a  limited  time,  "  dis- 
pose of  the  land  conveyed  to  better  advantage,"  he  may  do  so, 
paying  to  the  grantee  the  "  consideration  money  "  mentioned  in 
the  deed,  does  not  make  the  instrument  a  mortgage.^  And  so  a 
covenant  by  the  grantor,  who  is  a  joint  tenant,  not  to  make  par- 
tition without  the  advice  and  consent  of  the  grantee,  does  not 
turn  a  conditional  sale  into  a  mortgage.^ 

272.  The  fact  that  there  is  no  agreement  for  the  payment 
of  the  debt  is  a  circumstance  entitled  to  considerable  weight,  as 
tending  to  show  that  the  conveyance  was  not  intended  as  a  mort- 
gage, and  that  the  relation  of  debtor  and  creditor  did  not  exist, 
but  is  not  conclusive.^     "  The  want  of  a  covenant  to  repay  the 

1  §  267;  Macaulay  v.  Porter,  71  N.  Y.  ker  v.  Thrasher,  4  Den.  (N.  Y.)  493;  Ma- 
173;  Cadman  v.  Peter,  12  Fed.  Rep.  363.  caulay  v.  Port;er,  supra. 

2  Ogden  V.  Grant,  6  Dana  (Ky.),  473;  &  Woodruff  v.  Robb,  19  Ohio,  212;  and 
Crane  v.  Buchanan,  29  Ind.  570 ;  RufF-  see  Irwin  v.  Longworth,  20  Ohio,  581  ; 
ners  v.  Putney,  12  Gratt.  (Va.)  541 ;  Hag-  Walsh  v.  Brennan,  52  111.  193.  See,  how- 
thorp  V.  Hook,  1  G.  «&  J.  (Md.)  270;  Gillis  ever,  Alleghany  R.  R.  &  Coal  Co.  v.  Ca- 
i;.  Martin,  2  Dev.  (N.  C)  Eq.  470;  Law-  sey,  79  Pa.  St.  84. 

rence  v.  Farmers'  Loan  &  Trust  Co.  13  ^  Stratton  v.  Sabin,  9  Ohio,  28. 

N.  Y.  200;  Kidd  v.  Teeple,  22  Cal.  255;  ^  Cotterell  v    Purchase,  For.  61  ;  Cas. 

Hoffman  v.  Ryan,  21  W.  Va.  415 ;  Beck-  temp.  Talb.  61. 

man  v.  Wilson,  61  Cal.  335;  Curtiss  v.  ^  Horn  v.  Keteltas,  46  N.  Y.  605  ;  Mat- 
Sheldon,  47  Mich.  262;  Stephens  v.  Allen,  thews  v.  Sheehan,  69  N.  Y.  585  ;  Holmes 
11  Oreg.  188.  v.  Grant,  8  Paige,  243,  251  ;  Brumfield  v. 

8  Eaton   V.   Whiting,   3   Pick.  (Mass.)  Boutail,  24  Hun   (N.  Y.),  451  ;  Flagg  v. 

484.                                                              v^  Mann,    14  Pick.   (Mass )  467  ;    Bacon  v. 

*  Palmer  v.  Gurnsey,  7  Wend.  (N.  Y.)  Brown,  19  Conn.  34;  Jarvis  v.  Woodruff, 

248,  distinguished  and  questioned  in  Ba-  22   Conn.   548,  550;   Rockwell  v.  Hum- 

194 


WHEN   THEY   CONSTITUTE   A   CONDITIONAL   SALE.  [§  272. 

money,"  saj'S  Chief  Justice  Marshall,^  "  is  not  complete  evidence 
that  a  conditional  sale  was  intended,  but  is  a  circumstance  of  no 
inconsiderable  importance."  No  conveyance  can  be  a  mortgage 
unless  made  for  the  purpose  of  securing  the  payment  of  a  debt,  or 
the  performance  of  a  duty  either  existing  or  created  at  the  time, 
or  else  to  be  created  or  to  arise  in  the  future.  But  it  is  not  nec- 
essary that  the  debt  or  duty  should  be  evidenced  by  any  express 
covenant,  or  by  any  separate  written  security .^  Although  a  mort- 
gage cannot  be  a  mortgage  on  one  side  only,  but  must  be  a  mort- 
gage with  both  parties,'^  yet  this  principle  is  applicable  to  the 
lien  upon  the  land  only,  and  not  to  the  personal  obligation. 

The  fact  that  there  is  no  collateral  undertaking  by  the  grantor 
for  the  payment  of  money,  or  the  performance  of  anjj^  obligation, 
is  by  no  means  conclusive  of  the  nature  of  the  transaction.  This 
is  only  one  circumstance  to  be  regarded  in  ascertaining  whether 
it  is  to  be  treated  as  a  mortgage  or  a  sale  with  a  contract  for 
repuichase.*  It  affects  the  equitable  rights  and  claims  of  the 
parties.  If  there  be  no  contract  for  the  repayment  of  the  money, 
the  grantee  must  bear  any  loss  arising  from  depreciation  in  value  ; 
and  it  would  seem  equitable,  on  the  other  hand,  that  he  should 
have  the  benefit  of  any  advance  in  the  value  of  the  property,  if 
the  repurchase  be  not  made  within  the  stipulated  period. 

A  debtor  conveyed  to  his  surties  certain  land,  taking  from 
them  a  bond  providing  that  the  obligors  should  pay  his  debt,  and 
stating  that  "  the  intent  of  the  deed  was  to  indemnify  and  save 
them  harmless."  The  bond  also  referred  to  the  deed  as  "  indem- 
nity and  security  in  addition  to  security  "  of  other  lands  mort- 
gaged to  the  obligors,  and  stipulated  that  the  land  should  not 
be  sold  for  three  years,  so  that  the  debtor  "  may  redeem  if  he 
chooses  to  do  so."  If  the  obligors  were  not  "  reimbursed  "  within 
the  three  years,  they  were  to  hold  the  lands  free  from  all  claim 
on  the  debtor's  part,  but  they  agreed  to  place  no  obstacles  in  the 
way  of  his  "  paying  said  debts   and  redeeming  the  said  lands." 

phrey,  57  Wis.  410;  Schriber  v.  Le  Clair,  *  Murphy  v.  Galley,  1   Allen  (Mass.), 

66  Wis.  579;  Niggeler  u.  Maurin,34  Minn.  107;    Flagg  v.   Mann,   14  Pick.    (Mass.) 

118;    Madigan   v.   Mead,   31    Minn.  94;  407-479;  Uice  t-.  Rice,  4  lb.  349;  Brant 

Fi»k  V.  Stewart,  24  Minn.  97.  v.  Robertson,  supra;  Bodwell  v.  Webster, 

*  In  Conway  r.  Alexander,  7  Crancb,  13  I'iek.  (Mass.),  411,  415  ;  Flint  i;.  Shel- 

218.  don,  13  Mass.  443,  448  ;  Kelly  v.  Beers,  12 

2  Brant  u.  Robertson,  10  Mo.  12a;Fisk  Mass.  387;    Brown   v.  Dewey,   1   Sandf. 

V.  Stewart,  24  Minn.  97.  (N.  Y.)  Ch.  56;    S.  V.  2  Barb.  (N.  Y.) 

^  Coplc.Hton  V.  Boxwill,   1    Ch.  Ca.  1  ;  28;  Stephens  u.  Allen,  11  Oreg.  188. 
Wbite  V.  Ewer,  2  Vent.  340. 

195 


§  273.]         ABSOLUTE   DEED   AND   AGREEMENT   TO   RECONVEY. 

The  transaction  was  adjudged  to  be  a  mortgage,  and  not  a  con- 
ditional sale,  although  there  was  no  covenant  on  the  part  of  the 
grantor  to  pay  the  debt.^ 

273.  The  fact  that  interest  is  payable,  by  the  terms  of  the 
contract,  upon  the  money  advanced  by  the  person  who  takes  the 
title  to  the  property,  is  a  circumstance  tending  to  show  that  the 
transaction  was  a  loan  upon  security  instead  of  a  conditional  sale. 
Anything  tending  to  show  that  there  was  a  subsisting  debt,  or  an 
advance  by  way  of  loan,  goes  to  prove  the  transaction  to  be  a 
mortgage.^ 

What  is  in  fact  a  payment  of  interest  is  sometimes  disguised 
under  the  payment  of  rent  by  the  grantor  in  possession  to  the 
grantee ;  but  although  the  transaction  has  the  appearance  of  a 
conditional  sale,  the  payment  of  rent  in  lieu  of  interest  may  be 
a  circumstance  tending  to  show  that  it  is  in  fact  a  mortgage.^  If 
a  conveyance  of  land  be  made  in  fee,  and  the  grantee  give  back  a 
bond  to  reconvey  upon  repayment  of  the  consideration  money,  and 
to  permit  the  grantor  to  occupy  the  premises  at  a  rent  equal  to 
the  interest  on  the  consideration,  these  are  parts  of  one  and  the 
same  transaction,  and  constitute  a  mortgage.* 

The  owner  of  land  occupied  by  him  as  a  homestead  executed 
an  absolute  conveyance  of  it  in  consideration  of  one  thousand  dol- 
lars, and  the  grantee  at  the  same  time  executed  with  him  a  joint 
instrument  stipulating  that  the  grantor  should  have  the  privi- 
lege of  repurchasing  the  premises  for  the  same  price,  at  any  time 
within  twelve  months,  and  should  remain  in  possession,  and  pay 

1  Wing  V.  Cooper,  37  Vt.  169.  property  has  not  been  sold,  said  Honore  is 

2  Murphy  v.  Galley,  1  Allen  (Mass.),  to  pay  one  half  the  sum  so  advanced,  with 
107  ;  Farmer  v.  Grose,  42  Cal.  169  ;  Har-  the  accrued  interest,  or  said  Hutchings  is 
bison  V.  Houghton,  41  111.  522 ;  Honore  v.  to  be  the  sole  owner  of  the  same.'  The 
Hutchings,  8  Bush  (Ky.),  687;  Turpie  v.  land  was  not  sold  within  the  time  speci- 
Lowe  (Ind.),  15  N.  E.  Rep.  834.  fied,  and  Honore  failed  to  pay  any  part  of 

"  Hutchings  and  Honore,  in  1861,  joint-  the  sum  advanced.  In  1869,  Hutchings 
ly  purchased  thirty  acres  of  land  near  Chi-  sold  the  land  for  $100,000,  and  refused  to 
cago,  111.  Hutchings  advanced  the  entire  pay  any  part  of  the  profits  to  Honore. 
purchase  price,  took  a  conveyance  to  him-  But  it  was  decided  that  Hutchings  held 
self,  and  executed  a  writing  in  which,  the  legal  title  to  one  half  the  land  in  trust 
among  other  things,  'it  is  agreed  between  for  Honore,  and  must  account  for  the  pro- 
said  parties,  that  when  said  land  is  sold  ceeds  according  to  the  agreement." 
said  Hutchings  is  to  have  first  his  six  thou-  ^  Wright  v.  Bates,  13  Vt.  341  ;  Wood- 
sand  dollars  so  advanced,  and  ten  percent,  ward  IK  Pickett,  8  Gray  (Mass.),  617; 
interest,  and  the  profits  over  and  above  Preschbaker  v.  Feaman,  32  111.  475 ;  Ew- 
said  sum  are  to  be  equally  divided  between  art  v.  Walling,  42  111.  453  ;  Bearss  v.  Ford, 
said  parties.  .  .  ,  This  arrangement  is  to  108  III.  16. 
continue  eighteen  months,  when,  if   the  *  Woodward  v.  Pickett,  supra. 

196 


WHEN   THEY   CONSTITUTE   A   CONDITIONAL   SALE.      [§§  274,  '275. 

rent  at  the  rate  of  forty  dollai's  per  month  until  such  repurchase, 
or  the  expiration  of  the  twelve  months.  He  remained  in  posses- 
sion eleven  years,  and  paid  over  twelve  hundred  dollars  as  rents. 
The  transaction  was  held  to  be  a  mortgage  ;  that  the  rent  was  a 
device  to  screen  usury,  and  that  the  debt  had  been  extinguished 
by  the  payments  made.^ 

274.  The  continued  possession  of  the  grantor,  as  is  else- 
where noticed  with  reference  to  proving  by  parol  that  an  absolute 
conveyance  is  not  a  sale,  is  a  circumstance  tending  to  show  that 
the  agreement  for  repurchase,  in  connection  with  the  deed,  consti- 
tutes a  mortgage  rather  than  a  conditional  sale.^ 

275.  Inadequacy  of  price  is  one  of  the  circumstances  which 
are  considered  as  of  weight,  as  tending  to  show  that  an  absolute 
conveyance  accompanied  by  an  agreement  to  reconvey  is  a  mort- 
gage rather  than  a  conditional  sale.  This  alone  will  not  au- 
thorize a  court  to  give  the  grantor  a  right  to  redeem,  but  in 
connection  with  other  evidence  affords  much  ground  of  inference 
that  the  transaction  was  not  really  what  it  purports  to  be.^  In- 
adequacy of  price,  to  be  of  controlling  effect,  must  be  gross.*  If 
it  be  very  inadequate,  it  is  a  circumstance  tending  to  show  a  loan 
and  mortcracre  :  but  it  is  not  conclusive.  Nor  would  the  fact  of 
the  adequacy  of  the  price,  taken  in  connection  with  the  absence  of 
any  obligation  to  repay  the  money,  be  conclusive  that  a  condi- 
tional sale  was  intended.^  Nevertheless,  the  fact  that  the  consid- 
eration is  fully  equal  to  the  value  of  the  land  is  evidence  of  some 
weight  that  the  transaction  was  a  sale  and  not  a  mortgage,  be- 

1  In  Boatrif,'ht  v.  Peck,  33  Tex.  68.  Reed   v.  Reed,  75    Me.  264.     Maryland  : 

2  See  §§  329,  600,  the  cases  beiiif,'  equal-  Thompson  v.  Banks,  2  Md.  Ch.  430.  Mas- 
ly  applicable  here  :  Ransone  v.  Frayser,  sachusetts  :  Campbell  v.  Dearborn,  109 
10  Lei;^h  (Va.),  592;  Gibson  v.  EUer,  13  Mass.  130,  144.  Mississippi  :  Freeman  v. 
Ind.  124;  Clark  v.  Finlou,  90  III.  245;  Wilson,  51  Miss.  329.  New  York:  Brown 
Hoffman  v.  Ryan,  21  W.  Va.  415.  v.  Dewey,  2  Barb.  28.     North  Carolina: 

*  See  §  329  ;  Thornborough  v.  Baker,  Steel  v.  Black,  3  Jones  Eq.  427  ;  Streator 

3  Swanst.  628,631;  Davis  j;.  Thomas,!  r.  Jones,  3  Hawks,  423 ;  Sellers  v.  Stalcup, 

Rusj.  &  M.  506;  Williams  v.  (Jwen,  5  M.  7  Ired.  Eq.  13  ;  Kemp  v.  Earp,  lb.  167. 

&  C.  303 ;  Douglass  v.  Culverwell,  3  Gif.  Pennsylvania  :  Wharf  v.  Howell,  5  Binn. 

251  ;  Langton  v.  Ilorton,  5  Beav.  9;  Rus-  499.     In   this  ca.se  a  lot  worth  $800  was 

sell  V.  Southard,  12  How.  139.     Alabama  :  conveyed  in  consideration  of  $200,  wiih  an 

Pearson  v.  Seay,  35  Ala.  612;  Crews  v.  agreement  to  reconvey  upon  the  jjayineut 

Threa'igill,  35  Ala.  334.     Illinois  :  Rue  v.  of  this  Hum  within  three  months. 

Dole,    107   111.   275.     Indiana:   Turpie  r.  *  Elliott  u.  Muxwull,  7  Ired.  (N.  C.)  Eq. 

Lowe,  15  N.    E.  Rep.  834  ;  Davis  i-.  Stone-  246. 

htrcet,  4  Ind.  101.     Iowa:  Bridges  v.  Lin-  '•  Brown  r.  Dewey,  2  Baib.  (N.  Y.)   28  ; 

der,  60  Iowa,  190,  quoting  text.     Maine:  6'.  C.  1  Sandf.  (N.  Y.)  Ch.  56. 

liJ7 


§§  276,  277.]       ABSOLUTE   DEED   AND   AGREEMENT    TO   RECONVEY. 

cause  men  in   making  a  loan    do   not    usually  advance    the  full 
amount  of  the  land.^ 

If  the  transaction  creates  no  debt  or  loan,  but  only  a  right  to 
repurchase,  it  is  immaterial  whether  the  consideration  for  the  re- 
conveyance is  fixed  at  the  same  price  paid  for  the  conveyance,  or 
at  an  advanced  price.^ 

276.  When  the  transaction  is  otherwise  a  conditional  convey- 
ance and  not  a  mortgage,  the  latter  character  is  not  imparted  to 
it  by  the  mere  fact  that  the  instrument  is  recorded  as  a  mort- 
gage.^ The  acts  or  declarations  of  one  party  in  reference  to  the 
transaction  afterwards  will  not  change  its  character.  The  trans- 
action remains  what  the  parties  made  it  in  the  beginning,  until 
by  mutual  agreement  they  change  it.  It  can  hardly  be  said  that 
the  treatment  of  an  absolute  deed  as  conditional  by  the  grantee 
can  make  it  a  mortgage.  If  it  was  a  mortgage  in  the  beginning, 
his  admission  of  the  fact  only  relieves  the  mortgagor  from  proving 
it.  If  it  was  not  a  mortgage  in  the  beginning,  his  treating  it  as 
such  has  no  effect  unless  the  mortgagor  concurs  in  so  treating  it, 
80  that  in  fact,  by  mutual  agreement,  the  character  of  the  instru- 
ment is  changed.* 

277.  Parol  evidence  is  admissible  in  equity  to  show  that 
a  conditional  sale,  and  not  a  mortgage,  was  intended,  in  case 
there  is  nothing  on  the  face  of  the  papers  to  determine  whether 
the  transaction  was  the  one  or  the  other.  The  question  is  then 
to  be  decided  by  the  jury,  under  instructions,  and  not  by  the 
court.^  For  this  purpose  evidence  of  the  repeated  assertions  of 
the  grantee  that  he  had  bought  the  property  and  owned  it,  of  his 
repeated  denials  that  the  grantor  had  any  interest  in  it,  and  of 
acts  of  ownership  inconsistent  with  the  position  of  a  mere  mort- 
gagee may  be  received.^ 

But  if  the  instrument  on  its  face  be  a  mortgage,  or  if  a  deed 
and  bond  of  defeasance  be  executed  together  as  part  of  the  same 

1  Can-  V.   Rising,    62   111.   14,    19,   per  agreeing  with  the  statement  in  the  text. 
Walker,  J.  Holmes  v.  Fresh,  9  Mo.  201  ;  Thomaston 

2  Glover  V.  Payn,    19  Wend.    (N.  Y.)  Bank  v.  Stimpson,  21  Me.  195;   Nichols 
518;  West    v.    Hendrix,    28    Ala.    226;  v.  Reynolds,  1  R.  I.  30. 

French  v.  Sturdivant,  8 'Me.  246;   Pitts  6  Alstin  i-.  Cundiff,  52  Tex.  453. 

V.  Cable,  44  111.  103.  6  See  §§  246,  282  ;    Newcomb  v.  Bon- 

8  Morrison  v.  Brand,  5   Daly  (N.  Y.),  ham,  1    Vern.  8,  214,  232  ;    Langton    v. 

40;  Jackson  v.  Richards,  6  Cow.  (N.  Y.)  Horton,  5  Beav.  9;  Hanford  v.  Blessing, 

617,619.  80  111.188. 

*  See,    on   this   point,  but    not  wholly 

198 


WHEN   THEY   CONSTITUTE  A   CONDITIONAL   SALE.         [§  277. 

transaction,  and  therefore  constitute  a  mortgage,  parol  evidence 
is  not  admissible  to  show  that  the  parties  intended  that  the  trans- 
action should  operate  as  a  conditional  sale.  It  is  then  for  the 
court  to  construe  the  instruments  and  determine  their  legal  effect.^ 
No  agreement  or  intention  of  the  parties,  whether  at  the  time  of 
the  transaction  or  subsequentl}^  can  change  the  redeemable  char- 
acter of  a  mortgage.^  In  the  one  the  proof  raises  an  equity  con- 
sistent with  the  writing,  and  in  the  other  the  proof  would  contra- 
dict the  writing.^ 

And,  on  the  other  hand,  parol  evidence  is  admissible  in  equity 
to  show  that  a  formal  conveyance,  with  a  defeasance  executed  at 
the  same  time  or  afterwards,  constituted  in  fact  a  mortgage,  and 
not  a  conditional  sale.* 

But  although  a  formal  conveyance  can  be  shown  to  be  a  mort- 
gage by  extrinsic  evidence,  a  formal  mortgage  cannot  be  shown  to 
be  a  conditional  sale.^  The  reason  of  the  rule,  that  a  formal  con- 
veyance may  be  shown  by  parol  to  be  a  mortgage,  while  a  formal 
mortgage  cannot  be  shown  to  be  a  conditional  sale  by  the  same 
means,  is,  that  "  in  the  one  case  such  proof  raises  an  equity  con- 
sistent with  the  writing,  while  in  the  other  it  would  contradict 
the  writing."  ^  When  the  transaction  is  a  sale  with  a  right  of 
repurchase,  and  the  grantor  claims  it  to  be  a  mortgage,  a  bill  will 
lie  to  have  the  sale  established." 

Such  evidence  is  inadmissible  at  law.^  It  is  received  only  in 
equity,  and  when  there  exist  equitable  grounds  for  its  admission. 
It  is  held,  too,  that  the  rule  admitting  parol  evidence  in  equity 
for  the  purposes  mentioned  does  not  extend  to  an  official  convey- 
ance, such  as  the  deed  of  a  sheriff  selling  under  process.^  Such 
officer  has  no  power  to  make  any  sale  other  than  an  absolute  one. 

1  Alstin  V.  Cundiff,  52  Tex.  453;  Buse  108  111.  16;  Heath  v.  Williams,  30  Ind. 
y.  Page,  32  Minn.  Ill  ;  Voss  v.  Eller,  109     495. 

Ind.  260.  5  McClintock  v.  McClintock,  3  Brews. 

2  Wing  V.  Cooper,  37  Vt.  169 ;  Woods  (Pa.)  76  ;  Wharf  v.  Howell,  5  Binn.  (Pa.) 
V.   Wallace,  22  Pa.   St.    171;  Colwell   i;.  499;  Reitenbaugh  v.  Ludwick,  supra. 
Woods,  3   Watts  (Pa.),   188;  Kunkle  v.  «  Per  Gibson,  C.  J.,  in  Kunkle  f.  Wolf- 
Wolfsberger,  6  lb.    126;   Reitenbaugh  v.  ersberger,  supra ;  Woods  r.  Wallace,  si/pra. 
Ludwick,  31   Pa.  St.  131,  138;  Brown  v.  "^  Rich  v.  Doane,  35  Vt.  125. 

Nickle,  6  Pa.  St.  390.  8  Wcbb  i'.    Rice,  6   Hill  (N.  Y.),  219  ; 

3  Kunkle  v.  Wolfersberger,  supra.  Bragg  v.  Massie,  38  Ala.  89 ;  McClane  v. 
<  Reitenbaiigh  r.  Ludwick,  supra  ,•  Far-     White,  5  Minn.  178;  Bclote  v.  Morrison, 

mer  v.  Grose,  42  Cal.  169;   and  sec  Gay     8  Minn.  87.     Contra,  Tillson  v.  Moulton, 

V.    Hamilton,    33    Cal.    686;    Tillson    v.     supra.     See  §  282. 

Moulton,  23    111    648  ;    Bearss   v.    Ford,         »  Ryan  v.  Dox,  25  Barb.  (N.  Y.)  440. 

199 


§§  278,  279.]      ABSOLUTE   DEED   AND   AGREEMENT   TO   EECONVEY. 

278.  Very  slight  circumstances  showing  that  the  transfer 
was  not  understood  at  the  time  to  be  absolute,  but  was  made  to 
secure  the  repayment  of  the  sum  advanced,  raay  be  sufficient  to 
turn  the  scale,  if  the  evidence  be  not  clear  whether  the  trans- 
action was  a  sale  of  the  securities  or  only  a  mortgage  of  them.^ 
And  so  where  there  is  an  agreement  to  reconvey,  very  sligiit  cir- 
cumstances will  suffice,  in  relation  to  such  a  transaction,  to  de- 
termine its  character,  —  whether  it  is  a  mortgage  or  an  absolute 
conveyance  with  a  stipulation  securing  the  grantor  a  reconvey- 
ance upon  certain  terms  and  within  a  certain  time.^  Thus  the 
circumstance  that  the  reconveyance  is  to  be  made  upon  payment 
of  the  precise  amount  of  the  consideration,  with  interest,  is  taken 
into  consideration  as  favoring  the  conclusion  that  a  loan  was 
made.^ 

279.  When  it  is  doubtful  whether  the  transaction  is  a  mort- 
gage or  a  conditional  sale,  it  will  generally  be  treated  as  a  mort- 
gage,^ although  it  is  in  some  of  the  cases  said  that  the  transac- 
tion, appearing  upon  its  face  to  be  a  conditional  sale,  will  be  held 
to  be  such  when  no  circumstances  appear  showing  an  intention 
that  it  should  be  considered  a  mortgage.^  But  generally  courts 
of  equity  incline  against  conditional  sales,  and  give  the  benefit 
of  any  doubt  arising  upon  the  evidence  in  favor  of  the  grantor's 
right  to  redeem.^  "  It  is  unquestionably  true,  that  in  cases  where 
upon  all  the  circumstances  the  mind  is  uncertain  whether  a  secu- 
rity or  a  sale  was  intended,  the  courts,  when  compelled  to  decide 

1  McKinney  v.  Miller,  19  Mich.  142,  Robinson  v.  Cropsey,  2  Edw.  (N.  Y.) 
148.  138. 

2  Waite  V.  Dimick,  10  Allen  (Mass.),  ^  j'ee  v.  Cobine,  11  Ir.  Eq.  Eep.  406. 
3G4.  Alabama:  Turnipseed  u.  Cunningham,  16 

3  Hickox  V.  Lowe,  10  Cal.  197.  See  Ala.  501  ;  McNeil  v.  Norsworthy,  39  Ala. 
§  275.  156  ;  Locke  v.  Palmer,  26  Ala.  312  ;  Mo. 

*  See  §§  335,  336 ;  Russell  v.  Southard,  bile  Building  &  Loan  As.so.  v.  Robertson, 
12  How.  139;  O'Neill  v.  Capelle,  62  Mo.  65  Ala.  382.  Arkansas:  Scott  v.  Henry, 
202;  Brant  v.  Robertson,  16  Mo.  129;  13  Ark.  112.  California:  Hickox  z;.  Lowe, 
Turner  v.  Kerr,  44  Mo.  429;  Desloge  v.  10  Cal.  196.  Illinois  :  Williams  v.  Bishop, 
Ranger,  7  Mo.  327;  Heath  y.  Williams,  15111.  553;  Bishop  y.  Williams,  18  lb.  101 ; 
30lnd.  495;  Bacon  v.  Brown,  19  Conn.  Miller  y.  Thomas,  14  111.  428;  Pensoneau 
34;  Trucks  v.  Liudsey,  18  Iowa,  504;  v.  Pulliam,  47  111.  58.  Indiana:  Heath 
Baugher  v.  Merryman,  32  Md.  185;  Klein  v.  Williams,  30  Ind.  496.  Maine:  Reed 
V.  McNamara,  54  Miss.  90 ;  Suavely  v.  v.  Reed,  75  Me.  264.  Maryland :  Dough- 
Pickle,  29  Gratt.  (Va.)  27  ;  De  Bruhl  v.  erty  v.  McColgan,  6  G.  &  J.  275;  Artzv. 
Maas,  54  Tex.  464;  Cosby  v.  Buchanan,  Grove,  21  Md.  456;  Baugher  v.  Merry- 
81  Ala.  574 ;  Stephens  v.  Allen,  11  Oreg.  man,  supra.  MicMgan  :  McKinney  v, 
188.  Miller,  19  Mich.  142;   Cornell  v.  Hall,  22 

6  Swetland  v.  Swetland,  3  Mich.  482 ;  Mich.  377.  Minnesota :  Holton  v.  Mei- 
200 


WHEN  THEY  CONSTITUTE  A  CONDITIONAL  SALE.   [§§  280,  281. 

between  them,  will  be  somewhat  guided  by  prudential  considera- 
tions, and  will  consequently  lean  to  the  conclusion  that  a  security 
was  meant,  as  more  likely  than  a  sale  to  subserve  the  ends  of  ab- 
stract justice  and  avert  injurious  consequences.  And  where  the 
idea  that  a  security  was  intended  is  conveyed  with  reasonable  dis- 
tinctness by  the  writings,  and  no  evil  practice  or  mistake  appears, 
the  court  will  incline  to  regard  the  transaction  as  a  security 
rather  than  a  sale,  because  in  such  a  case  the  general  reasons 
which  favor  written  evidence  concur  with  the  reason  just  sug- 
gested." 1 

280.  The  same  considerations  apply  to  an  assignment  of 
a  mortgage,  accompanied  by  an  agreement  to  reassign  within  a 
time  mentioned.  In  Henry  v.  Davis^  the  Chancellor  said :  "It 
is  clearly  setablished  by  the  answer  and  proofs  that  the  bond  and 
mortgage  were  assigned  by  the  plaintiff  to  the  defendant  by  way 
of  mortgage,  to  secure  the  payment  of  $225  by  a  given  day;  and 
any  agreement  that  the  assignment  was  to  be  an  absolute  sale, 
without  redemption  upon  default  of  payment  on  the  day,  was 
unconscientious,  ojDjjressive,  illegal,  and  void.  The  equity  of  re- 
demption still  existed  in  the  plaintiff,  notwithstanding  any  such 
agreement."  The  same  considerations  apply  also  to  an  assign- 
ment of  a  lease  made  in  connection  with  an  agreement  to  reas- 
sign, and  to  the  determination  of  the  question  whether  they  con- 
stitute a  mortgage  or  a  conditional  sale  of  the  leasehold  estate.^ 
But  an  absolute  lease  is  not  deemed  a  mortgage  because  the  rent 
is  to  go  in  satisfaction  of  a  debt.* 

281.  When  a  mortgage  rather  than  a  trust.  —  A  declara- 
tion of  trust  made  by  one  to  whom  a  conveyance  was  made,  upon 
his  advancing  money  for  the  benefit  of  one  having  an  agreement 

ghen,  15  Minn.  69.     Mississippi :   Free-  when  it  is  doubtful  whether  the  transac- 

man  v.  Wilson,  51  Miss.  .329.    New  York:  tion  is  a  conditional  sale  or  a  inoitgage. 

Glover  V.  Payne,  19  Wend.  518;  Kobinson  it  will  be  held  to  be  the  latter."     Trucks 

V.  Cropsey,  6  Paige,  480;    Matthews   v.  v.  Lindsey,  18  Iowa,    504,   per   Cole,   J. 

Slieehan,  69  N.  Y.  585 ;  Horn  v.  Keteltas,  And  see  Reed  v.  Reed,  75  Me.  2C4. 

42  How.  Pr.   138;    Brown  v.   Dewey,   2  i  Cornell  v.  Hall,  22   Mich.  377,  383, 

Uarb.  28.    North  Carolina :  Poindexter  j;,  per  Graves,  J. 

McCannon,  1  Dev.  Kq.  377.  2  7  Johns.   (N.   Y.)   Ch.  40.     And  sec 

"  A  resort,   however,  to  a  formal  con-  Warren  v.  Emerson,  1  Curtis,  239. 

ditional  sale,  as  a   device   to   defeat   the  "  Polhemus   v.   Trainer,   30   Cal.   085; 

equity  of  redemption,  will,  of  course,  wlien  and  see  King  i>.  King,  3   P.   Wms.  3.')8  ; 

shown,    be    unavailing    for   that   purpose.  Goodman  v.  Gricrson,  2   Ball  &  B.  274, 

And    the   possibility   of   such    resort,    to-  278. 

gether  with  other  considerations,  has  driv-  *  Halo  i;.  Schick,  57  Pu.  St.  319. 
cu  courts  of  equity  to  adopt  as  a  rule,  that, 

201 


§  281.]         ABSOLUTE  DEED  AND   AGREEMENT   TO   RECONVEY. 


for  the  purchase  of  the  land,  may  be  treated,  in  connection  with 
the  conveyance,  as  a  mortgage  rather  than  a  trust.^  A  debtor 
conveyed  all  his  real  estate  to  one  of  his  creditors  by  an  absolute 
deed,  the  creditor  making  a  declaration  of  trust  that  he  would 
sell  the  property,  pay  the  debt  due  himself,  and  sums  to  be  ad- 
vanced by  him  for  the  payment  of  other  debts  of  the  grantor,  and 
after  retaining  a  certain  sum  for  commissions  would  reconvey 
what  might  remain  of  the  property  to  the  gi-antor.  The  trans- 
action was  adjudged  to  be  a  mortgage,  and  not  an  assignment  for 
the  benefit  of  creditors,  and  that  no  one  but  the  grantor  could 
call  upon  the  grantee  to  account.^  The  equity  of  redemption  was 
still  subject  to  attachment  by  the  creditors  of  the  grantor. 

But  a  conveyance  expressly  in  trust  to  pay  debts,  and  after  the 
debts  are  paid  in  trust  for  one  of  the  grantors,  was  held  not  to  be 
a  mortgage ;  ^  and,  therefore,  the  creditors  could  not  maintain  a 
suit  for  foreclosure  or  sale.  In  such  a  conveyance  a  covenant  on 
the  part  of  the  debtor  to  pay  the  debts  would,  doubtless,  make  a 
mortgage  of  it.* 


1  Brumfield  v.  Boutall,  24  Hun  (N.  T.), 
451.  See  Stephens  v.  Allen,  11  Oreg. 
188;  Stewart  v.  Fellows,  17  N.  E.  Eep. 
476. 

2  Taylor  v.  Cornelius,  60  Pa.  St.  187; 
"Vance  v.  Lincoln,  38  Cal.  586 ;  Koch  v. 
Briggs,  14  Cal.  256;  Comstock  v.  Stewart, 
Walk.  (Mich)  110;  Myers's  Appeal,  42 
Pa.  St.  518;  Gothainer  i;.  Grigg,  32  N.  J. 
Eq.  567 ;  Chambers  v.  Goldwin,  5  Ves. 
834;  Bell  v.  Carter,  17  Beav.  11;  Jenkin 
V.  Row,  5  De  G.  &  S.  107;  Woodruff  v. 
Robb,  19  Ohio,  212  ;  Turpie  v.  Lowe(Ind.), 
15  N.  E  Rep.  834  ;  Hoffman  v.  Mackall,  5 
Ohio  St.  124;  64  Am.  Dec.  637. 

In  Lance's  App.  112  Pa.  St.  the  court 
say  that  a  mortgage  is  distinguishable 
from  a  trust  in  this  only,  that  the  prop- 
erty in  it  is  to  revert  to  the  mortgagor  on 
the  discharge  of  the  obligation  for  the 
performance  of  which  it  is  pledged.  In 
Hoffman  v.  Mackall,  supra,  the  court  say : 
"  A  mortgage  is  a  conveyance  of  an  estate 
or  pledge  of  property  as  security  for  the 
payment  of  money,  or  the  performance 
of  some  other  act,  and  conditioned  to  be- 
come void  upon  such  payment  or  perform- 
ance. A  deed  of  trust  in  the  nature  of 
a  mortgage  is  a  conveyance  in  trust  by 

202 


way  of  security,  subject  to~a  condition  of 
defeasance  or  redemption  at  any  time  be- 
fore the  sale  of  the  property.  A  deed 
conveying  land  to  a  trustee  as  mere  col- 
lateral security  for  the  payment  of  a  debt, 
with  the  condition  that  it  shall  become 
void  on  the  payment  of  the  debt  when 
due,  and  with  power  to  the  trustee  to  sell 
the  land  and  pay  the  debt  in  case  of  de- 
fault on  the  part  of  the  debtor,  is  a  deed 
of  trust  in  the  nature  of  a  mortgage.  By 
an  absolute  deed  of  trust  the  grantor  parts 
absolutely  with  the  title,  which  rests  in  the 
grantee,  unconditionally,  for  the  purpose 
of  the  trust.  The  latter  is  a  conveyance 
to  a  trustee  for  the  purpose  of  raising  a 
fund  to  pay  debts,  while  the  former  is  a 
conveyance  in  trust  for  the  purpose  of  se- 
curing a  debt,  subject  to  a  condition  of 
defeasance."  See  further,  as  to  the  dis- 
tinction between  a  mortgage  and  a  trust, 
Turpie  v.  Lowe  (Ind  ),  supra.  See,  also, 
Catlett  V.  Starr  (Tex.),  7  S.  W.  Rep. 
844. 

8  M'Menomy  v.  Murray,  3  Johns.  (N. 
Y.)  Ch.  435;  Charles  v.  Clagett,  3  Md. 
82;  Marvin  v.  Titsworth,  10  Wis.  320. 

*  Taylor  v.  Emerson,  4  Dr.  &  War. 
117;   Holmes  v.  Matthews,   3  Eq.   Rep. 


WHEN   THEY   CONSTITUTE   A   CONDITIONAL   SALE.         [§  281. 

A  declaration  of  trust  by  a  grantee,  to  the  effect  that  the 
money  to  be  paid  by  him  belonged  to  certain  creditors  of  the 
grantor,  is  not  in  the  nature  of  a  defeasance,  and  does  not  with 
the  deed  constitute  a  mortgage.^ 

450.     See  Pemberton  v.  Simmons  (N.  C),        ^  Frick's  App.  87  Pa.  St.  327. 
6  S.  E.  Rep.  122. 

203 


CHAPTER   VIII. 

PAROL   EVIDENCE  TO  PROVE  AN  ABSOLUTE  DEED   A  MORTGAGE. 

L  The  grounds  upon  which  it  is  admit-  I  II.  What  facts  are  considered,  324-342. 
ted,  282-323.  ' 

I.    The   Grounds  upon  ivMch  it  is  admitted. 

282.  It  is  a  settled  rule  and  practice  of  courts  of  equity 
to  set  tiside  a  formal  deed,  and  allow  the  grantor  to  redeem  upon 
proof,  even  by  parol  evidence,  that  the  conveyance  was  not  a  sale, 
but  merely  a  security  for  a  debt,  and  therefore  a  mortgage.  Ex- 
cept where,  as  in  New  Hampshire  and  Georgia,  the  exercise  of 
this  power  is  prohibited  by  statute,  there  is  probably  now  no  dis- 
sent anywhere  from  the  doctrine,  that  in  equity  a  deed  may  be 
converted  into  a  mortgage  whenever  there  are  proper  equitable 
grounds  for  the  exercise  of  the  power.  To  this  extent  there  is 
substantial  uniformity  in  the  decisions  of  the  courts  of  the  United 
States  and  of  the  several  states.  But  as  to  the  grounds  upon 
which  this  equitable  power  is  exercised  there  is  much  diversity  of 
opinion,  and  there  is  also  considerable  diversity  of  adjudication  in 
the  application  of  the  doctrine.  Under  what  circumstances  and 
upon  what  evidence  this  power  shall  be  exercised,  it  is  only  rea- 
sonable to  expect  considerable  divergence  of  practice  in  different 
courts.  The  cases  in  which  the  courts  have  been  called  upon  to 
receive  parol  evidence  to  show  that  a  deed  absolute  in  terms  is  a 
mortgage  are  very  numerous.  For  these  reasons,  and  because  the 
subject  is  of  much  practical  importance,  a  statement  of  the  rule 
in  equity  upon  it  in  each  of  the  states  is  given. 

At  law  it  is  generally  agreed  that  parol  evidence  to  show  that 
a  deed  absolute  on  its  face  was  intended  only  as  a  mortgage  is 
inadmissible.^ 

1  §  277;  Bryants.  Crosby,  36  Me.  562;  10  Mo.  483;  Farley  v.  Goocher,  11  Iowa, 

Stinchfield  v.  Milliken,  71  Me.  567,570;  570;  Webb  v.  Rice,  6  Hill  (N.  Y.),  219; 

Benton  v.  .Tones,  8  Conn.  186;  Reading  Bragg  v.  Massie,  38  Ala.  89;  McClane  ?;. 

V.  Weston,  8  Conn.  117;  Hogel  v.  Lindell,  White,  5  Minn.  178;  Belote  v.  Morrison, 

204 


PAROL   EVIDENCE   TO   PROVE,   ETC.  [§  283. 

Parol  evidence  is  admissible  in  equity  to  show  that  a  deed  ab- 
solute in  form  is  in  fact  a  mortgage,  not  because  the  rules  of  evi- 
dence are  different  in  equit}^  from  what  they  are  at  law,  but  be- 
cause the  jurisdiction  and  power  of  the  courts  with  reference  to 
dealing  with  the  facts  presented  are  different.  The  rules  of  evi- 
dence are  the  same  in  both  courts.  The  question  whether  an 
absolute  deed  was  intended  to  operate  as  a  mortgage  is  one  which 
belongs  exclusively  to  equity  tribunals,  and  over  which  common 
law  tribunals  have  no  jurisdiction  whatever.^ 

283.  To  obtain  relief  the  plaintiff  must  have  equitable 
grounds  for  it.  The  grounds  on  which  courts  of  equity  admit 
oral  evidence,  to  show  that  a  deed  absolute  in  form  is  in  fact  a 
mortgage,  are  purely  equitable,  and  relief  is  refused  whenever  the 
equitable  consideration  is  wanting.  Therefore,  when  a  debtor 
has  made  an  absolute  conveyance  of  his  land  to  one  creditor  for 
the  purpose  of  defrauding  his  other  creditors,  he  is  in  no  condition 
to  ask  a  court  of  equit}^  to  interfere  actively  in  his  behalf  to  help 
him  get  his  land  back  again,  and  thus  secure  to  him  the  fruits  of 
his  fraudulent  devices.^  "  One  who  comes  for  relief  into  a  court 
whose  proceedings  are  intended  to  reach  the  conscience  of  the  par- 
ties must  first  have  that  standard  applied  to  his  own  conduct  in 
the  transactions  out  of  which  his  grievance  arises.  If  that  con- 
demns himself,  he  cannot  insist  upon  applying  it  to  the  other 
party."  ^  An  oral  agreement  between  the  debtor  and  creditor 
who  took  the  conveyance,  whereby  the  latter  agreed  to  reconvey 
the  land  upon  payment  of  the  debt  due  him,  is  not  deemed  in 
such  case  an  equitable  ground  for  relief.  The  court  will  interfere 
only  for  the  benefit  of  those  whom  the  debtor  intended  to  de- 
fraud. It  is  true  that  a  grantee,  whose  rights  were  not  infringed, 
cannot  set  up  the  grantor's  fraud  against  other  creditors  in  the 
conveyance,  to  defeat  any  legal  claim  or  interest  which  the  fraud- 
ulent debtor  may  seek    to  enforce.      But   the  difficulty  is,  that 

8  Minn.  87;  Jones  (,-.  Blake,  33  Minn.3G2;  See  article  13  West  Jur.  193,  fully  ex- 
Moore  V.  Wade,  8  Kans.  380.  In  Illinois  aniining  this  sulycct. 
it  is  admissible  at  law  as  well.  Tillson  y.  i  Foley  i;.  Kirk,  33  N.  J.  Eq.  170; 
Moiiltou,  23  111.  648;  Miller  v.  Thomas,  Stinchlield  v.  Milliken,  71  Mo.  567. 
14  111.  428;  Coates  v.  Woodworth,  13  111.  ^  Ilassam  v.  Barrett,  115  Mass.  256  ; 
654.  So  in  Iowa  :  McAnnulty  v.  Scick,  Arnold  v.  Matti.son,  3  Hidi.  (S.  C.)  Eq. 
59  Iowa,  580.  So  in  California :  sec  §  288.  1.53 ;  and  see  Wehbtrw.  Fanner,  4  Bro.  P. 
So  in  Wisconsin  :  -ee  §  .320.  In  Pennsyl-  C.  170;  Baldwin  v.  Cawthoriic,  19  Vcs, 
vania,  §  312,  and  Texas,  §,  316,  there  are  166. 

no  cha/K-ery  courts,  and  this  evidence  is  »  Mr.  Justice  Wells,  in  Ilassam  v.  Bar- 
admitted  at  law.  rctt,  supra. 

205 


§§  284,  285.]  PAROL   EVIDENCE  TO   PROVE 

when  the  debtor  has  no  legal  right,  but  comes  into  equity  seek- 
ing relief,  he  has  in  such  case  no  equitable  standing,  and  must  go 
out  of  court. 

284.  The  English  decisions  are  to  the  effect  that  in  equity 
an  absolute  conveyance  may  be  construed  to  be  a  mortgage  when 
the  defeasance  has  been  omitted  by  fraud  or  accident ;  ^  when  the 
grantee  has  made  a  separate  defeasance,  although  merely  verbal ;  ^ 
or  when  by  the  payment  of  interest,  or  other  circumstances,  it  ap- 
pears that  the  conveyance  was  intended  to  be  a  mortgage.^ 

285,  The  doctrine  in  the  United  States  Courts.  —  The  de- 
cisions of  the  Supreme  Court  of  the  United  States,  and  the  Cir- 
cuit and  District  Courts,  are  uniform  in  admitting  parol  evidence 
to  show  that  an  absolute  conveyance  is  in  fact  a  mortgage.^  The 
admission  of  such  evidence  is  not  limited  to  cases  in  which  ex- 
press deceit  or  fraud  in  taking  the  conveyance  in  that  form  is 
shown.  It  is  admitted  where  the  instrument  of  defeasance  has 
been  "  omitted  by  design  upon  mutual  confidence  between  the 
parties."  It  is  admitted  to  show  the  real  intention  of  the  parties, 
and  the  real  nature  of  the  transaction.  In  Russell  v.  Southard 
the  Supreme  Court  declare  that  when  it  is  alleged  and  proved 
that  a  loan  was  really  intended,  and  the  grantee  sets  up  the  loan 
as  a  payment  of  purchase  money,  and  the  conveyance  as  a  sale, 
both  fraud  and  a  vice  in  the  consideration  are  sufficiently  averred 
and  proved  to  require  a  court  of  equity  to  hold  the  transaction 
to  be  a  mortgage ;  and  that  whenever  the  transaction  is  in  sub- 
stance a  loan  of  money  upon  security  of  the  land  conveyed,  a 
court  of  equity  is  bound  to  look  through  the  forms  in  which  the 
contrivance  of  the  lender  has  enveloped  it,  and  declare  the  con- 
veyance to  be  a  mortgage.     In  the  late  case  of  Peugh  v.  Davis  ^ 

1  Maxwell  v.  Mountacute,  Free.  Ch.  Morris  v.  Nixon,  1  How.  118;  Sprigg  v. 
526;  Card  v.  Jaffray,  2  Sch.  &  Lef.  374;  Bank  of  Mount  Pleasant,  14  Pet.  201, 
England  v.  Codrington,  1  Eden,  169  ;  208  ;  Hughes  v.  Edwards,  9  Wheat.  489  ; 
Dixon  V.  Parker,  2  Ves.  Sen.  219,  per  Taylor  v.  Luther,  2  Sum.  228;  Flagg  i;. 
Lord  Hardwicke ;  Irnham  v.  Child,  1  Bro.  Mann,  lb.  486  ;  Eldredge  v.  Jenkins,  3 
C.  C.  92;  Portmore  v.  Morris,  2  lb.  219;  Story,  181  ;  Bentley  v.  Phelps,  2  Wood. 
Lincoln  v.  Wright,  4  De  G.  &  J.  16.  &  M.  426  ;  Wyman  v.  Babcock,  2  Curtis, 

2  Manlove  v.  Bale,  2  Veru.  84  ;  Lincoln  386,  398  ;  S.  C.  sub.  mm.  Babcock  v.  Wy- 
V.  Wright,  supra;  Whitfield  v.  Parfitt,  15  man,  19  How.  289  ;  Amory  v.  Lawrence, 
Jur.  852.                   '  3  Cliff.  523 ;  Hubbard  v.  Stetson,  3  Mac- 

8  Allenby  v.  Dalton,  5  L.  J.  K.  B.  312;  Arthur,  113;  Andrews  v.  Hyde,  3  Cliff. 

Cripps  V.  Jee,  4  Bro.  C.  C.  472  ;  Sevier  v.  516,  522. 
Greenwa}-,  19  Ves.  413.  8  95  u.  S.  332;  Horbach  v.  Hill,  112 

*  Eussell   V.  Southard,   12  How.   139  ;  U.  S.  144. 

206 


AN   ABSOLUTE   DEED   A  MORTGAGE.      [§§  286-288. 

the  court  also  declare  that  as  the  equity,  upon  wliicli  the  court  acts 
in  such  cases,  arises  from  the  real  character  of  the  transaction,  any 
evidence,  written  or  oral,  tending  to  show  this,  is  admissible. 

286.  In  Alabama  a  court  of  equity  will  not  by  parol  evidence 
establish  a  deed  absolute  on  its  face  as  a  mortgage,  "  unless  the 
proofs  are  clear,  consistent,  and  convincing  "  that  it  was  not  in- 
tended as  an  absolute  purchase,  but  was  intended  as  a  security 
for  money.i  Such  evidence  seems  to  be  admitted  upon  the  ground 
of  fraud,  accident,  or  mistake.^  It  is  in  equity  and  not  at  law 
that  parol  evidence  is  admissible  in  such  cases.^ 

Such  a  conveyance  made  by  an  embarrassed  debtor  is  regarded 
in  this  state  as  fraudulent  and  void  as  against  existing  creditors.* 

287.  In  Arkansas  parol  evidence  is  admissible  to  show  an  ab- 
solute deed  to  be  a  mortgage,'^  and  the  ground  of  its  admission  is 
stated  in  some  of  the  cases  to  be  fraud  or  mistake ;  ^  but  in  later 
cases  it  seems  to  be  held  generally  admissible  to  show  the  inten- 
tion of  the  parties,  and  the  fact  that  the  transaction  was  really  a 
mortgage.'' 

288.  In  California  parol  evidence  is  admissible  in  law  ^  as  well  as 
in  equity  to  show  that  a  deed  absolute  upon  its  face  was  intended 
as  a  mortgage,  and  such  evidence  is  not  restricted  to  cases  of  fraud, 
accident,  or  mistake.  Evidence  of  the  circumstances  and  rela- 
tions existing  between  the  parties  is  admitted,  not  for  the  purpose 
of  contradicting  or  varying  the  deed,  but  to  establish  an  equity 
superior  to  its  terms.^  The  deed  must  speak  for  itself;  but  the 
objects  and  purposes  of  the  parties  in  executing  the  instrument 
may  be  inquired  into.  Fraud  in  the  use  of  the  deed  is  as  much  a 
ground  for  the  interposition  of  equity  as  fraud  in  its  creation. 
In  Pierce  v.  Robinson  '^^  Mr.  Justice  Field  forcibly  and  clearly 

1  Phillips  V.  Croft,  42  Ala.  477  ;  Parks  ^  Johnson  v.  Clark,  5  Ark.  321  ;  Scott 
V.  Parks,  66  Ala.  326  ;  Knaus  v.  Dreher,  4  i;.  Henry,  13  Ark.  112  ;  McCarrou  v.  Cas- 
So.  Kep.  287  ;  Turner  v.  Wilkinson,  72  Ala.     sidy,  1 8  Ark.  34. 

361  ;  Cosby  v.  Buchanan,  81  Ala.  574.  "  Blakemore  v.  Byrnside,  7  Ark.  505 ; 

2  English  V.  Lane,  1  Port.  (Ala.)  328;     Jordan  v.  Fenuo,  13  Ark.  593. 

West  V.  Hendrix,  28  Ala.  226;  Wells  v.  ''  Anthony  v  Anthony,  23  Ark.  479, 

Morrow,  38  Ala.  125;  Brantley  u.  West,  *  Jackson  v.  Lodge,  36  Cal.  28;   Cun- 

27  Ala.  542 ;   Locke  v.  Palmer,  26  Ala.  uingham  v.  Hawkins,  27  Cal.  603. 

312;  Bryan  y.  Co  wart,  21  Ala.  92;  Parish  ®  Huschcon    v.  Huschcon,  12  Pac.  Rep. 

V.  Gates,  29  Ala.  254;  Crews  i;.  Tliread-  410;  Arnot  v.  Baird,  12  I'ac.  Kip.  386. 

gill,  35   Ala.  334;  Bisl^op   «;.   Bisiiop,   13  ^''  Pierce    v.    Hobinson,    13    Cal.     116; 

Ala.  475.  overruling  the  earlier  cases  of  Lee  v.  Kv- 

'  Bragg   V.   Massio,   38   Ala.   89,   106;  ans,  8  Cal.  424,  and  Low  y.  Henry,  9  Cal. 

Jones  v.  Trawick,  31  Ala.  253,  256;  Par-  538;  restricting  .such  evidence  to  cases  of 

ish  V.  Gates,  29  Ala.  254,  201.  fraud,  accident,  or  mistake. 

*  §  627.  207 


§§  288  a,  289.]         parol  evidence  to  prove 

declares  these  to  be  the  true  grounds  for  the  admission  of  parol 
evidence  to  show  that  a  deed  absolute  in  its  terms  is  in  fact  a 
mortgage. 

It  is  declared  by  statute  that  every  transfer  of  an  interest  in 
real  estate,  other  than  in  trust  made  only  as  a  security  for  the 
performance  of  another  act,  is  to  be  deemed  a  mortgage  deed.^ 
The  fact  that  the  transfer  was  made  subject  to  defeasance  may 
be  proved,  though  it  does  not  appear  by  the  terms  of  the  instru- 
ment. 

288  a.  In  Colorado  the  Code  provides  that  a  deed  may  be 
proved  by  oral  testimony  to  be  in  effect  a  mortgage.^ 

289.  In  Connecticut  the  court  in  a  recent  case  seemed  to  re- 
gard it  as  an  undecided  question  whether  parol  evidence  is  ad- 
missible to  show  that  an  absolute  deed  is  a  mortgage.^  In  early 
cases  it  was  held  that  such  evidence  was  inadmissible  in  courts  of 
law,  either  as  between  the  parties  or  between  third  persons.*  An 
absolute  deed  may  be  shown  to  be  a  mortgage  by  evidence  from 
any  paper  signed  by  the  grantee,  showing  that  the  deed  was  given 
as  security  only.^     In  equity  parol^  evidence   seems  to  have  been 


In  further  illustration  of  the  reason  of 
the  rule,  the  learned  judge  says  :  "  Unless 
parol  evidence  can  be  admitted,  the  pol- 
icy of  the  law  will  be  constantly  evaded. 
Debtors,  under  tlie  force  of  pressing  ne- 
cessities, will  submit  to  almost  any  exac- 
tions for  loans  of  a  trifling  amount  com- 
pared with  the  value  of  the  property,  and 
the  equity  of  redemption  will  elude  the 
grasp  of  the  court,  and  rest  in  the  simple 
good  faith  of  the  creditor.  A  mortgage, 
as  I  have  observed,  is  in  form  a  convey- 
ance of  the  conditional  estate,  and  the  as- 
sertion of  a  right  to  redeem  from  a  for- 
feiture involves  the  same  departure  from 
the  terms  of  the  instrument  as  in  the  case 
of  an  absolute  conveyance  executed  as  se- 
curity. The  conveyance  upon  condition 
by  its  terms  purports  to  vest  the  entire 
estate  upon  tlie  breach  of  the  condition, 
just  as  the  absolute  conveyance  does  in 
the  first  instance.  The  equity  arises  and 
is  asserted  in  both  cases  upon  exactly 
the  same  principles,  and  is  enforced  with- 
out reference  to  the  agreement  of  the  par- 
ties, but  from  the  nature  of  the  transac- 

208 


tion  to  which  the  right  attaches,  from  the 
policy  of  the  law,  as  an  inseparable  inci- 
dent." 

And  see,  also,  Johnson  v.  Sherman,  15 
Cal.  287,  291 ;  Lodge  v.  Turman,  24  Cal. 
385,  390;  Cunningham  v.  Hawkins,  24 
Cal.  403  ;  Gay  v.  Hamilton,  33  Cal.  686  ; 
Hopper  V.  Jones,  29  Cal.  18;  Jackson  v. 
Lodge,  36  Cal.  28 ;  Vance  v.  Lincoln,  38 
Cal.  586;  Farmer  v.  Grose,  42  Cal.  169; 
Raynor  v.  Lyons,  37  Cal.  452 ;  Kuhn  v. 
Rumpp,  46  Cal.  299;  Montgomery  v. 
Spect,  55  Cal.  352  ;  Booth  v.  Hoskins,  17 
Pac.  Rep.  225. 

1  Civil  Code  1872,  §§  2924,  2925,  and 
amendment  1874,  p.  260;  Huscheon  v. 
Huscheon,  12  Pac  Rep.  410. 

2  Civil  Code  1877,  §243. 

3  Osgood  V.  Thompson  Bank,  30  Conn. 
27. 

*  Reading  v.  Weston,  8  Conn.  117;  S. 
C.  7  lb.  143,  149;  Benton  v.  Jones,  8 
Conn.  186. 

5  Belton  V.  Avery,  2  Root  (Conn.),  279  ; 
French  v.  Lyon,  lb.  69. 


AN   ABSOLUTE   DEED   A   MORTGAGE.       [§§  290-291. 

admitted   to  sliow  that  the  defeasance  was  omitted  by  fraud  or 
mistake.^ 

290.  Dakota  Territory. —  It  is  provided  that  every  transfer 
of  an  interest  in  real  estate  not  in  trust,  made  as  a  securit}'  for 
the  performance  of  another  act,  is  to  be  deemed  a  mortgage  ;  and 
the  fact  that  the  transfer  was  made  subject  to  defeasance  may 
be  proved,  except  as  Mgainst  a  subsequent  purchaser  or  incum- 
brancer for  vahie  and  without  notice,  though  it  does  not  appear 
by  tlie  terms  of  the  instrument.^ 

290  a.  Delaware.  —  A  court  of  equity  will  treat  a  deed  ab- 
solute in  form  as  a  mortgage,  or  a  conveyance  in  trust  for  the 
payment  of  debts,  if  tlie  parties  in  executing  it  intended  it  as  a 
security.  But  where  there  was  no  deception,  undue  influence,  or 
otlier  fraudulent  means  employed  to  procure  a  deed  absolute  in 
form.,  the  party  relying  upon  parol  evidence  to  prove  that  there 
was  an  agreement,  understanding,  or  intention  that  the  instru- 
ment should  be  in  effect  a  mortgage  or  security  for  the  payment 
of  an  indebtedness,  must  adduce  clear  and  convincing  proof.^ 

291.  In  Florida  it  is  provided  that  all  conveyances  securing 
the  payment  of  money  shall  be  deemed  mortgages.  This  statute, 
however,  does  not  change  the  rule  as  to  the  admission  of  parol 
evidence  to  sliow  that  a  deed  absolute  on  its  face  was  intended  as 
a  mortgage;  but  some  ground  for  equitable  interference  must  be 
shown,  such  as  fraud,  accident,  or  mistake  in  the  execution  of  the 
instrument.*   .In  a  late  case  the  court  say  that  parol  evidence  is 

^  "Washburn  v.   Merrills,   1   Day,   139;  constituting  the  late  Union     In  some  of 

Daniijs  v.  Alvord,  2  Root,  196;  Collins  them  any  evidence  going  to  show  the  in- 

V.  Tiliou,  26  Conn.  368;  Bacon  v.  Brown,  tention  of  the  parties  is  admissible  to  fix 

19   Conn.    29;    Jarvis   v.    Woodruff,    22  the  character  of  the  instrument;  while  in 

Conn.  548;  Mills  r.  Mills,  26  Conn.  213;  others  it  is  held  that  such  evidence  only 

French  v.  Burns,  35  Conn.  359;  Braincrd  as  tends  to  show  fraud,  accident,  mistake, 

V.  Brainerd,  15  Conn.  575.  or  trust  will  be  permitted.     We  are  not 

2  Civil  Code  1877,  §§  1724,  1726.  aware  that  there  has  been  any  authorita- 

2     Walker  t;.  Farmers'  Bank,   14  All.  tive  adjudication  of  the  question  in  this 

Rep.  819;  S.  C  10  lb.  94,  98,  per  Salis-  state,  and  it  is  now  presented  to  us  as  one 

bury,  Cii. ;  Hall  v.  Livingston,  3  Del.  Ch.  of    first    impression.     The    theory    upon 

348,  374.  which    the  former  class  of  adjudications 

*  Chnircs  v.  Brady,  10  Fla.   133  (1863);  proceed  is,  that   tiie  fact  of  a  deed  i)cing 

Matthews  V.  Porter,  16  Fla.  406;  Lindsay  given  as  security  deterniincs  its  character, 

V.  Mattliews,   17  Fla.  577.     "This  ques-  and  not  the  evidence  of  the  fact.     Also, 

lion,"  Kays  Du  Font,  C.  J.,  in   the  latter  that  jiarol  evidence  that  a  deed  is  a  mort- 

case,  "  has  been  a  fruitful  source  of  litiga-  gage  is  not  heard  in  contradiction  of  the 

tion  in  the  courts  of  the  country,  and  there  deed,  but  in  explanation  of  the  trausac- 

hiis  been  great  diversity  and  contradiction  tion  to  prevent  the  perpetration  nf  fraud 

in  the  adjudications  of  the  several  Btatta  by  the  mortgagee."     See,  also,  Shear  v. 


VOL.    I. 


1^  209 


§§  292,  293.]  PAROL   EVIDENCE  TO   PROVE 

admissible  in  equity  to  show  that  an  absolute  deed  was  intended 
as  a  mortgage  ;  that  the  court  looks  beyond  the  terms  of  the 
instrument  to  the  real  transaction ;  and  that  any  evidence  tending 
to  show  this  is  admissible.^ 

292.  In  Georgia  it  is  provided  by  statute  that  a  deed  absolute 
on  its  face,  accomjaanied  with  possession  of  the  property,  shall 
not  be  proved,  at  the  instance  of  the  parties,  by  parol  evidence, 
to  be  a  mortgage  only,  unless  fraud  in  its  procurement  is  the 
issue  to  be  tried.^  Such  a  deed  passes  the  legal  title,  and  enables 
the  grantee  to  recover  possession  by  ejectment,  although  a  formal 
mortgage  does  not.^  It  may,  nevertheless,  be  used  as  security 
for  a  debt."^  "  It  does  not  follow,  because  a  mortgage  is  only  se- 
curity, that  every  security  is  only  a  common  mortgage."  ^  The 
grantor  in  possession  ma}'  defend  his  possession  by  pleading  an 
equitable  plea  and  doing  equity  ;  that  is,  tendering  the  debt  and 
interest.  When  the  deed  has  served  its  purpose,  that  is,  when 
the  debt  is  discharged,  the  facts  having  been  established  by  com- 
petent evidence,  the  creditor  will  be  compelled  to  reconvey. 
He  is  treated  as  holding  the  title  solely  in  trust  for  his  former 
debtor.^ 

293.  In  Illinois  it  is  provided  by  statute  that  every  deed  of 
real  estate  intended  as  security,  though  absolute  in  terms,  shall  be 
considered  as  a  mortgage.'''  In  order  to  change  an  absolute  sale 
into  a  mortgage,  the  evidence  must  clearly  show  the  intention  of 
parties  to  make  a  mortgage.  Slight  evidence  is  not  sufficient. 
An  absolute  sale  is  valid  if  intended.  To  overcome  the  express 
terms  of  the  deed,  a  debt  must  exist,  and  the  liability  to  pay  it. 
The  kind  of  parol  evidence  which  is  properly  receivable  to  show 
an  absolute  deed  to  be  a  mortgage  is  that  of  facts  and  circum- 
stances of  such  a  nature  as,  in  a  court  of  equity,  will  control  the 
operation  of  a  deed,  and  not  of  loose  declarations  of  parties  touch- 
Robinson,  18  Fla.  379  ;  Franklin  v.  Ayer,  »  Code  1882,  §  1969 ;  Thaxton  v.  Rob- 
22  Fla.  654.  erts,  66  Ga.  704 ;  McLaren  v.  Clark,  7  S. 

1  First  Nat.  Bank  v.  Ashmead,  2  So.  E.  Rep.  230;  Broach  v.  Smith,  75  Ga. 
Rep.  657.  159. 

2  §  26;  Code  1882,  §  3809,  and  see  4  Broach  v.  Barfield,  57  Ga.  601,  604; 
Spencei'.  Steadman,49  Ga.  133,139;  Keith  Carter  v.  Gunn,  64  Ga.  651. 

V.  Catchings,  64  Ga.  773 ;    Hall  v.  Waller,  5  Biggers  v.  Bird,  55  Ga.  650,  652. 

66  Ga.  483.  But  it  may  be  shown  by  such  6  Biggers   i\   Bird,   supra ;    Lackey  v. 

evidence  to  be  a  mortgage  in  a  contest  be-  Bostwick,  54  Ga.  45. 

tween  general  creditors  of  the  mortgagor  7  r.  g.  1874,  p.  713  ;  R.  S.  1880,  ch.  95. 

and  his  widow  claiming  dower  in  the  prop-  §  12  ;  Annot.  Stats.  1885,  ch.  95,  §  12. 
erty.     Carter  v.  Hallahan,  61  Ga.  314. 
210 


AN   ABSOLUTE  DEED   A   MORTGAGE. 


[§  293. 


iiig  their  intentions  or  understanding.  The  latter  is  a  dangerous 
species  of  evidence  upon  which  to  disturb  the  title  to  land,  being 
extremely  liable  to  be  misunderstood  or  perverted.  If  the  papers 
show  upon  their  face  a  conditional  sale,  or  a  sale  and  agreement 
for  repurchase,  to  make  the  transaction  a  mortgage  the  evidence 
must  do  more  than  create  a  doubt  as  to  the  character  of  the  trans- 
action.^ 

Evidence  of  fraud,  or  undue  advantage  or  oppression,  is  al- 
lowed, as  tending  to  show  that  an  absolute  conveyance  should  be 
regarded  as  a  mortgage.^  If  the  fact  be  established  by  parol  evi- 
dence that  there  was  a  loan  of  money,  equity  regards  the  deed 
as  a  security  for  the  repayment  of  the  money  loaned.^  To  es- 
tablish this  fact,  a  parol  agreement  that  the  land  conveyed  should 
be  held  by  the  grantee  as  security  for  money  loaned  the  grantor, 
or  paid  for  his  benefit,  may  be  proved ;  *  or  that  it  should  be  held 
to  indemnify  the  grantee  for  moneys  to  be  paid  by  him  on  the 
debts  of  the  grantor.^  In  short,  any  evidence  is  admissible  which 
tends  to  show  the  relations  between  the  parties,  or  to  show  any 
other  fact  or  circumstance  of  a  nature  to  control  the  deed,  and 
establish  such  an  equity  as  would  give  a  right  of  redemption.^ 


1  Klock  V.  Walter,  70  111.  416,  and 
cases  cited;  Eemington  v.  Campbell,  60 
111.  .516;  Wilson  v.  McDowell,  78  111. 
514;  Dwcn  v.  Blake,  44  111.  135;  Heald 
f.  Wiiglit,  75  III.  17;  Taintor  v.  Keys, 
43  111.  332  ;  Price  v.  Karnes,  59  111.  276  ; 
Alwood  V.  Mansfield,  59  111.  496  ;  Shays 
V.  Norton,  48  111.  100;  Christie  i;.  Hale, 
46  111.  117,  120;  Hunter  v.  Hatch,  45  111. 
178;  Pitts  V.  Cable,  44  111.  103;  Parmelee 
t;.  Lawrence,  44  111.  405  ;  Ewart  v.  Wal- 
ling, 42  111.  453;  Silsbee  v.  Lucas,  36  III. 
462;  Lindauer  y.  Cummings,  57  111.  195; 
Sutphen  i-.  Cushman,  35  111.  186  ;  Roberts 
V.Richards,  36  III.  339;  Reigard  «.  Mc- 
Neil, 38  III.  400 ;  Snyder  v.  Gri.swold,  37 
111.216;  Preschbaker  v.  Feaman,  32  111. 
475;  Ennor  v.  Thompson,  46  III.  214; 
Wcider  v.  Clark,  27  III.  251  ;  Maxficld  v. 
Patchen,  29  III.  39  ;  Shaver  v.  Woodward, 
28  HI.  277  ;  l)e  Wolf  v.  Strader,  26  III. 
225;  Til>on  v.  Moulton,  23  111.  648; 
Davi.s  V.  Hopkins,  15  111.  519;  Smith  v. 
Crenier,  71  III.  185;  Coates  t;.  Wood- 
worth,  13  111.  654  ;  Miller  v.  Thomas,  14 
111.  428;    MagnuHson  v.  Johnson,  73  111. 


156;  Strong  v.  Shea,  83  111.  575;  West- 
lake  V.  Horton,  85  111,  228;  Sharp  v. 
Smitherman,  85  111.  153;  Hancock  v. 
Harper,  86  111.  445 ;  Knowles  i\  Knowles, 
86  111.  1 ;  Clark  v.  Finlou,  90  111.  245 ; 
Darstr.  Murphy,  119  111.  343;  9  N.  E. 
Rep.  887  ;  Bartling  v.  Brasuhn,  102  111. 
441  ;  Union  Mut.  L.  Ins.  Co.  v.  White,  106 
106  III.  67;  Bearss  r.  Ford,  108  111.  16; 
Bailey  v.  Bailey,  115  III.  551. 

2  Brown  v.  Gaffney,  28  111.  149. 

3  Wynkoop  v.  Cowing,  21  111.  570; 
Williams  i-.  Bishop,  15  111.  553,  555;  S. 
C.  18  111.  101;  Smith  v.  Sackett,  15  111. 
528,  530;  Davis  v.  Hopkins,  15  111.  519. 

*  Reigard  v.  McNeil,  supra. 

^  Roberts  v.  Richards,  supra. 

•^  In  Sutphen  v.  Cushman,  supra,  Mr. 
Justice  Beckwitli  states  very  clearly  the 
rule  governing  the  admission  of  jiarol 
evidence  in  sucii  cases :  "In  determining 
whether  the  transaction  consummated  by 
the  deed  in  question  was  an  absolute  sale 
or  should  he  regarded  merely  as  a  mort- 
gage, we  entirely  disregard  the  testimony 
of  those  witnesses  introduced  for  the  pur- 

211 


§  294.] 


PAROL   EVIDENCE   TO   PROVE 


Any  circumstance  tending  to  illustrate  the  purpose  and  intent  of 
the  parties,  including  their  declarations  at  the  time  of  the  execu- 
tion of  the  instrument,  may  be  given  in  evidence.^ 

294,  Indiana.  —  The  admission  of  parol  evidence  to  show  that 
an  absolute  deed  was  executed  merely  as  security  for  the  pay- 
ment of  money  or  the  performance  of  some  act,  is  a  well  settled 
rule  in  this  state.^  Formerly  the  ground  on  which  it  was  received 
seemed  to  be  fraud  or  mistake  ;  and  the  attempt  to  set  up  such  a 
deed  as  an  absolute  conveyance  was  regarded  in  itself  as  a  fraud  ; 
but  the  latest  decisions  hold  that  without  showing  any  fraud,  ac- 


pose  of  establisliing  their  uuderstanding 
of  the  nature  of  the  transaction,  and  who 
relate  conversations  of  the  panics.     Tlie 
conveyance   purports  to  convey  an   abso- 
lute estate  to  tlie  grantee,  and  it  must  be 
taken  as  the  exponent  of  the  rights  of  tlie 
parties,  unless  some  equity  is  shown,  not 
f  juuded  on  the  mere  allegation  of  a  con- 
temporaneous understanding  inconsistent 
with  the  terms  of  the  deed,  but  indepen- 
dently both  of  the  deed  itself  and  of  the 
understanding  with  which  it  was  executed. 
The  right  to  redeem  lauds  conveyed  can- 
not be  established  by  simply  proving  that 
such  was  the  understanding  on  which  the 
deed  was    executed,    because   equity,   as 
well  as  the  law,  will  seek  for  the  under- 
standing of  the  parties  in  tlie  deed  itself. 
The  right  must  be  one  paramount  to,  and 
independent  of,  the   terms  of  the  deed,  as 
well  as  of  the  understanding  between  the 
parties  at  the  time  it  was  executed.    Parol 
evidence  is  admissible  so  far  as  it  conduces 
to  show  the  relations  between  the  parties, 
or  to  show  any  other  fact  or  circumstance 
of  a  nature  to  control  the  deed,  and  to 
establish  such  an  equity  as  would  give  a 
right  of  redemption,  and  no  further.     In 
the  application  of  this  rule,  parol  evidence 
is  received  to  establish  the  fact  that  a  debt 
existed,  or  money  was  loaned  on  account 
of  which  the  conveyance  was  made;  for 
such  facts  will,  in  a  court  of  equity,  con- 
trol the  operation  of  the  deed.     So,  too, 
in   regard    to   any   other  fact  or  circum- 
stance having  the  same  operation.     From 
some  expressions  of  opinion  in  cases  hith- 
erto decided    by  this   court,  it   has   been 
supposed  that  a  more   enlarged  rule  has 

212 


been  adopted  in  this  state,  but  a  careful 
examination  of  them  will  show  that  this 
court  has  never  departed  from  the  rule  we 
now  enunciate." 

The  ground  or  principle  of  the  doctrine 
was  also  considered  in  Ruckman  v.  Al- 
wood,  71  111.  155,  where,  after  referring  to 
the  earlier  cases  in  this  sUite,  tlie  court 
say :  "It  will  be  perceived  that  in  none  of 
these  cases  did  the  court  attempt  to  range 
the  jurisdiction  to  turn  an  absolute  deed 
into  a  mortgage  by  parol  evidence,  under 
any  specific  head  of  equity,  such  as  fraud, 
accident,  or  mistake ;  but  the  rule  seems 
to  have  grown  into  recognition  as  an  in- 
dependent head  of  equity.  Still  it  must 
have  its  foundation  in  this,  that  where  the 
transaction  is  shown  to  have  been  meant 
as  a  security  for  a  loan,  the  deed  will 
have  the  character  of  a  mortgage,  witliout 
other  proof  of  fraud  than  is  imjdied  iu 
showing  that  a  conveyat;ce,  taken  for  the 
mutual  benefit  of  both  parties,  lias  been 
appropriated  solely  to  the  use  of  the 
grantee." 

1  Darst  V.  Murphy,  119  111.  343  ;  Helm 
V.  Boyd,  16  N.  E.  Kep.  85;  Bartling  v. 
Brasuhn,  102  111.441 ;  Bentley  v.  O'Bryan, 
111  111.  53;  Workman  v.  Grunnig,  113  111. 
477  ;  4  N.  E.  Rep.  385. 

2  Heath  V.  Williams,  36  Ind.  495 ;  Davis 
V.  Stonestreet,  4  Ind.  101 ;  Smith  v.  Parks, 
22  Ind.  59;  Hayworih  v.  Worthington,  5 
Blackf.  361;  Blair  v.  Bass,  4  lb.  539; 
Harbison  v.  Lemon,  3  lb.  51 ;  Con  well  v. 
Evill,  4  lb.  67 ;  Cross  v.  He];ner,  7  Ind. 
359  ;  Crane  v.  Buchanan,  29  Ind.  570 ; 
Graham  v.  Graham,  55  Ind.  23 ;  Butcher 
V.  Stultz,  60  Ind.  170. 


AN   ABSOLUTE  DEED   A   MORTGAGE.  [§§  295,  296. 

ciclent,  or  mistake,  parol  evicience  is  admissible  to  prove  that  an 
absolute  deed  was  intended  as  a  security. ^  Th^  proof  that  a 
mortgjage  was  intended  must  be  clear  and  decisive.^ 

295.  In  Iowa  parol  evidence  is  admissible,  on  the  ground  that 
to  dechire  that  to  be  a  sale  which  was  really  a  mortgMge  would 
be  a  fraud.^  Such  evidence  is  not  admitted  to  contradict  or  vary 
the  written  deed,  but,  as  an  exception  to  the  rule,  to  show  the 
intention  of  the  parties.  The  burden  of  proving  that  a  mortgage 
was  intended  is  upon  the  party  seeking  to  establish  it  as  such,  and 
the  proof  must  be  clear,  satisfactory,  and  conclusive,*  and  even 
then  the  evidence  is  received  with  caution.  Inadequacy  of  the 
consideration  paid  is  a  strong  circumstance  to  support  the  claim 
that  the  conveyance  was  intended  to  operate  as  a  mortgage;  and 
the  fact  that  the  grantor  remains  in  possession  is  also  to  be  con- 
sidered in  determining  this  question.^  The  condition  and  con- 
duct of  the  parties,  and  all  the  surrounding  circumstances,  will  be 
weighed. 

296.  In  Kansas  it  is  declared  that,  although  such  evidence 
may  not  be  admissible  at  law,  it  is  in  equity.  Although  no 
written  defeasance  was  ever  executed  between  the  parties,  their 
understanding,  intention,  or  agreement  may  be  shown  to  create 
a  parol  defeasance.  The  mortgage  results  from  the  facts  of  the 
case,  and  the  statute  of  frauds  and  the  statute  relating  to  trusts, 
while  making  void  parol  agreements  respecting  land,  do  not  make 
void  an  estate  which  results  from,  or  is  created  by,  operation  of 
law.  This  evidence  is  admitted  to  show  the  facts  of  the  case, 
which  render  the  deed  defeasible.^     The  deed  may  be  declared  a 

1  Beatty    v.    Brummett,    94    Ind.    76 ;  son  v.  Patrick,  34  Iowa,  362 ;  Key  v.  Mc- 
Smitli  V.  Brand,  64  Ind.  427.  Clcary,  25  Iowa,  191  ;  CliiMs  v.  Giiswold 

2  Conwc-U  V.  Evill,  4  Blackf.  67  ;  Fox  v.  19  Iowa,  362  ;  Siindcilaud  v.  Sunderland 
Fraser,  92  Ind.  26.5;  Ilerron  v.  IIerron,91  19  Iowa,  323;  Cooper  v.  Skeel,  14  Iowa 
Ind.  278;  Parker  f.  Hubble,  75  Ind.  580 ;  578;  Atkins  v.  Faulkner,  11  Iowa,  326 
Landers  v.  Beck,  92  Ind.  49;  Luca.s  v.  Noel  v.  Noel,  1  Iowa,  423;  Holliday  v 
Hendrix,  92  Ind.  54;  Cox  v.  Ratcliffe,  Anliur,  25  Iowa,  19;  Woodworth  y  Car 
105  Ind.  374;  5  N.  E.  Rep.  5;  Ro;,'crs  v.  man,  43  Iowa,  504;  KniiL,^ht  v.  McCord 
Beach,  17  N.  E.  Rep.  609;  Voss  v.  Filer,  63  Iowa,  429;  19  N.  W.  Rep.  310;  Ens 
109  Ind.  260;  10  N.  E.  Rep.  74.  min{,'er  v.  Ensniin;,'er   (Iowa),  39  N.  W 

3  IJobertsi;.  McMalian, 4  Greene  (Iowa),  Rep.  208;  Kibby  v.  Harsh,  61   Iowa,  196 
34;  Johnson  v.  Smith,  39  Iowa,  549;  Ber-  16  N.  \V.  Rej).  85. 

berick  i'.  Fritz,  39  Iowa,  700.  ''  Wilson  v.  Patrick,  supra;  Trucks  v. 

*  Zuverv.  Lyons,  40  Iowa,  510;  Corbit  Lindsey,  18  Iowa,  504. 

V.  Smith,  7  Iowa,  60 ;  Ilyntt  v.  Cocliran,  "  Moore  v.  Wade,  8  Kans.  380 ;  Olynn 

37    Iowa,    .309 ;    Crawford    v.   Taylor,    42  v.   Home    Buililin^   Asso.   22  Kiiiis.   746 

Iowa,  260;  Gardner  v.  Wenton,  18  Iowa,  McDonald  v.  Kellog;;;,  30  Kans.  170. 

33 ;  Green  v.  Turner,  38  Iowa,  112;  Wil-  213 


§§  297-298.]  PAROL   EVIDENCE   TO  PROVE 

mortgage  not  only  upon  the  application  of  the  grantor,  but  also 
upon  application  of  bis  creditors  wbo  seek  to  reach  bis  interest  by 
attachment. 1 

297.  Kentucky.  —  Parol  evidence  is  admitted  in  this  class  of 
cases  upon  the  ground  of  fraud  or  mistake.^  Especially  if  the 
transaction  be  infected  with  usury,  it  is  admissible  to  show  that 
the  real  character  of  the  transaction  is  different  from  what  it  pur- 
ports to  be.^ 

297  a.  Louisiana,  —  A  conveyance  in  the  form  of  an  absolute 
sale,  but  intended  and  understood  by  both  parties  to  be  a  security 
for  a  debt,  is  a  mortgage,  and  does  not  vest  the  ownership  in  the 
apparent  buyer.  Parol  evidence  is  admissible  to  show  tlie  real 
nature  of  the  conveyance.^ 

298.  In  Maine,  by  statutory  definition,  mortgages  of  real  es- 
tate include  those  made  in  the  usual  form  in  which  the  condition 
is  set  forth  in  the  deed,  and  those  made  by  a  conveyance  appear- 
ing on  its  face  to  be  absolute,  with  a  separate  instrument  of  de- 
feasance executed  at  the  same  time,  or  as  part  of  the  same  trans- 
action.°  Parol  evidence  is  not  admissible  at  law  to  convert  an 
absolute  deed  into  a  mortgage.^  In  equity  a  resulting  trust  was 
formerly  held  to  arise  in  favor  of  a  grantor  who  had  conveyed 
land  by  an  absolute  deed  to  secure  a  debt  due  to  the  grantee, 
under  which  redemption  might  be  had  within  a  reasonable  time.^ 
By  recent  decisions  a  new  rule  in  equity  has  been  adopted. 
Where  the  proof  is  clear  and  convincing,  a  deed  absolute  on  its 
face  may  be  construed  to  be  an  equitable  mortgage.^  In  a  late 
case  upon  this  subject  the  court  said  :  "  It  is  a  sound  policy  as  well 
as  principle  to  declare  that,  to  take  an  absolute  conveyance  as  a 

1  Bennett  v.  Wolverton,  24  Ivans.  284.  »  Stinchfield  v.   Milliken,  71   Me.   567. 

2  Skinner  v.  Miller,  5  Litt.  84,  86  ;  This  doctrine  was  first  allowed  in  this 
Blancliard  v.  Kenton,  4  Bibb,  451.  state  in  Rowell  v.  Jewett,  69  Me.  293  ;  af- 

3  Murphy  v.  Trigg,  I  Men.  72  ;  Lind-  firmed  in  Knapp  v.  Bailey,  9  Atl.  Rep. 
ley  V.  Sharp,  7  lb.  248 ;  Cook  v.  Colyer,  122  ;  Reed  v.  Reed,  75  Me.  264. 

2  B.  Mod.  71  ;  Stapp  v.  Phelps,  7  Dana,         Since  the  statute  of  1874,  ch.  175,  con- 

296.  ferring   full    jurisdiction    in    equity,   the 

*  Crozier  v.  Ragan,  .38  La.  Ann.  154  ;  court  has  complete  jurisdiction  over  equi- 

Parmer  v.  Mangham,  31  La.  Ann.  348.  table  mortgages.     Reed  v   Reed,  supra. 

^  R.  S.  1883,  ch.  90,  §  1.  The  dictum  of  the  court  in  Uiciiardson 

^  Bryant  v.  Crosby,  36  Me.  562  ;  Ellis  v.  Woodbury,  supra,  that  a  resulting  trust 

V.  Higgins,  32  Me.  34  ;  Thoniaston  Bank  arises  in  such  case,  is  not  supported  by  any 

V.  Stiiiipson,  21  Me.  195.  reliable  authority  or  well-grounded  rea- 

'  Richardson  i\  Woodbury,  43  Me.  206;  son,  and  it  has  never  been  followed.    Reed 

Howe  d.  Russell,  36  Me.  115 ;  Whitney  v.  v.  Reed,  supra,  per  Virgin,  J. 
Batchelder,  32  Me.  313. 
214 


AN  ABSOLUTE   DEED   A   MORTGAGE.       [§§  299,  300. 


mortgage  without  any  defeasance,  is  in  equity  a  fraud."  ^  The 
intention  of  the  parties  is  the  criterion,  and  this  may  be  ascer- 
tained from  any  facts  within  or  without  the  deed. 

299.  Maryland.  —  Parol  evidence  is  admitted  only  to  show 
that  the  defeasance  was  omitted  or  destroyed  by  fraud  or  mis- 
take.2  It  is  admitted  upon  the  same  principle  that  it  is  admitted 
to  establish  a  resulting  trust.^  The  fraud  may  be  inferred  from 
the  facts  and  circumstances  of  the  case,  from  the  character  of  the 
contract,  or  from  the  condition  of  the  parties.* 

300.  In  Massachusetts  parol  evidence  is  admitted  in  such 
cases  not  to  vary,  add  to,  or  contradict  the  deed,  but  to  establish 
the  fact  of  an  inherent  fault  in  the  transaction  or  its  considera- 
tion, which  affords  ground  for  avoiding  the  effect  of  the  deed  by 
restraining  its  operation  or  defeating    it  altogether.^     This  doc- 


1  Stinchfield  v.  Milliken,  71  Me.  567. 

2  Bank  of  Westminster  v.  Whyte,  1 
Md.  Ch.  .536 ;  S.  C.  3  lb.  508  ;  Farrell  v. 
Bean,  10  MJ.  217  ;  Bend  v.  Susquehanna 
Bridge  &  Bank  Co.  6  H.  &  J.  128;  Artz 
V.  Grove,  21  Md.  456,  474  ;  Dougherty  v. 
McCol<ran,  6  G.  &  J.  275  ;  Baugher  v. 
Merry  man,  32  Md.  185  ;  and  see  Price  v. 
Govcr,  40  Md.  102. 

8  Cochrane  v.  Price,  8  Atl.  Rep.  361. 

*  Thompson  v.  Banks,  2  Md.  Ch.  430 ; 
3  Md.  Cii.  138  ;  Brogden  v.  Walker,  2  H. 
&  J.  (.Md.)  285  ;  Watkins  v.  Stockett,  6 
lb.  435. 

6  Campbell  v.  Dearborn,  109  Mass.  130; 
Newton  v.  Fay,  10  Allen,  505;  Glass  v. 
Hulbert,  102  Mass.  24  ;  Pond  y.  Eddy,  113 
Mass.  149  ;  McDonough  v.  Squire,  111 
Mass.  217;  McDonough  v.  O'Niel,  !13 
Mass.  92  ;  CuUen  v.  Carey,  15  N.  E.  Rep. 
131.  Prior  to  the  statute  of  1855,  ch.  194, 
§  1,  Gen.  Stat.  ch.  113,  §  2,  conferring 
ujion  the  Supreme  Judicial  Court  jurisdic- 
tion in  equity,  "in  all  cases  of  fraud,  and 
of  conveyances  or  transfers  of  real  estate 
in  the  nature  of  mortgages,"  the  jurisdic- 
tion of  the  court  in  relation  to  the  fore- 
closure and  redemption  of  mortgages  was 
confined  to  casesof  a  defeasance  contained 
in  the  deed, or  in  Kome  other  instrument 
under  seal.  Eaton  v.  Green,  22  Pick.  520  ; 
Fla-.'g  I'.  Mann,  14  I'ick.  407,  478  ;  Lincoln 
V.  I'arsona,  I  Allen,  388 ;  Coffin  v.  Loring, 


9  Allen,  154;  Flint  v.  Sheldon,  13  Mass. 
443  ;  Stackpole  v.  Arnold,  11  Mass.  27; 
Kellcran  v.  Brown,  4  Mass.  443  ;  Boyd  v. 
Stone,  11  Mass.  442;  Bodwell ;;.  Webster, 
13  Pick.  411,  413;  Saunders  v.  Frost,  5 
Pick.  259.  But  before  that  statute  parol 
evidence  had  been  frecjueutly  admitted 
where  there  was  a  deed  and  a  provision 
for  a  reconveyance,  to  show  the  real  na- 
ture of  the  transaction  ;  and  the  instru- 
ments had  been  construed  as  constituting 
a  mortgage  when  it  was  shown  that  the 
transaction  was  really  and  essentially  a 
loan  of  money.  Flagg  v.  Mann,  supra  ; 
Rice  V.  Rice,  4  Pick.  349  ;  Parks  v.  Hall.  2 
Pick.  200,  211  ;  Carey  y.  Rawson,  8  Mass. 
159;  Taylor  d.  Weld,  5  Mass.  109;  Kel- 
lcran V.  Brown,  supra;  Erskine  v.  Town- 
send,  2  Mass.  493.  But  the  question, 
whether,  in  the  absence  of  any  written  de- 
feasance, an  absolute  deed  could  be  con- 
verted into  a  mortgage,  or  restricted  in 
its  operation  so  as  to  allow  a  redemption, 
when  shown  to  be  in  fact  merely  security 
for  a  loan,  was  not  decided  until  it  came 
before  the  court  in  Campbell  v.  Dearborn, 
supra,  though  the  question  had  been  dis- 
cussed in  Newton  v.  Fay,  supra,  and,  so 
far  as  concerned  the  statute  of  frauds,  in 
Glass  V.  Hulbert,  supra.  The  opinion  of 
Mr.  Justice  Wells,  in  Campbell  l\  Dear- 
born, contains  a  full  and  able  discussion 
of  the  whole  subject. 

216 


§  301.]  PAROL  EVIDENCE  TO  PROVE 

trine  is  regarded  as  a  sound  and  salutary  pi-inciple  of  equity  juris- 
prudence, when  properly  administered ;  but  it  is  declared  to  be 
a  power  to  be  exercised  with  the  utmost  caution,  and  only  when 
the  grounds  of  interference  are  fully  made  out,  so  as  to  be  clear 
from  doubt.  "  It  is  not  enough,"  says  Mr.  Justice  Wells,  "  that 
the  relation  of  borrower  and  lender,  or  debtor  and  creditor,  ex- 
isted at  the  time  the  transaction  was  entered  upon.  Negotia- 
tions, begun  with  a  view  to  a  loan  or  security  for  a  debt,  may 
fairly  terminate  in  a  sale  of  the  property  originally  proposed  for 
security.  And  if,  without  fraud,  oppression,  or  unfair  advantage 
taken,  a  sale  is  the  real  result,  and  not  a  form  adopted  as  a  cover 
or  pretext,  it  should  be  sustained  by  the  court.  It  is  to  the  de- 
termination of  this  question  that  the  parol  evidence  is  mainly 
directed."  i 

Dissent  is  expressed  in  the  opinion  of  the  court  already  quoted 
from  the  doctrine  advanced  in  some  of  the  cases,  that  the  subse- 
quent attempt  to  retain  the  property,  and  refusal  to  permit  it  to 
be  redeemed,  constitute  a  fraud  and  breach  of  trust,  which  afford 
ground  of  jurisdiction  and  judicial  interference.  "There  can 
be  no  fraud,  or  legal  wrong,  in  the  breach  of  a  trust  from  which 
the  statute  withholds  the  right  of  judicial  recognition.  Such 
conduct  may  sometimes  appear  to  relate  back  and  give  character 
to  the  original  transaction,  by  showing  in  that  an  express  in- 
tent to  deceive  and  defraud.  But  ordinarily  it  will  not  be  con- 
nected with  the  original  transaction  otherwise  than  construc- 
tively, or  as  involved  in  it  as  its  legitimate'  consequence  and  nat- 
ural fruit."  2  The  fault  is  in  the  original  transaction  rather  than 
in  the  grantee's  subsequent  conduct  in  relation  to  it.  As  between 
borrower  and  lender,  or  debtor  and  creditor,  an  absolute  deed 
given  as  security,  and  a  renunciation  of  all  legal  right  of  redemp- 
tion, are  regarded  as  so  significant  of  oppression,  and  so  calcu- 
lated to  invite  to  or  result  in  wrong  and  injustice  on  the  part  of 
the  stronger  towards  the  Aveaker  party  in  the  transaction,  as  in 
themselves  to  constitute  a  quasi  fraud  against  which  equity  ought 
to  relieve,  —  in  the  same  way  that  it  does  against  the  strict  letter 
of  an  express  condition  of  forfeiture.^ 

301.  Michigan.  —  Parol  evidence  is  admissible  to  convert  an 
absolute  deed  into  a  mortgage.*     It  is  admitted  to  show  the  in- 

'  In  Campbell  v.  Dearborn,  109  Mass.  3  pgr  Wells,  J.,  in  Hassam  v.  Barrett, 

»30,  143.  115  Mass.  256. 

*  Campbell  v.  Dearborn,  supra,  140.  *  Swetland  v.  Swetland,  3  Mich.  482  ; 

216  Wadsworth  v.  Loranger,  Har.  Ch.  II3; 


AN  ABSOLUTE   DEFD   A   MORTGAGE.  [§§  302,  303. 

tention  of  the  parties  in  the  transaction,  but  whether  as  an  ex- 
ception under  the  statute  of  frauds,  or  upon  the  ground  of  fraud, 
the  court  in  one  case  expressly  leave  undetermined  ;i  but  in  an- 
other it  is  said  that  neither  the  statute  of  frauds  nor  the  statute 
requiring  powers  and  trusts  to  be  created  in  writing  is  encroached 
upon  by  a  court  of  equity  in  exercising  its  jurisdiction  in  this 
class  of  cases;  that  a  different  construction  would  make  them 
what  they  were  never  intended  to  be,  —  a  shield  for  the  protec- 
tion of  oppression  and  fraud  ;  that  the  court  will  interfere  between 
creditor  and  debtor  to  prevent  oppression  ;  and  that  to  give  relief 
in  such  cases  lias  ever  been  the  province  of  courts  of  equity,  whose 
chief  excellence  consists  in  a  wise  and  judicious  exercise  of  this 
part  of  their  jurisdiction.^  The  burden  of  proof  is  upon  the 
grantor  to  prove  beyond  a  reasonable  doubt  that  his  deed  was 
meant  to  be  in  effect  a  mortgage.^ 

302.  Minnesota.  —  Parol  evidence  is  admissible  in  equity  of 
the  circumstances  under  whiuh  the  deed  was  made,  and  the  re- 
lation subsisting  between  the  parties.*  At  first  it  was  held  to  be 
admissible  only  upon  the  ground  of  fraud,  mistake,  or  surprise  in 
making  or  executing  the  instrument;  but,  subsequently,  it  was 
held  to  be  admissible  to  show  the  real  character  of  the  transac- 
tion. In  a  court  of  law,  such  evidence  cannot  be  received  on  any 
ground.^ 

303.  In  Mississippi  it  is  well  settled  that  parol  evidence  will 
be  admitted  in  equity  to  show  that  an  absolute  deed  was  in- 
tended to  be  a  security  for  money,  and  therefore  a  mortgage.^  It 
is  received  to  exphiin  the  true  character  of  the  transaction.  For 
this  purpose,  the  conduct  of  the  parties  at  the  time  and  subse- 
quently, and  all  the  attending  circumstances,  may  be  looked  at ; 
and  when  it  is  shown  that  the  consideration  of  the  conveyance 

Kmerson  v.  Atwatcr,  7  Mich.  12;  Barber  ing  within  the  statute  of  frauds.     Belote 

V.  Milner,  4.3  Micii.  248;  Hurst  v.  Beaver,  v.  Morrison,  8  Miuii.  87. 

50 -Mich.  612.  Mvlein   v.   McNamara,   54    Miss.   90; 

1  Fuller  r.  Parrish,  6  Mich.  211.  Llttleworfc  v.    Davis,   .50   Miss.   403,   and 

2  Kmerson  v.  Atwatcr,  supra.  cases  cited  ;  Freeman  v.  Wilson,  51  Miss, 

3  Tilden  v.  Strceter,  45  Mich.  53.3.  329,  and  cases  cited ;  Yasser  v.  Vasser,  23 
«  Weide  v.  Gehl,  21   Minn.  449;  Phoe-  Miss.  378;  Sogj^^ns   v.   Heard,   31    Miss. 

nix  V.  Gardner,  13  Minn.  430;  Madi<,'an  426;  Anding  r.  Davis,  38  Miss.  574,  594; 

i;.  Mead,  31  Minn.  94;  Marshall  u.  Thomp-  Wtather.sly   v.  Weatlier-iv',  40  Miss.  462, 

son,  39  N.  \V.  Kep  .309.  469  ;  Prcwctt  v.  Dol)l)s,  13  Sin.  &  M.  431^ 

'  McCIane  v.  White,  5  Minn.  1 78  ;  keei)-  440  ;  Watson  v.  Dickens,  12  lb.  608. 

217 


§§  304-306.]       PAROL  EVIDENCE  TO  PROVE 

was  a  loan  or  a  debt,  the  courts  always  incline  to  regard  it  as  a 
mortgage.^ 

304.  Missouri.  —  A  conveyance  intended  as  a  security  at  the 
time  of  its  execution,  though  absolute  in  form,  is  treated  as  a 
mortgage.  Such  intention  may  be  shown  by  parol  evidence,  on 
the  ground  that  the  denial  of  the  trust  character  of  the  deed  by 
the  grantee  is  a  fraud  on  his  part,  which  gives  a  court  of  equity 
jurisdiction  of  the  case,  and  thus  enables  it  to  hold  to  the  verbal 
or  implied  defeasance  as  effectually  as  if  this  had  been  a  formal 
written  one.^     It  is  not  admissible  at  law.^ 

305.  In  Nebraska  a  formal  conveyance  may  be  shown  to  be  a 
mortgage  by  extrinsic  evidence.  "  This  rule  seems  to  be  founded 
on  the  principle  that  in  such  case  the  proof  raises  an  equity 
which  does  not  contradict  the  writing  or  affect  its  validity,  but 
simply  varies  its  import  so  far  as  to  show  the  true  intention  and 
object  of  the  parties  without  a  written  defeasance,  and  establish 
the  trust  purpose  for  which  the  deed  was  executed.  But  to  thus 
vary  the  legal  import  of  such  absolute  deed,  and  especially  when 
fraud,  accident,  mistake,  or  surprise  is  not  alleged,  the  evidence 
in  reference  to  the  understanding  and  intention  of  the  parties,  at 
the  time  of  the  execution  of  the  writing,  must  be  clear,  certain, 
and  conclusive,  before  a  court  of  chancery  will  determine  such 
writing  to  be  a  mortgage  security  only."  * 

306.  In  Nevada  a  conveyance  absolute  upon  it  face  may  be 
shown  by  parol  to  be  a  mortgage.  It  is  not  received  to  contra- 
dict the  deed,  but  to  prove  an  equity  superior  to  it.^  The  proof 
on  the  part  of  the  plaintiff  must  be  clear,  satisfactory,  and  con- 
vincing. The  presumption  is  in  favor  of  the  natural  effect  of  the 
instrument.     The  evidence  to  overcome  such  presumption  should 

1  Freeman  v.  Wilson,  51  Miss.  329.  which  may  be  invoked  even  in  an  action 

2  O'Neill  V.  Capelle,  62  Mo.  202  ;  and  which,  under  the  old  system,  would  be 
see  Slowey  v.  McMurray,  27  Mo.  113,  termed  an  action  at  law.  Quick  y.  Tur- 
116;  Tibeau  v.  Tibeau,  22  Mo.  77;  Hogel  ner,  supra;  Wood  v.  Matthews,  73  Mo. 
V.  Lindell,  10  Mo.  483  ;  Johnson  v.  Hus-  477. 

ton,  17  Mo.  58;  Wilson  v.  Drumrite,  21  ^  Schade  v.  Bessinger,  3  Neb.  140;  and 
Mo.  325 ;  Schradski  v.  Albright,  5  S.  W.  see  Wilson  v.  Richards,  1  Neb.  342 ;  De- 
Rep.  807  ;  Quick  v.  Turner,  26  Mo.  App.  roin  v.  Jennings,  4  Neb.  97  ;  Eisaman  v, 
29.  Gallagher,  37  N.  W.  Rep.  941. 

3  Hogel  V.  Lindell,  supra.     Under  the  ^  Cookes   v.  Culbertson,   9   Nev.    199; 

practice   act,  the   rule   allowing    the   ad-  Saunders  v.  Stewart,  7  Nev.  200 ;  Carlyon 

mission  of  parol   evidence  in  such  cases  v.  Lannau,  4  Nev.  156,  159. 
seems  to  be  regarded  as  a  rule  of  evidence 

218 


AN  ABSOLUTE  DEED   A  MORTGAGE.  [§§  307,  308. 

be  so  cogent,  weighty,  and  convincing  as  to  leave  no  doubt  upon 
the  mind.^ 

307.  In  New  Hampshire  it  is  provided  by  statute  that  no 
conveyance  in  writing  of  any  lands  shall  be  defeated,  nor  any 
estate  incumbered  by  any  agreement,  unless  it  is  inserted  in  the 
condition  of  the  conveyance,  and  made  part  thereof,  stating  the 
sum  of  money  to  be  secured,  or  other  thing  to  be  performed.^ 
But  a  proviso  that  if  the  grantor  comply  with  the  conditions  of  a 
bond  executed  by  him  to  the  grantee  at  the  same  time,  the  deed 
shall  be  void,  sufficiently  sets  forth  the  thing  to  be  done.^ 

Under  this  statute  a  parol  agreement  entered  into  between  the 
grantor  and  grantee  at  the  time  of  the  delivery  of  the  deed  that 
the  grantee  should  give  a  bond  to  reconvey,  even  after  a  bond 
is  subsequently  given  in  pursuance  of  such  agreement,  does  not 
make  the  conveyance  a  mortgage.*  Even  a  bond  executed  at  the 
same  time  with  the  conveyance,  providing  that  the  conveyance 
shall  be  void  upon  payment  of  a  certain  sum  of  money,  does  not 
constitute  a  mortgage.  The  defeasance  must  be  inserted  in  the 
deed  itself ;  and  a  deed  without  such  defeasance  confers  an  abso- 
lute title  upon  the  grantee.^ 

308.  In  New  Jersey.  —  The  efficacy  of  the  parol  evidence  is 
not  to  establish  an  agreement  to  reconvey,  the  specific  perform- 
ance of  which  a  court  of  equity  will  enforce,  but  to  establish  the 
true  nature  and  effect  of  the  instrument  by  showing  the  object 
for  which  it  was  made.  It  is  well  settled  that  this  may  be  done.^ 
The  question  in  every  case  is,  whether  the  transaction  was  a  sale 
and  conveyance,  coupled  with  an  agreement  for  a  reconveyance, 
or  whether  it  was  a  security  for  a  loan.  "  Any  means  of  proof 
may  be  used  to  show  it  to  be  the  latter :  the  declaration  of  the 
parties  ;  the  relations  subsisting  between  them  ;  the  possession 
of  the  premises  retained  by  the  complainant ;  the  value  of  the 
property,  compared  with  the  money  paid  ;  the  understanding  that 
the  sums  advanced  should  be  repaid  ;  and  the  payment  of  interest 

1  Bingham  v.  Thompson,  4  Nev.  224  ;  5  Tiffl  t;.  Walker,  10  N.  H.  150. 
Pierce  v.  Traver,  13  Nev.  526.  6  Budd  v.  Van  Ordcn,  33  N.  J.  Kq.  143 ; 

2  G.  S.  ch.  122,  §  2;  Stilt.  1867  ;  G.  L.  Sweet  v.  Parker,  22  N.  J.  Eq.  453,  457; 
1878,  ch.  130,  §  2;  Stat.  July  3,  182'J;  Crane  f.  Decamp,  21  N.  J.  Kq.  414 ;  Crane 
Boo<ly  y.  Davis,  20  N.  II.  140.  i'.    Bonnell,   1   Green   Ch.  264;  Youlo  v. 

8  Bas.sett  v.  Bassctt,  10  N.  II.  64.  Hicliards,  Sax.  Ch.  534  ;  Lokerson  v.  Still- 

*  Porter  v.  Nelson,  4  N.  II.  130;  Clark     well,  13  N.  J.  Eq.  357  ;  Condit  v.  Tich- 

B.  Ilobbs,  11  N.  II.  122;  Boody  v.  Davis,     cnor,  19  N.  J.  Eq.  43;  Vandegrifl  v.  Iler- 

$upra  ;  Riudet  v.  Otis,  2  N.  II.  167  ;  Lund     bcrt.  18  N.  J.  Eq.  406  ;  Friiik  i;.  Adams, 

i;.  Lund,  1  N.  II.  39.  36  N.  J.  Eq.  485. 

219 


§§  308  a,  309.]         parol  evidence  to  prove 

meanwhile  on  the  amount.  The  distinction  between  parol  evi- 
dence to  vary  a  written  instrument  and  parol  evidence  sliowing 
facts  which  control  its  operation  is  employed  to  reconcile  the 
allowance  of  such  proofs  with  the  statute  of  frauds  and  the  gen- 
eral rule  of  common  law.  Deeds  absolute  on  their  face  have  been 
frequently  decreed  to  be  mortgages  by  this  court,  and  the  grantors 
allowed  to  redeem."  ^ 

308  a.  'New  Mexico  Territory.  —  An  absolute  unconditional 
deed,  may  be  shown  to  be  a  mortgage  by  agreement  of  the  parties, 
and  this  agreement  may  be  proved  by  parol  evidence.^ 

309.  In  New  York.  —  Such  evidence  was  admitted  in  some  of 
the  earlier  cases  solely  upon  the  ground  of  fraud  or  mistake.^ 
But  Chancellor  Kent  apparently  thought  the  only  fraud  necessary 
to  be  shown  was  the  fraud  on  the  part  of  the  grantee  in  attempt- 
ing to  convert  a  mortgage  into  an  absolute  sale;^  and  it  is  dis- 
tinctly asserted  in  other  eases  that  it  is  not  necessary  to  prove 
that  the  deed  was  given  in  this  form  through  fraud  or  mistake.^ 
This  evidence  is  admitted  in  all  cases  without  reference  to  the 
reason  why  a  written  defeasance  was  omitted,  or  why  the  grantee 
denies  the  redeemable  character  of  the  conveyance.  It  is  admit- 
ted to  show  what  the  transaction  really  was.^ 

1  Per  Vice  Chancellor  Dodd,  in  Sweet  sary  to  justify  the  court  in  admitting  the 
V.  Parker,  22  N.  J.  Eq.  453,  457  ;  and  see     parol  evidence." 

Phillips  V.  Hulsizer,  20  N.  J.  Eq.  308.  «  Horn  v.  Keteltas,  46  N.  Y.  605,  609. 

2  King  V.  Warrington,  2  N.  Mex.  318.  "It  is  now  too  late,"  says  Mr.  Justice 

3  Patchin  v.  Pearce,  12  Wend.  61 ;  Allen,  delivering  the  judgment  in  this 
Swart  ?;.  Service,  21  Wend.  36;  Stevens  case,  "to  controvert  the  proposition  that 
V.  Cooper,  1  Johns.  Ch.  425  ;  Strong  v.  a  deed,  absolute  upon  its  face,  may  in 
Stewart,  4  lb.  167  ;  Marks  v.  Pell,  1  lb.  equity  be  shown,  by  parol  or  other  extrin- 
594 ;  Taylor  v.  Baldwin,  10  Barb.  582 ;  sic  evidence,  to  have  been  intended  as  a 
Webb  y.  Rice,  6  Hill,  219.  In  the  latter  mortgage;  and  fraud  or  mistake  in  the 
case  it  was  held  that  such  evidence  is  in-  preparation,  or  as  to  the  form  of  the  in- 
admissible at  law,  and  earlier  cases  at  law  strument,  is  not  an  essential  element  in 
in  which  it  had  been  admitted  were  over-  an  action  for  relief,  and  to  give  effect  to 
ruled.  the  intention  of  the  parties.     The  courts 

*  Strong  V.  Stewart,  4  Johns.  Ch.  167.  of  this  state  are  fully  committed  to  the 

s  Brown  i;.  Clifford,  7  Lans.  46,  per  Mr.  doctrine;  and  whatever  may  be  the  rule 

Justice  Mullin  :  "  I  have  said  that  parol  in  other  states,  here,  in  passing  upon  the 

evidence    was    admissible,    although    no  question,  we  have  only  to  stand  upon  the 

fraud  or  mistake  in  making  the  deed  was  safe   maxim  of  stare  decisis.     It   is   not 

alleged  or  proved,  and  I  say  this  because  enough,  in  view  of  the  fact  that  the  adju- 

in  nearly  all  of  the  cases  cited,  and  in  the  dications  have  entered  into  and  controlled 

numerous  others  upon  the  same  point,  no  business  transactions  and  become  a  rule 

fraud  or  mistake  was   either  alleged   or  of  property,  to  authorize  a  reconsideration 

proved,  nor  was  any  suggestion  made  that  of  the  questions,  that  the  rule  has  been 

any  such  allegation  or  proof  was  neces-  authoritatively  adjudged  otherwise   as  a 

220 


AN  ABSOLUTE   DEED   A   MORTGAGE. 


[§  310. 


310.  North  Carolina.  —  Parol  evidence  seems  to  be  admitted 
upon  the  general  grounds  of  equity  jurisdiction  in  cases  of  fraud, 
accident,  and  mistake.^  "  In  equity,  plaintitfs  are  allowed,  by- 
making  the  proper  preliminary  allegations,  —  as  that  a  certain 
clause  was  intended  to  be  inserted  in  a  written  instrument,  but 
was  omitted  by  the  ignorance  or  mistake  of  the  draughtsman ;  or 
by  some  fraud  or  circumvention  of  the  opposite  party ;  or  some 
oppression  or  advantage  taken  of  the  plaintiff's  necessities;  or 
when  an  unlawful  trust  was  designedly  omitted  to  evade  the  law, 


rule  of  evidence  in  common  law  courts, 
and  that  eminent  judges  have  contended 
earnestly  against  its  adoption  as  a  rule  in 
courts  of  equity.  Notwithstanding  their 
protests,  the  rule  has  heen,  upon  the  fullest 
consideration,  deliberately  established,  and 
cannot  now  be  lightly  departed  from." 

The  learned  judge  refers  to  the  earlier 
ca^es  in  New  York,  saying :  "  The  prin- 
ciple was  recognized  by  tlie  Chancellor  in 
Holmes  v.  Grant,  8  Paige,  243,  although 
it  was  not  apjilied  in  that  case;  and  had 
been  before  asserted  under  like  circum- 
stances in  Eobinson  v.  Cropsey,  2  Edw. 
138 ;  affirmed  6  Paige,  480. 

"It  was  expressly  adjudged  in  Strong 
V.  Stewart,  4  Johns.  Ch.  167,  that  parol 
evidence  was  admissible  to  show  that  a 
mortgage  only  was  intended  by  an  assign- 
ment absolute  in  terms;  and  to  the  same 
effect  is  Clark  v.  Henry,  2  Cow.  324 ; 
which  was  followed  by  this  court  in  Mur- 
ray V.  Walker,  31  N.  Y.  399.  In  Hodges 
V.  Tennessee  Marine  &  Fire  Insurance  Co. 
8  N.  Y.  416,  the  court  says  that  'from 
an  early  day  in  this  state  the  rule,  that 
parol  evidence  is  admissible  for  the  pur- 
po.se  named,  has  been  established  as  the 
law  of  our  courts  of  equity,  and  it  is  not 
fitting  that  the  question  should  be  reexam- 
ined, and  the  cases  in  which  it  has  been  so 
adjudged  are  cited  witli  approval.' 

"In  Sturtevant  v.  Sturtevant,  20  N.  Y. 
39,  the  same  judge,  pronouncing  the  opin- 
ion as  in  ihe  case  last  cited,  distinguishes 
between  the  ca.se  of  a  mortgage  and  trust; 
and  it  was  decided  thiit,  while  a  deed  ab- 
solute in  terms  could  be  shown  to  be  a 
mortgage,  a  trust  in  favor  of  the  grantee 
could  not  be  ebtablished   by  parol.     And 


see  Despard  v.  Walbridge,  1.5  N.  Y.  374. 
The  rule  does  not  conflict  with  that  other 
rule  which  forbids  that  a  deed  or  other 
written  instrument  shall  be  contradicted 
or  varied  by  parol  evidence.  The  instru- 
ment is  equally  valid,  whether  intended 
as  an  absolute  conveyance  or  a  moitgage. 
Effect  is  only  given  to  it  according  to  the 
intent  of  the  parties,  and  courts  of  equity 
will  always  look  through  the  forms  of  a 
transaction  and  give  effect  to  it,  so  as  to 
carry  out  the  substantial  intent  of  the 
parties." 

And  see  Moses  v.  Murgatroyd,  1  Johns. 
Ch.  119;  Marks  v.  Pell,  lb.  594,  599; 
Clark  V.  Henry,  2  Cow.  324,  332;  Whit- 
tick  V.  Kane,  1  Paige,  202,  206  ;  Van  Bu- 
ren  v.  Olmstcad,  5  Paige,  9,  10;  Mclntyre 
y.  Humphreys,  1  HofF.  31,34;  Hodges  y. 
Tennessee  Marine  &.  F.  Ins.  Co.  stifn-a  ; 
Despard  v.  Walbridge,  supi-a  ;  Sturtevant 
V.  Sturtevant,  supra ;  Van  Dusen  v.  Wor- 
rell, 4  Abb.  App.  Dec.  473 ;  Stoddard  v. 
Whiting,  46  N.  Y.  627 ;  Carr  v.  Carr,  52 
N.  Y.  251  ;  S.  C.  i  Lans.  314  ;  Meehan  v. 
Forrester,  52  N.  Y.  277;  Brown  v.  Clif- 
ford, 7  Lans.  46;  Loomis  v.  Loomis,  60 
Barb.  22 ;  Fiedler  v.  Darrin,  50  N.  Y.  437  ; 
Odell  V.  Montross,  68  N.  Y.  499;  Simon 
V.  Schmidt,  41  Hun,  318;  Erwin  v.  Cur- 
tis, 43  Hun,  292. 

1  McDonald  v.  McLeod,  I  Ircd.  Eq. 
221 ;  Steel  i;.  Black,  3  Jones  Eq.  427 ; 
Cook  V.  Gudger,  2  lb.  172;  Glisson  x\ 
Hill,  2  lb.  256;  Sellers  v.  Stalcup,  7  Ired. 
Eq.  13;  Elliott  v.  Maxwell,  7  lb.  246; 
Blackwell  v.  Overby,  6  lb.  38;  Kelly  v. 
Bryan,  6  lb.  283 ;  M'Laurin  v.  Wright,  2 
lb.  94. 

221 


§§  311,  311  a.]  PAROL   EVIDENCE  TO   PROVE 

—  to  call  for  a  discovery  on  the  oath  of  the  defendant.  If  the 
fact  is  confessed,  the  plaintiff  can  have  relief.  If  it  be  denied, 
although  it  was  for  a  long  time  questioned,  it  is  now  settled  that, 
provided  the  matter  can  be  established,  not  merely  by  the  decla- 
rations of  the  parties  or  the  unaided  memory  of  the  v^itnesses, 
but  by  facts  and  circumstances  dehors  the  instrument,  such  as  are 
more  tangible  and  less  liable  to  be  mistaken  than  mere  words, 
equity  will  give  relief,  by  considering  the  clause  thus  shown  to 
have  been  omitted  as  if  it  had  been  set  out  in  the  instrument."  ^ 
Thus,  where  there  was  the  preliminary  allegation  of  oppression 
to  account  for  the  omission  of  the  defeasance,  and  it  was  shown 
that  the  plaintiff  was  hard  pressed  for  money,  and  was  forced  to 
consent  to  the  omission  of  this  clause  ;  and  it  was  further  shown 
that  there  was  great  inadequacy  of  price,  and  that  the  plaintiff 
retained  possession  and  paid  interest,  he  was  allowed  to  redeem.^ 
The  grantor  having  executed  a  deed,  knowing  it  to  be  absolute, 
must  be  deemed  to  have  intended  it  to  be  so,  unless  there  is  strong 
and  clear  proof  of  mistake  or  imposition.^  Parol  evidence  of  ad- 
missions on  the  part  of  the  grantee  that  the  deed  was  intended 
as  a  mere  security  are  not  alone  sufficient.  There  must  also  be 
shown  facts  or  circumstances  inconsistent  with  the  idea  of  an 
absolute  conveyance,  and  proof  of  fraud,  oppression,  ignorance, 
or  mistake,  so  as  to  account  for  the  conveyance  being  absolute  on 
its  face,  when  such  was  not  the  intention.* 

311.  Ohio.  —  Parol  evidence  is  admitted  to  show  whether  an 
absolute  deed  be  a  mortgage  or  not.  If  given  as  a  security  it  is  a 
mortgage,  whatever  its  form  ;  and  the  fact  of  its  being  so  given, 
and  not  the  evidence  of  the  fact,  determines  its  character.  In 
such  case  a  trust  arises  in  favor  of  the  grantor.  Being  a  tacit 
trust,  it  is  more  difficult  to  establish  than  one  that  is  expressed, 
but  when  it  is  ascertained,  the  same  consequences  attach  to  it. 
The  evidence  for  this  purpose  must  be  clear,  certain,  and  conclu- 
sive.^ 

311  a.  Oregon.  —  Parol  evidence  is  admissible  to  show  that  a 
deed  absolute  on  its  face  was  intended  to  operate  as  a  mortgage.^ 

1  Kelly  V.  Bryan,  6  Ired.  Eq.  283,  per  Cook  v.  Gudger,  lb,  172;  Glisson  v.  Hill, 
Pearson,  J.  lb.  256. 

2  Streator  v.  Jones,  3  Hawks,  423  ;  5.  C.  ^  Miami  Exporting  Co.  v.  Bank  of  U. 
1  Murpli.  499.  S.,  Wright,  249,  252  ;    Cotterell  v.  Long, 

3  Elliott  V.  Maxwell,  7  Ired.  Eq.  246.         20  Ohio,  464 ;    and  see  Miller  v.  Stokely, 
*  Brothers  v.  Harrill,  2  Jones  Eq.  209  ;     5  Ohio  St.  194  ;  Stall  v.  Cincinnati,  16  lb. 

169. 
222  6  Hurford  v.  Harned,  6  Oreg.  362. 


AN  ABSOLUTE   DEED   A   MORTGAGE.  [§  312. 

The  intention  of  the  parties  is  the  only  safe  criterion  for  deter- 
mining whether  the  transaction  is  a  mortgage ;  and  for  the  pur- 
pose of  showing  such  intention  evidence  may  be  given  of  tlie  situ- 
ation of  the  parties ;  of  the  value  of  the  property  as  compared 
■with  the  price  fixed  for  it ;  of  the  conduct  of  the  parties  before 
and  after  the  transaction  ;  and  of  all  the  surrounding  facts  and 
circumstances,  so  far  as  they  serve  to  explain  the  i-eal  character 
of  the  transaction.!  The  evidence  must  be  clear  and  satisfactory, 
and  sufficient  to  overcome  the  presumption  that  the  instrument 
is  what  it  purports  to  be.^ 

312.  Pennsylvania.  —  The  courts  of  this  state  have  no  general 
equity  jurisdiction.  Mortgages  are  dealt  with  as  matters  of  strict 
law ;  and  yet  parol  evidence,  under  restrictions  as  to  its  suffi- 
ciency, is  admitted  to  show  that  an  absolute  conveyance  is  in  fact 
a  mortgage."^  "  In  strict  law,"  says  Chief  Justice  Lowrie,  "  no 
mortgage  is  allowed  that  is  not  proved  by  written  evidence,  and 
the  judge  may  not  admit  any  lower  evidence  on  equitable  grounds 
without  seeing  that  justice  imperiously  demands  it.  The  case  of 
a  lost  instrument  is  a  useful  analogy.  If,  in  such  a  case,  the  judge 
refuses  to  hear  secondary  evidence  until  he  is  perfectly  satisfied 
that  the  justice  of  the  case  cannot  be  otherwise  administered, 
much  more,  it  would  seem,  ought  this  to  be  so  where  the  evidence 
which  the  law  makes,  not  merely  primary  but  essential,  never  had 
any   existence."  ^     Therefore,  it   is   held   that   mere  evidence  of 

1  Stephens?;  Allen,  11  Oreg.  188.  key,    102    Pa.  St.  462;    Hartley's   App. 

2  Albany  v.  Crawford,  11  Oreg.  243.  103   Pa.  St.  23;    Pancake   v.  Cauffman, 
8  Odenbaugh  v.  Bradford,  67  Pa.   St.     114  Pa.  St.  113.     By  Statute  Laws  1881, 

96  ;    Paige  v.   Wheeler,  92  Pa.   St.  282 ;  p.  84,  it  was  provided  that  uo  defeasance 

Kenton  v.  Vandergrift,  42  Pa.  St.  339  ;  should  have  the  effect  of  reducing  an  ab- 

Kellum  r.  Smith,  33  Pa.  St.  158 ;  Todd  v.  solute  deed  to  a  mortgage  unless  it  be 

Campbell,   32   Pa.   St.    250;     Kunkle  v.  made  in  writing,  signed,  s-ealed,  acknowl- 

Wolfersberger,  6  Watts,  126,  130;  Kerr  edged,  and  delivered  by  the  grantee,  and 

V.   Gilmore,   6   lb.    405,   414;     Kelly  v.  recorded  within  sixty  days  from  the  exe- 

Thompson,  7  lb.  401  ;  Jaques  v.  Weeks,  7  cution  of  the  same. 
lb,  2G1,  268;  Priedley  v.  Hamilton,  17  S.         *  De  France  v.  De  France,  34  Pa.  St. 

6  K.  70;  Manufacturers',  &c.  Bank  v.  385.  "Equitable  princijdes  are  contin- 
Bank  of  Pa.  7  W.  &  S.  335 ;  Cole  v.  Bol-  ually  insinuating  themselves  into  the  sys- 
ard,  22Pa.  St.  431  ;  Houser  v.  Lamont,  55  tcm  of  the  law.  Our  law  abounds  with 
Pa.  St.  311  ;  Guthrie  v.  Kahle,  46  Pa.  St.  principles  that  were  formerly  purely  equi- 
331;  Harptr's  Appeal,  64  lb.  315;  S.  C.  table.    And  the  process  by  which  this  takes 

7  rhila.  276;  Khines  /•.  Baird,  41  lb.  256;  place  is  perfectly  natural ;  for,  in  the  prog- 
McClurkan  i;.  Thompson,  69  lb.  305;  ress  of  society,  and  in  the  natural  changes 
Fcrsier's  Appeal,  75  lb.  483;  Stewart's  of  its  customs,  excejitional  i)riiKii)les  are 
Appeal,  98  I'a.  St.  377  ;  Umbenhower  v.  constantly  demanding  recognition,  and 
Miller,  101  Pa.  St.  71;  lluoncker  v.  Mer-  continually  enlarging  their  sphere,  until 

223 


§  312.]  PAROL   EVIDENCE   TO   PROVE 

verbal  declarations  by  the  parties,  unless  corroborated  by  other 
facts  and  circumstances,  is  not  a  proper  substitute  for  the  written 
evidence  required  by  law.^  The  presumption  always  is  that  the 
deed  is  what  it  purports  to  be.  To  prove  it  otherwise,  the  evi- 
dence must  be  clear  and  convincing.  If  the  intention  of  the  par- 
ties be  to  create  a  mortgage  rather  than  a  conveyance,  this  must 
be  established,  not  merely  by  loose  conversations  between  the 
parties,  or  b}^  declarations  to  third  persons,  but  by  facts  and  cir- 
cumstances outside  the  deed,  inconsistent  with  the  idea  of  an  ab- 
solute purchase.^  The  principle  upon  which  parol  evidence  is  ad- 
mitted is  to  show  and  explain  the  true  intention  and  purpose  of 
the  parties,  in  order  to  develop  the  real  character  of  the  transac- 
tion.^ Whether  the  transaction  is  to  be  regarded  as  an  absolute 
convej'ance  or  a  mortgage  depends  more  upon  its  attendant  cir- 
cumstances than  upon  any  express  agreement  making  it  defeas- 
ible ;  and  it  is  doubtful  whether  parol  proof  of  an  agreement  to 
reconvey,  standing  alone  and  without  fraud,  would  be  permitted 
to  convert  it  into  a  mortgage.  But  facts  and  circumstances  in- 
consistent with  its  being  an  absolute  conve3^ance  may  be  proved ; 
and  if  they  are  clear  and  convincing  enough  to  authorize  a  court 
of  equity  to  infer  that  the  conveyance  was  intended  to  secure  a 
loan,  under  th-e  jurisprudence  of  this  state  they  should  be  sub- 
mitted to  a  jury  to  find  whether  the  transaction  was  a  mortgage.^ 
The  proof  must  establish  an  agreement  for  a  reconveyance  sub- 
stantially contemporaneous  with  the  execution  and  delivery  of  the 
deed,  and  not  rest  on  the  subsequent  admissions  and  declarations 
of  the  mortgagee  only.  The  agreement  need  not,  however,  be 
express ;  it  may  be  inferred  from  circumstances.^  The  evidence 
must  be  clear,  precise,  indubitable,  and  sufficient  to  satisfy  the 

they  become  general,  and  thus  truly  legal.  Clurkan  v.  Thompson,  69  lb.  305 ;  Plumer 

In  this  way  the  social  system  keeps  pace  v.  Guthrie,  76  lb.  441  ;  Baisch  v.  Oakcley, 

with  the  changes  of  social  purposes  and  68  lb.  92  ;  Pearson  v.  Sharp,  9  Atl.  Hep. 

principles,  and  never  requires  any  violent  38  ;    Kinports  v,   Boynton,  14  Atl    Rep. 

disruption."     Per  Lowrie,  C.  J.  135;  Kicolls  v.  McDonald,  supra. 

1  Todd  V.  Campbell,  32  Pa.  St.  250 ;  «  piumer  v.  Guthrie,  supra. 

De  France  v.  De  France,  34  Pa.  St.  385.  "  Less  than  this  would  not  only  conflict 

2  Todd  V.  Campbell,  32  Pa.  St.  250,  per  with  the  rules  of  evidence  which  prescribe 
Strong,  J. ;  Lance's  App.  112  Pa.  St.  456  ;  the  manner  in  which  a  written  instrument 
Logue's  App.  104  Pa.  St.' 136;  Nicolls  v.  may  be  changed  by  parol,  but  also  defeat 
McDonald,  101  Pa.  St.  514.  the  wise  provision  of  the  statute  of  frauds." 

2  Kerr  v  Gilmore,  6  Watts,  405,  414.         Per  Mercur,  J. 
*  llhines  v.  Baird,  41  Pa.  St.  256 ;  Mc- 

224 


AN   ABSOLUTE  DEED   A   MORTGAGE.  [§§  313-316. 

mind  of  a  chancellor;    otherwise  it  is  error  to  submit  it  to  the 

313.  Rhode  Island.  —  Parol  evidence  is  admissible  to  show 
that  an  absolute  deed  was  intended  as  a  mortgage,  and  that  the 
defeasance  has  been  omitted  or  destroyed  by  fraud  or  mistake,  or 
omitted  by  design,  upon  mutual  confidence  between  the  parties.^ 

314.  South  Carolina. — Parol  evidence  is  received  to  convert 
an  instrument  absolute  on  its  face  into  a  defeasible  instrument, 
where  the  omission  to  reduce  the  defeasance  to  writing  was  oc- 
casioned by  fraud  or  mistake.^  If  it  can  be  I'eceived  in  any  other 
case  the  evidence  must  be  very  clear  and  convincing.* 

315.  Tennessee.  —  It  is  well  settled  that  although  a  convey- 
ance be  absolute  in  its  terms,  it  may  be  shown  by  parol  proof  to 
be  a  mortgage.  It  seems  to  be  admitted  for  the  purpose  of  show- 
ing the  intention  of  the  parties  and  the  real  character  of  the 
transaction.^  When  a  parol  defeasance  is  shown,  the  effect  of  it 
is  to  reduce  the  title  under  an  absolute  deed  to  what  was  intended 
by  the  parties,  a  defeasible  estate  ;  a  security  for  a  debt,  instead 
of  a  sale.^  The  evidence,  however,  must  be  clear  and  decisive, 
as  the  presumption  is  in  favor  of  the  deed  as  it  appears  upon  its 
face." 

316.  Texas.  —  The  doctrine  that  parol  evidence  is  admissible 
to  prove  tiiat  an  absolute  deed  was  intended  merely  as  a  security 
for  the  payment  of  a  debt  is  fully  recognized.^  It  is  admitted  to 
show  that  the  deed  was  really  executed  and  delivered  upon  cer- 

^  Pancake  v.   Cauffman,    114   Pa.    St.  ^  Ruggles  i'.  Williams,  s!//)ra . 

113.  '  Hayiics  v.  Swaim,6  Heisk.  560;  Nick- 

2  Taylor  17.  Luther,  2  Sumn.  228;  Nich-  son  i'.  Toney,  3   Head,  655;  Hickman  v. 

ols  V.  Reynolds,  I  li.  I.  30.  Quinn,  6  Ycrg.  96;  Lane  v.  Dickcrson,  10 

'^  Arnold  v.  Mattison,  3  Rich.  Eq.  153  ;  Yerg.  373  ;  Overton  v.  Bigelow,  3  lb.  513  ; 

Walker  v.  Walker,  17  S.  C.  329  ;  Carter  v.  Hammonds  v.  Hopkins,  lb.  525. 

Evans,  17  S.  C.  458.  "  Gibbs  v.  Penny,  43  Tex.  560;  Ruffier 

*  Arnold  v.  Mattison,  supra  ;  Nesbitt  v.  v.  Womack,  30  Te.\.  332,  343  ;  Stanipers 

Caveiidcr  (S.  C),  2  S.  E.  Rep.  702.  v.  Johnson,  3  Tex.  1 ;  Carter  v.  Carter,  5 

^  Nichols  u.  Cabe,  3  Head,  92 ;  Ruggles  Tex.  93;  Hannay  v.  Thompson,  14  Tex. 

u.  Williams,  1  lb.  141  ;  Hinsou  w.  Partee,  142   Mead    v.    Randolph,    8    Tex.    191; 

11   Humpn.  587  ;  JJallard  v.  Jones,  6  lb.  Mann  v.  Falcon,  25  Tex.  271  ;  Miller  r. 

455;  IJrown  r.  Wright,  4  Ycrg.  57  ;  Lane  Thatcher,  9  Tex.  482  ;  McClcnny  y.  Floyd, 

V.  Dickerrion,  10  lb.  373;  Yarborough  v.  10  Tex.  159;  Cuncy  v.  Duprce,  21  Tex. 

Ncwtll,  10  lb.   376;    Guinn  v.  Locke,  1  211;  (irooms  v.  Rust,  27  Tex.  231  ;  Cal- 

Heiid,  1 10;  Jones  v.  Jones,  lb.  105  ;  Leech  houn  i;.  Lumpkin,  60  Te.\.  185  ;  Loving  v. 

I'.  Hillsiiian,  8  Lea,  747  ;  Robinsons  u.  Lin-  Milliken,  59  Te.x.  423;  Ullman  r.  Jasper, 

coin  Savings  Bank,  85  Tenn.  363  ;  3  S.  W  7  8.  W.  Rip.  763. 
Rep.  056. 

VOL.  I.                15  225 


§§  316  a,  317.]        PAROL  evidence  to  prove 

tain  trusts,  not  reduced  to  writing,  which  the  grantee  promised  to 
perform.  These  trusts  existing  in  parol  are  established  to  pre- 
vent the  fraudulent  use  of  the  deed  or  written  instrument.^  It  is 
not  necessary  that  there  should  be  any  charge  of  fraud,  mistake, 
or  surprise,  to  afford  a  foundation  for  the  introduction  of  such 
evidence.2  When  it  is  attempted  to  use  the  deed  for  a  fraudu- 
lent purpose,  or  one  wholly  different  from  that  intended  by  the 
parties,  equity  interposes  to  prevent  the  fraud  and  establish  the 
trust.  The  trust  must  be  shown  with  "  clearness  and  certainty,"  ^ 
and  it  has  sometimes  been  said  that  it  must  be  shown  by  the  tes- 
timony of  more  than  one  witness,  unless  that  testimony  be  sup- 
ported by  corroborating  circumstances.*  But  it  is  error  for  the 
court  to  instruct  the  jury  that  the  proof  that  an  absolute  deed  is 
a  mortgage  must  be  "  clear  and  convincing."  ^  As  in  Pennsylva- 
nia, there  being  no  court  of  chancery,  such  evidence  must  be 
passed  upon  by  a  jury.*^ 

316  a.  Utah  Territory.  —  An  absolute  conveyance  may  be 
shown  to  be  a  mortgage  by  parol  evidence  that  the  consideration 
of  it  is  a  loan.*" 

317.  In  Vermont  parol  testimony  is  admissible  to  show  that 
a  deed  absolute  in  terms  was  in  fact  made  as  security  for  money 
loaned,  if  the  grantor  has  remained  in  possession,  and  the  title 
has  continued  in  the  grantee.^  If  he  has  parted  with  the  title, 
the  grantor  loses  his  right  to  redeem.  The  fact  that  the  grantor 
remains  in  possession  is  always  regarded  as  a  strong  circumstance 
tending  to  show  that  the  deed  is  a  mortgage.^  The  absence  of 
any  written  evidence  of  a  debt  does  not  make  the  deed  less   effec- 

1  Moi-eland  v.  Barnhart,  44  Tex.  275;  ^  Wasatch  Min.  Co.  v.  Jennings,  16 
Mead  v.  Randolph,  8  Tex.  191  ;  Grooms     Pac.  Eep.  399 ;  -S.  C.  15  lb.  65. 

V.  Rust,  27  Tex.  231.  »  Crosby  v.  Leavitt,  50  Vt.  239. 

2  Mead  v.  Randolph,  supra ;  Carter  v.  ^  Hills  v.  Loomis,  43  Vt.  562 ;  Rich  v. 
Carter,  5  Tex.  93.  Doane,  35  Vt.  195;  Wright  v.  Bates,  13 

3  Moreland  v.  Barnhart,  supra  ;  Mark-  Vt.  341  ;    Baxter  v.  Willey,  9  Vt.  276  ; 
ham  V.  Carothers,  47  Tex.   21 ;    Hughes  Campbell    v.   Worthiugton,   6   Vt.   448  ; 
V.  Delaney,  44  Tex.  529  ;  Pierce  v.  Fort,  Wing  v.  Cooper,  37  Vt.  169  ;   Hyndman . 
60  Tex.  464;  Miller   v.  Yturria,  7  S.  W.  v.  Hyndman,  19  Vt.  9  ;  Bigelow  v.  Top- 
Rep.  206.  liff,  25  Vt.  273 ;  Mott  v.  Harrington,  12 

*  Moreland    v.   Barnhart,   supra,    and  Vt.  199.     In  Conner  y.  Chase,  15  Vt.  764, 

cases  cited.  it  was  held  that  such  evidence  was  inad- 

5  Miller  v.  Yturria,  supra.  niissible  to  show  that  a  deed  of  warranty, 

6  Carter  v.  Carter,  supra ;  Moreland  v.  followed  by  possession  through  several 
Barnhart,  supra  ;  Ruffier  v.  Womack,  30  successive  grantees,  by  similar  deeds,  was 
Tex.  332  ;  Miller  v.  Yturria,  supra;  Ull-  a  mortgage. 

man  v.  Jasper,  7  S.  W.  Rep.  663. 
226 


AN   ABSOLUTE   DEED   A   MORTGAGE. 


[§§  318-320. 


tual  as  a  mortgage.^  The  ground  upon  which  parol  evidence  is 
admitted  seems  to  be  that  when  the  instrument  is  in  fact  a  mort- 
gage, and  there  is  an  attempt  to  set  it  up  as  an  absolute  convey- 
ance, there  is  a  fraudulent  application  or  use  made  of  it  which  a 
court  in  chancery  maj'^  interfere  with  to  prevent.^ 

318.  Virginia.  —  Parol  evidence  is  admitted  in  equity  to  de- 
termine whether  a  deed  shall  be  considered  a  mortgage  or  an 
absolute  purchase.  The  court  is  governed  by  the  intention  of  the 
parties.  The  question  is  whether  the  parties  intended  to  treat 
of  a  purchase,  or  to  secure  the  repayment  of  money.  To  deter- 
mine this,  the  whole  circumstances  of  the  transaction  will  be  ex- 
amined.^ 

318  a.  "Washington  Territory.  —  A  deed  absolute  on  its  face 
is  treated  as  a  mortgage  when  it  is  shown  that  the  parties  intended 
it  to  be  a  mortgage.* 

319.  West  Virginia.  —  The  rule  in  relation  to  the  admission 
of  parol  evidence,  to  show  that  a  deed  is  a  mortgage,  is  the  same 
that  prevails  in  Virginia.^ 

320.  In  Wisconsin  the  admissibility  of  parol  proof,  to  show 
a  deed  absolute  on  its  face  to  be  a  mortgage,  is  the  settled  law.^ 
This  is  not  only  the  rule  in  equity,'  but  at  law  as  well.     The  evi- 


i  Graham  v.  Stevens,  34  Vt.  166. 

2  Wright  V.  Bates,  13  Vt.  341,  348. 

8  Ross  V.  Xorvell,  1  Wash.  14  ;  Thomp- 
son V.  Davenport,  I  lb.  125;  King  v.  New- 
man, 2  Munf.  40  ;  Breckenriilge  v.  Auld, 
1  Hob.  148;  Dabney  r.  Green,  4  Hen.  & 
Munf.  101  ;  Chapman  v.  Turner,  1  Call, 
280;  Robertson  v.  Campbell,  2  lb.  421  ; 
Pennington  v.  Hanbj,  4  Munf.  140;  Bird 
V.  Wilkinson,  4  Leigh,  266  ;  Suavely  v. 
Pickle,  29  Gratt.  27  ;  Edwards  v.  Wall,  79 
Va.  321. 

*  Miller  v.  Ausenig,  2  Wash.  T.  22. 

'  KlitK-k  V.  Price,  4  W.  Va.  4,  9,  citing 
the  above  cases  in  Virginia;  Troll  v.  Car- 
ter, 1.')  W.  Va.  567  ;  iJavis  v.  Demniing,  12 
W.  Va.  246  ;  Lawrence  v.  Du  Bois,  16  W. 
Va.  443;  Hoffman  v.  Hyan,  21  W.  Va. 
415;  Vangildcr  v.  Hoffman,  22  W.  Va. 
1  ;  Matheney  v.  Sandford,  26  VV.  Va.  386  ; 
Kerr  i;.  Hill,  27  W.  Va.  576. 

«  WiUo.x  V.  Bates,  26  Wis.  465.  "  Not- 
withstanding what  WH8  said  in  the  opinion 
in  liasdall  v.  ]{a.sdall,  9  Wis.  379,  as  to  the 
admissibility  of  parol  evidence  to  prove  an 


absolute  deed  a  mortgage,  upon  principle, 
it  has  since  been  frequently  held  by  this 
court  that  the  admissibility  of  such  evi- 
dence had  been  so  long  established  by  au- 
thority as  to  have  become  a  rule  of  prop- 
erty, which  ought  not  to  be  changed  by 
the  judicial  department."  Per  Paine,  J.  ; 
and  see  Plato  v.  Roe,  14  Wis.  453  ;  Sweet 
V.  Mitchell,  15  Wis.  641  ;  Spencer  v.  Fre- 
dendall,  15  Wis.  666;  Butler  v.  Butler, 
46  Wis.  430 ;  McCormick  v.  Herndon,  67 
Wis.  648;  Starksf.  Redlield,  52  Wi.s.  349  ; 
Schribcr  v.  Le  Clair,  66  Wis.  579,  586  ;  S. 
C.  29  N.  W.  Rep.  570,  889;  Rockwell  v. 
Htmiphrey,  57  Wis.  410. 

"  Kent  V.  Agard,  24  Wis.  378;  Kent  v. 
Lasley,  24  Wis.  654.  "The  doctrine  that 
a  deed  absolute  in  its  terms  can  l)c  thus 
transformed  into  a  mortgage,  and  the  title 
of  the  liolder  defeated,  is  purely  an  equi- 
table, and  not  a  hgal,  doctrine.  It  iuul  its 
origin  in  the  Court  of  Chancery,  in  which 
court  alone  the  remedy  could  formerly  be 
administered.  The  rules  and  practice  of 
tiiat  court  were  such  as  to  afford  many 

227 


§  321.]  PAROL   EVIDENCE  TO  PROVE 

dence,  liowever,  must  be  clear  and  convincing,  such  as  courts  of 
equity  require  in  such  cases,  and  equal  in  force  to  that  upon 
which  a  deed  will  be  reformed.  As  to  the  grounds  upon  which 
the  evidence  is  admitted,  "  it  is  the  fraudulent  use  of  the  deed 
whicli  equity  interposes  to  detect  and  prevent,  and  for  this  pur- 
pose parol  proof  is  admissible,  not  to  vary  the  deed,  but  to  main- 
tain the  equity  which  attaches  to  the  transaction  inherently,  and 
which  the  deed  or  contract  of  the  parties  does  not  create,  and 
cannot  destroy.  If  an  equity  of  redemption  really  attaches  to  the 
transaction  itself,  any  attempt  to  defeat  that  equity  by  setting  up 
the  deed  as  absolute  is  fraudulent."  ^ 

321.  A  review  of  the  cases,  with  reference  to  the  grounds 
upon  which  parol  evidence  is  admitted  to  prove  that  an  absolute 
conveyance  is  a  mortgage  in  equity,  will  show  that  in  the  earliest 
cases,  both  in  England  and  America,  it  was  admitted  solely  upon 
the  ground  of  fraud,  accident,  or  mistake,  which  are  ordinar}' 
grounds  of  equity  jurisdiction.  In  several  states  this  is  still  de- 
clared by  the  courts  to  be  the  only  ground  upon  which  their  inter- 
ference, in  such  case,  can  be  justified ;  or,  at  any  rate,  there  have 
been  no  decisions  which  distinctly  place  such  interference  upon 
any  other  ground.  Such  seems  to  be  the  doctrine  in  Alabama, 
Connecticut,  Florida,  Indiana,  Kentucky,  Maryland,  North  Caro- 
lina, Rhode  Island,  and  South  Carolina.^ 

In  a  few  states,  as  for  instance  Iowa,  Missouri,  Vermont,  and 
Wisconsin,  it  is  declared  that  it  is  fraud  on  the  part  of  the 
grantee  to  insist  that  the  conveyance  is  absolute,  when,  in  fact,  it 
was  in  its  origin  intended  to  be  redeemable.  In  Ohio  and  Texas 
the  intention  of  the  parties  to  create  a  security  only  seems  to  be 
regarded  as  raising  a  trust  in  favor  of  the  grantor  which  equity 
will  enforce.^ 

But  the  doctrine  in  this  country,  now  more  generally  accepted, 
is,  that  the  omission  of  parol  evidence  is  not  confined  to  cases  of 
distinct  fraud  on  the  part  of  the  grantee  in  obtaining  a  deed  with- 
out a  defeasance,  or  mistake  on  the  part  of  the  grantor  in  giving 
such  a  deed.     The  doctrine  declared  by  the  Supreme  Court  of  the 

safeguards   to  the  rights  of  the  grantee,  Walker.   2   Atk.  98,  99;  Joynes  v.  Stat- 

and    to   obviate  many  evils  which   must  ham,  3  lb.  388 ;  Pym  i\  Blackburn,  3  Ves. 

otherwise  have  grown  up  out  of  the  doc-  Jr.  34,  38;  Townshend  v.  Stangroom,  6 

trine."     Per  Dixon,  C  J.  A'^es.  328. 

1  Rogan  V.  Walker,  1  Wis.  527.  ^  -phis  was  formerly  the  case  in  Maine. 

2  See   §§    285,    300 ;    also   Maxwell   v.  §  298. 
Mountacute,  Prec.   Ch.   526;   Walker  v. 

228 


AN   ABSOLUTE   DEED   A  MORTGAGE.  [§  322. 

United  States  in  Russell  v.  Southard,^  and  Peiigh  v.  Davis,^  and 
by  the  Supreme  Court  of  Massachusetts  in  recent  cases,^  is,  that 
the  mere  fact  that  an  absolute  deed  was  intended  as  security 
merely  affords  ground  of  jurisdiction  to  courts  of  equity  to  inter- 
fere and  give  relief  ;  that  a  security  in  this  form  is  so  calculated 
to  be  an  instrument  of  oppression  and  wrong  as  in  itself  to  con- 
stitute a  quasi  fraud,  which  equity  should  relieve  against;  that 
the  fraud,  or  fault,  is  inherent  in  the  transaction  itself,  and  does 
not  arise  out  of  the  subsequent  conduct  of  the  grantee  in  attempt- 
ing to  retain  the  property.  This  doctrine  is  declared  with  more  or 
less  distinctness  in  the  later  decisions  of  the  courts  of  Arkansas, 
California,  Illinois,  Kansas,  Massachusetts,  Maine,  Michigan,  Min- 
nesota, Mississippi,  Nebraska,  Nevada,  New  Jersey,  New  York, 
Pennsylvania,  Tennessee,  Virginia,  and  West  Virginia. 

322.  The  statute  of  frauds  was  at  first  supposed  to  stand  in 
the  way  of  allowing  a  grant,  absolute  on  its  face,  to  be  established 
by  parol  evidence  as  a  mortgage.  But  the  courts,  after  a  struggle 
and  much  hesitation,  established  the  doctrine,  as  otherwise  it  was 
found  that  the  statute  designed  to  prevent  frauds  and  perjuries 
would  become  in  this  way  an  effectual  instrument  of  fraud  or  in- 
justice.* Although  the  admission  of  such  evidence  is  placed  upon 
different  grounds  by  different  courts,  there  is  substantial  unanim- 
ity in  holding  that,  when  once  the  fact  is  established  that  the 
grant  was  intended  as  a  mortgage,  the  conveyance  will  be  so  re- 
garded. The  statute  of  frauds  does  not  interpose  any  insuper- 
able obstacle  to  granting  relief  in  such  a  case,  because  relief,  if 
granted,  is  obtained  by  setting  aside  the  deed  ;  and  parol  evi- 
dence is  availed  of  to  establish  the  equitable  grounds  for  impeach- 
ing that  instrument,  and  not  for  the  purpose  of  setting  up  some 
other  or  different  contract  to  be  substituted  in  its  place.  The 
equities  of  the  parties  are  adjusted  according  to  the  nature  of  the 
transaction  and  the  facts  and  circumstances  of  the  case,  including 
the  real  agreement.  It  does  not  violate  the  statute  of  frauds  to 
admit  parol  evidence  of  the  real  agreement  as  an  element  in  the 
proof  of  fraud  or  other  vice  in   the  transaction,  which  is  relied 

'  §  285.  &  J.  16,  22;  Carr  i;.  Carr,  52  N.  Y.  251  ; 

2  9G  U.  S.  332.  Moore  v.  Wade,  8  Ivans.  3S0,  387  ;  Sewell 

'  §  300.  V.  Price,  32  Ala.  97;  Klein  i-.  MiNmiiara, 

*  Coitf;rcll  V.  rurcliase,  f'as.  temp.  Tal-     54  Miss.  90;  Kccd  v.   Kecd,  75  Me.  2G4  ; 
bot,  61,  63;  Lincoln  v.  Writ,'lit,  4  Do  G.     Landers  v.  Beck,  92  Ind.  49. 

229 


§  323.]  PAROL  EVIDENCE   TO  PROVE 

upon  to  defeat  tbe  written  instrument.^  Lord  Hardwicke  said 
that  such  evidence  has  nothing  to  do  with  the  statute  of  frauds.^ 

Neither  does  the  rule  which  excludes  parol  testimony  to  con- 
tradict or  vary  a  written  instrument  have  any  application  to  such 
a  case.  This  rule  has  reference  to  the  language  used  by  the  par- 
ties. That  cannot  be  qualified  or  varied  from  its  natural  import, 
but  must  speak  for  itself.  The  rule  does  not  forbid  an  inquiry 
into  the  object  of  the  parties  in  executing  and  receiving  the  in- 
strument. Thus  it  may  be  shown  that  a  deed  was  made  to 
defraud  creditors,  or  to  give  a  preference,  or  to  secure  a  loan,  or 
for  any  other  object  not  apparent  on  its  face.  The  object  of 
parties  in  such  cases  will  be  considered  by  a  court  of  equity  :  it 
constitutes  a  ground  for  the  exercise  of  its  jurisdiction,  which  will 
always  be  asserted  to  prevent  fraud  or  oppression,  and  to  promote 
justice.'"^ 

323.  The  grantor  is  not  estopped  from  showing  the  true 
character  of  the  transaction  by  reason  that  he  has  sworn,  on  an 
application  for  discharge  in  bankruptcy,  that  he  had  no  interest 
in  the  land.  The  original  transaction  being  without  fraud,  the 
subsequent  improper  conduct  of  the  mortgagor,  even  if  he  were 
guilty  of  perjury,  would  not  affect  his  right.  At  any  rate  the 
mortgagee  cannot  make  the  misconduct  of  the  mortgagor,  about 
which  he  need  not  concern  himself,  a  ground  for  the  non-per- 
formance of  his  own  contract.^  The  statute  of  frauds  cannot  be 
set  up  as  inconsistent  with  showing  that  an  absolute  deed  was  in- 
tended by  the  parties  merely  as  a  security  for  the  payment  of 
money .^  If  the  grantee  deny  the  trust  raised  by  a  verbal  defea- 
sance, on  proof  of  the  trust,  such  denial  is  regarded  in  some  courts 
as  a  fraud,  and  the  grantee  is  held  to  be  as  firmly  bound  by  his 
verbal  agreement  as  he  would  be  by  a  written  one,  "  hedged  about 
with  all  the  formal  solemnity  known  to  the  law."  ^ 

An  agreement,  however,  between  the  grantee  and  a  third  per- 
son that  the  land  shall  be  conveyed  to  him  upon  the  payment  by 
him  of  the  purchase  money  and  interest,  is  within  the  statute  of 

1  Campbell  v.  Dearboru,  109  Mass.  130,  3  Peiigh  v.  Davis,  96  U.  S.  332,  336, 
per  Wells,  J. ;  Glass  v.  Huibert,  102  Mass-     per  Field,  J. 

24;  Newton  v.  Fay,  10  Allen  (Mass.),  50.5;  *  Smith  v.  Cremer,  71  111.  185. 

Wyman  v.  Babcock,  2  Curtis,  386,  399;  ^  Russell    v.   Southard,    12   How.  139; 

Amory  v.  Lawrence,  3  Cliff.  523 ;  Taylor  Maffit  v.  Rynd,  69  Pa.  St.  380,  387,  and 

r.  Luther,  2  Sum.  228,  232;  Reed  v.  Reed,  cases  cited;   Houser   v.  Lamont,    55   lb. 

75  Me.  264,  273.  311  ;  Payne  v.  Patterson,  77  lb.  134;  Lee 

2  Walker  v.  Walker,  2  Atk.  98.  v.  Evans,  8  Cal.  424 ;  Raynor  v.  Lyons, 

37  Cal.  452. 
230  6  O'Neill  V.  Capelle,  62  Mo.  202. 


AN  ABSOLUTE   DEED   A   MORTGAGE.  [§  32-4. 

frauds ;  because  such  a  conveyance  and  agreement  do  not  consti- 
tute a  mortgage.!  To  constitute  a  mortgage,  such  agreement 
must  be  made  with  the  grantor  and  not  with  a  stranger.  A 
promise  by  a  third  person  to  purchase  the  property,  and  convey 
it  to  the  grantor,  is  open  to  the  same  objection.^ 

One  cUiiming  the  benefit  of  such  an  agreement  must  show  that 
at  that  time  he  had  an  equitable  interest  in  the  property.  A 
mortgagee  having  foreclosed  his  mortgage,  which  was  in  the  form 
of  a  trust  deed,  and  purchased  the  property  at  the  foreclosure 
sale,  the  mortgagor  claimed  there  was  a  verbal  agreement  with 
him  that  the  premises  should  still  be  held  as  security  for  the  pay- 
ment of  the  mortgage  debt,  and  that  when  the  rents  received  had 
been  sufficient  for  that  purpose  the  premises  should  be  recon- 
veyed  to  the  mortgagor ;  that  afterwards  the  mortgagor  procured 
another  person  to  advance  the  money  for  the  payment  of  the 
mortgage  debt,  and  the  former  mortgagor  thereupon  conveyed 
the  property  to  this  other  person  by  absolute  deed  ;  and  that  this 
purchaser  made  an  agreement  to  the  same  effect  with  the  former 
mortgagor.  The  evidence  was  not  very  satisfactory.  Mr.  Justice 
Hunt,  delivering  the  opinion  of  the  Supreme  Court  in  this  case, 
declared  that  unless  the  equity  of  redemption  of  the  mortgagor 
was  kept  alive  by  the  alleged  agreement  with  his  mortgagee,  he 
had  no  interest  which  could  sustain  a  parol  agreement  by  the 
purchaser  from  the  mortgagee  to  buy  the  property  for  the  mort- 
gagor's benefit  and  to  convey  to  him  when  required.  Such  an 
agreement  is  one  creating  by  parol  a  trust  or  interest  in  lands, 
which  cannot  be  sustained  under  the  statute  of  frauds.  It  is  a 
naked  promise  by  one  to  buy  lands  in  his  own  name,  pay  for  thera 
witli  his  own  money,  and  hold  them  for  the  benefit  of  another. 
It  cannot  be  enforced  in  equity,  and  is  void.^ 

II.    What  Facts  are   Considered. 

324.  The  true  character  of  the  conveyance  will  be  inquired 
into,  and  effect  given  to  the  intention  of  tlie  parties  as  ascer- 
tained by  their  conduct  and  declarations  at  the  time  and  subse- 

1  Payne  v.  Patterson,  77  Pa.  St.  134;  3  Ilowland  r.  Blake,  97  U.  S.  624  ;  S.C. 
Wilson  V.  McDowell,  78  111.  .514;  and  see  11  Chicago  L.  N.  139;  7  Riss.  40.  See, 
Sweet  V.  Mitchfdl,  1.5  Wis.  641.  also,  Levy  v.  Brush,  45  N.  Y.  589;  Hich- 

2  Wilson  V.  McDowell,  supra;  Stephen-  !ir(lsoii  v.  Johnson,  41  Wis.  U)0 ;  Di^rby  v. 
son  V.  Thompson,  13  111.  18G;  Perry  v.  Jones,  67  Mo.  104  ;  S.  C.  18  Am.  L.  Keg. 
McIIcnry,  lb.  227.  (N.  S.)  132;  §§  331,  332. 

231 


§  325.]  PAROL   EVIDENCE   TO  PROVE 

qnently.^  Thus,  a  verbal  agreement  made  at  the  time  of  the 
conveyance,  that  it  shall  operate  as  security  for  a  loan  of  money, 
if  clearly  proved,  is  decisive  of  the  character  of  the  transaction.^ 
And  so  is  an  agreement  that  the  deed  shall  stand  only  as  security 
for  a  debt,  and  that  in  case  of  a  sale  by  the  grantee  the  excess  of 
the  proceeds  over  the  debt  shall  be  paid  to  the  grantor.  Such 
an  agreement  and  deed  constitute  a  mortgage;  and  therefore  the 
agreement  is  not  void,  as  an  attempt  to  create  a  trust  bj"^  parol. ^ 
But  it  is  said  in  some  cases,  that  parol  evidence  of  such  an  agree- 
ment should  be  supported  by  other  facts  and  circumstances  which 
are  incompatible  with  the  idea  of  a  purchase,  and  leave  no  fair 
doubt  that  a  security  only  was  intended.* 

The  intent  at  the  time  of  the  delivery  of  the  deed  governs. 
Where  a  husband  and  wife  made  a  conveyance  absolute  in  terms 
of  property  belonging  to  the  wife,  the  husband  conducting  the 
negotiation  with  the  grantee,  the  intent  of  the  wife  in  delivering 
the  deed  governs  as  to  the  nature  of  the  transaction.  If  her  un- 
derstanding was  that  the  deed  was  only  a  security  for  her  hus- 
band's debt,  then  the  transaction  is  a  mortgage,  whatever  may 
have  been  the  intention  as  between  the  husband  and  his  creditor 
at  the  time  of  the  negotiation  and  before  the  instrument  was 
delivered.^ 

325.  Evidence  of  the  continuance  of  the  debt,  such  as  the 
payment  of  interest  upon  it,  or  the  extension  of  the  time  of  pay- 
ment, is  generally  conclusive  of  the  character  of  the  original  trans- 
action as  a  mortgage.^     It  shows  either  that  the  preexisting  debt 

1  See  §  258;   Russell  v.  Southard,  12  J.  Eq.  264.    New  York:  Lane  v.  Shears, 

How.  139.     Alabama:  Eiiand  i?.  Radford,  1    Wend.   433.      Pennsylvania:    Cole   v. 

7  Ala.  724.     California:  Daubenspeck  v.  Bolard,  22  Pa.  St.  431.    Tennessee:  Over- 

Platt,  22  Cal.  330;  Lodge  v.  Turman,  24  ton   v.   Bigelow,   3   Yerg.    513.      Texas: 

Cal.  38.5 ;  Montgomery  v.  Spect,  55  Cal.  Carter  v.  Carter,  5    Tex.  93 ;  Loving  v. 

352;  Manasse  i>.  Diukelspiel,  68  Cal.  404.  Milliken,  59  Tex.  423;    Ruffier  v.   Wo- 

Illinois :    Purviance  v.  Holt,  8   111.    394 ;  mack,  30  Tex.  332. 

Reigard  v.  McNeil,   38   111.   400;    Whit-  -  Anthony  v.  Anthony,  23  Ark.   479; 

comb  i\  Sutherland,  18  111.  578 ;  Williams  Anding  v.   Davis,   38   Miss.    574;    First 

V.    Bishop,    15    111.    553;    Workman    v.  Nat.  Bank  v.  Ashmead  (Fla.),  2  So.  Rep. 

Greening,  115  HI.  477  ;  4  N.  E.  Rep.  385  ;  657. 

Darst  V.  Murphy,  119  111.  343  ;    9  N.  E.  ^  Crane  v.  Buchanan,  29  Ind.  570. 

Rep.  887.     Iowa:    Ingalls  v.  Atwood,  53  *  Blackwell  v.   Overby,  6  Ired.  (N.  C.) 

Iowa,  283.     Maine :  Reed  v.  Reed,  75  Me.  Eq.  68  ;   Kelly  v.  Bryan,  lb.  283. 

264.     Mississippi  :    Freeman   v.   Wilson,  ^  Davis   v.   Brewster,   59  Tex.  93,  re- 

51  Miss.  329  ;  Prewett  v.  Dobbs,  21  Miss,  versing  S.  C.  56  Tex.  478. 

431.     Missouri:  Tibeau  v.  Tibeau, 22  Mo.  6  gge  §  265  ;  Ruffier  v.  Womack,  snjna; 

77.    New  Jersey :  Crane  v.  Bonnell,  2  N.  Eaton  v.  Green,  22  Pick.  (Mass.)  526,  530 ; 
232 


AN   ABSOLUTE   DEED   A   MORTGAGE.  [§  325. 

was  not  surrendered  or  cancelled  at  the  time  of  the  conveyance  ; 
or,  in  case  there  was  no  such  debt,  it  shows  that  one  was  then  cre- 
ated.^ If  the  mortgagee  retains  the  evidence  of  a  preexisting 
indebtedness,  and  receives  rent  from  the  mortgagor,  this  will  be 
reo-arded  as  a  payment  of  interest,  and  an  evidence  of  a  mort- 
o-ao-e.^  The  taking  of  judgment  for  the  consideration  money  is 
evidence  that  an  absolute  deed  was  intended  to  be  a  mortgage.^ 

Of  course,  where  there  is  no  written  acknowledgment  of  a  debt 
or  express  promise  to  pay,  the  party  who  attempts  to  impeach  the 
deed  is  obliged  to  make  out  his  proofs  by  other  and  less  decisive 
means.  The  absence  of  such  evidence  of  debt  is  far  from  being 
conclusive  that  the  transaction  was  a  sale.*  Forma^raortgages  are 
sometimes  made  without  any  personal  liability  on  the  part  of  the 
mortf^ao-or.  Moreover,  when  it  is  considered  that  the  occasion  for 
anv  inquiry  in  such  case,  as  to  the  nature  of  the  transaction, 
arises  from  the  adoption  of  forms  and  outward  appearances  sup- 
posed to  differ  from  the  fact,  it  is  hardly  reasonable  that  the 
absence  of  a  written  contract  of  debt  should  be  regarded  as  of 
more  significance  than  the  absence  of  a  formal  defeasance.^  But 
the  burden  of  proof  is  upon  the  grantor  in  an  action  to  redeem  to 
show  that  the  relation  of  debtor  and  creditor  existed  between  the 
grantor  and  grantee  after  the  delivery  of  the  deed.^ 

Westlake  v.  Ilorton,  85  111.  228 ;  Klein  v.  to  be  secured,  that  the  relation  of  debtor 

McNamara,    54  Miss.  90;  Budd   v.   Van  and    creditor     must     exist    between    the 

Orden,  33  N.  J.  Eq.  143  ;  Montgomery  v.  grantor  and  grantee,  in  order  to  lay  the 

Spcct,  55  Cal.  352  ;  Lawrence  i;.  DuBois,  foundation    for    converting    an    absolute 

16  W.   Va.  443;   Turner  i-.  Wilkinson,  72  deed   in  form  into  a  mere  security.     In 

Ala.  361.  this  case  there  was  no  note  or  bond,  or 

1  Farmer  v.  Grose,  42  Cal.  169.  other  evidence  of  debt,  executed  by  the 

2  Ennor  w.  Thompson,  46  111.  214.  defendants;    and   though   this   is   by   no 

3  Hamet  i'.  Dundass,  4  Pa.  St.  178.  means  conclusive,  still  it  is  a  circumstance 
"  In  all  this  class  of  cases,"  says  Chief  favorable  to  the  orator,  as,  if  the  jjarties 

.Justice  Poland,  in  Rich  i*.  Doane,  35  Vt.  intended  the  conveyance  merely  as  a  se- 

125,  128,  "one  principle  has  universally  curity  for  a  loan  or  debt,  it  would  have 

been  recognized,  tliat,  in  order  to  convert  been  natural  that  the  ordinary  evidence 

a  conveyance  absolute  upon  its  face  into  of  a  debt  .should  have  been  required  and 

a   mortgage,  or    security    merely,    there  iriven." 

must  be  a  debt  to  be  secured.     Some  of  4  Flagg  i;   Maun,  14  Pick.  (Mass.)  4G7, 
the  CH8C8  go  so  far  as  to  hold  that  there  473;    Brown  v.   Dewy,    1   Sandf.  (N.  Y.) 
must  be  a  debt  in  such  form  tiiat  it  can  be  Ch.   56;    Russell    v.  Southard,   12  How. 
enforced    by   action    against   tiie  debtor,  139;    Rol>inson  v.  Farrelly,  16  Ala.  472; 
while  others  have  denied  it.     We  have  no  Morris  v.  Biulloug,  78  N.  Y.  543. 
occasion  now  to  decide  whether  the  debt  6  i>e,.   Wells,  J.,  in   Camitbell  v.   Dear- 
must  be  such  that  it  could  be  enforced  by  born,  109  Mass.  130,  144. 
action  against   the  debtor;   the   tendency  0  Helms  v.   riiadbournc,  45   Wis.  60; 
of  later  cases  seems  to  be  against  it.     But  McCormick  v.  Ilerndon,  67  Wis.  648. 
all  agree  that  there  must  be  a  debt  or  loan  233 


§  326.]  PAROL   EVIDENCE   TO   PROVE 

A  mortgage  in  the  form  of  an  absolute  conveyance  is  quite  fre- 
quently and  properly  taken  when  the  amount  of  the  debt  to  be 
secured  is  uncertain,  and  depends  wholly  or  in  part  upon  future 
advances.^ 

326.  When  the  transaction  is  shown  to  have  been  based 
upon  a  preexisting  debt,  the  question  to  be  settled  is,  whether 
the  intention  of  the  parties  was  to  cancel  that  debt  or  to  secure 
it.  This  is  a  question  of  fact,  for  the  determination  of  which  not 
only  the  negotiations  had  at  the  time  of  the  conveyance,  but  also 
the  subsequent  acts  of  the  parties  in  relation  to  it,  are  to  be  con- 
sidered. The  mere  fact  that  there  was  a  debt  at  the  time  is  not 
conclusive  that  the  conveyance  was  a  mortgage  for  its  security. 
It  can  hardly  be  said  that  it  raises  a  presumption  of  a  mortgage, 
though  the  courts  have  generally  manifested  a  disposition  to  con- 
strue all  conveyances  coupled  with  a  stipulation  for  a  reconvey- 
ance at  a  future  day  as  mortgages.  But  whatever  presumption 
of  this  kind  there  may  be,  it  is  readily  repelled  by  any  facts 
showing  that  the  debt  was  surrendered  and  cancelled  at  the  time 
of  the  conveyance.  The  burden  is  then  upon  the  grantor  to  show 
that  the  deed  is  not  to  have  effect  according  to  its  terms.^ 

Although  the  securities  are  not  surrendered,  if  the  debt  is  abso- 
lutely extinguished  a  simple  right  to  repurchase  does  not  make 
the  conveyance  a  mortgage.^  Whether  the  transaction  is  a  mort- 
gage or  not  is  determined  by  the  answer  to  the  inquiry,  whether 
it  WHS  the  intention  of  the  parties  to  secure  the  payment  of  the 
debt  or  to  extinguish  it.*  If  the  object  of  the  parties  was  to 
satisfy  the  debt,  the  conveyance  must  necessarily  vest  the  estate 
absolutely  in  the  grantee,  and  it  cannot  of  course  take  effect  as  a 
mortgage ;  ^  even  if  the  conveyance  contains  a  redemption  clause.^ 
But  the  fact  that  the  evidence  of  the  indebtedness  is  retained 
after  the  conveyance  is  strong  evidence  that  it  was  taken  merely 
as  security." 

1  Abbott  V.  Gregory,  39  Mich.  68.  *  Bigelow  v.  Topliff,  25  Vt.  273  ;  Toler 

2  See  §§  267,  269 ;  Hogarty  v.  Lynch,  v.  Pender,  1  Dev.  &  B.  (N.  C.)  Eq.  445  ; 
6  Bosw.  (N.  Y.)  138;  Ford  v.  Irwin,  18  Todd  v.  Campbell,  32  Pa.  St.  250;  and 
Cal.  117  ;  14  lb.  428;  Bai>ch  v.  Oakcley,  see  Allegheny  R.  R.  &  Coal  Co.  v.  Casey, 
68  Pa.  St.  92 ;  Snavely  v.  Pickle,  29  Gratt-  79  lb.  84  ;  McDonald  v.  Kellogg,  30  Kans. 
(Va.)  27;  Montgomery  v.  Spect,  55  Cal'  170;  Loving  v.  Milliken,  59  Tex.  423. 
352;  Manasse  i;.  Dinkelspiel,  68  Cal.  404:  ^  Slee  v.  Manhattan  Co.  1  Paige  (N 
Matheney  v.  Sandford,  26  W.  Va.  386'  Y.),48:  Hoopes  u.  Bailey,  28  Miss.  328; 
Rice  V.  Dole,  107  111.  275;  Gassert  v.  Carter  y.  Williams,  23  La.  Ann.  281. 
Bogk  (iMont.),  19  Pac.  Rep.  281.  ^  West  v.  Hendrix,  28  Ala.  226. 

3  Baxter  v.  Willey,  9  Vt.  276.  "  Ennor  v.  Thompson,  46  111.  214. 

234 


AN   ABSOLUTE  DEED   A   MORTGAGE.         [§§  327-329. 

327.  The  transaction  may  have  been  a  sale,  although  the 
application  of  the  grantor  was  in  the  first  place  for  a  loan.  Of 
course,  where  an  absolute  conveyance  or  a  deed  of  trust  is  executed 
with  the  understanding  between  the  parties  that  tlie  title  is  to  be 
transfeiTed  forever  from  the  grantor  to  the  grantee,  his  heirs  and 
assigns,  the  deed  is  not  a  mortgage  but  a  sale.^  In  such  a  case, 
the  person  applied  to  having  refused  to  deal  except  as  a  purchaser, 
and  a  conversance  having  been  made  to  him  without  his  giving 
any  contract  to  reconvey,  the  court  refused,  after  a  long  lapse  of 
time,  to  convert  the  transaction  into  a  mortgage,  upon  evidence  of 
loose  conversations  to  the  effect  that  the  grantee  would  reconvey 
upon  repayment,  although  coupled  with  evidence  of  inadequacy 
of  consideration. 2 

328.  The  continued  possession  of  the  grantor  is  also  evi- 
dence tending  to  show  that  the  conveyance  was  a  mortgage.^ 
This  fact  alone  is  not  very  important,  but  adds  weight  to  other 
considerations  which  tend  to  this  conclusion.  It  is  rebutted  by 
proof  of  an  agreement  by  the  grantor  to  pay  rent.* 

On  the  other  hand,  the  fact  that  the  grantee  has  entered  into 
possession  and  made  improvements  strengthens  the  presumption 
that  the  conveyance  is  absolute.^ 

329.  Inadequacy  of  price  is  also  a  circumstance  tending  to 
show  that  the  transaction  is  a  mortgage  rather  than  a  sale,  just 
as  it  is  when  there  is  a  written  agreement  for  a  reconveyance;^ 

1  McDonald  i\  Kellogg,  30  Kans.  170,  246;  Lawrence  v.   l)u   Bois,   16  W.  Va. 

per  Valentine,  J.  443  ;   Hoffman  v.  Ryan,  21  W.  Va.  415; 

■^  De  France  v.  De  France,  34  Pa.  St.  Vangilder  i-.  Hoffman,  22  \V.  Va.  1 ;  Ma- 

385;    Albany   v.   Crawford,    11    Oregon,  theney  y.  Saudford,  26  W.  Va.  386  ;  Kerr 

243.  V.  Hill,  27  W.  Va.  576,  598. 

3  See  §  274  ;  Cottcrell  v.  Purchase,  Cas.  *  Danner  Laud  Co.  v.  Insurance  Co.  77 

temp.  Talbot,  61  ;   Lincoln  v.  Wright,  4  Ala.  184. 

De   Gex   &  J.   16.     Alabama  :   Crews  v.  ^  Woodworth  v.  Carman,  43  Iowa,  504. 

Threadgill,35  Ala.  334.    California:  Dau-  6  gee  §  275;  Davis  y.  Stonestrect,  4  Ind. 

benspeck  i;.  Piatt,  22  Cal.  330.     Illinois :  101  ;  Turpie  v.  Lowe  (Ind.),  15  N.  E.  Rep. 

Strong  V.  Shea,  83  111.  575.     Maryland  :  834  ;  Wilson  v.  Patrick,  34  Iowa,  362,  and 

Thom]».son  f.  Banks,  2  Md.  Ch.  430.    Mas-  cases  cited  ;  Trucks  v.  Lindsey,  18  Iowa, 

sachusetts  :    f:anipbell   v.  Dearborn,    109  504;  West  y.  Hindsey,  28  Ala.  226  ;  Crews 

MaHs.  I'iO,  145.     North  Carolina:  Steel  v.  v.  Threadgill,  SM/)m ;  Overton  v.  Bigelow, 

Black,  3  Jones  Eq.  427  ;  Streator  y.  Jones,  3  Yerg.  (Tenn.)  513;  Gibbs  r.  Penny,  43 

3  Hawks,  41.';j;  Sellers  v.  Stalcup,  7   Ired.  Te.x.  560  ;  Matthews  r.  Porter,  16  Fhi.  466, 

Eq.   13;  Kemp  y.  Earp,  lb.  167.     Texas:  487;   Klein  v.  McNnmara,  54   Miss.  90; 

Ruffier   V.  Womack,  30  Tex.  332.     Ver-  Davis   v.  Demining,  suinit  ;  Lawrence  v 

mont:  AVrigbt  f.  Bates,  13  Vt.  341.    Vir-  Du  Bois,   supra;    Vangilder  v.  IIofTinan, 

ginia:  Edwards  i-.  Hall,  7'J  Va.  321.  West  suimi  ;   Kerr  v.  Hill,  su/jr«;  Iliiscbcon  v. 

Virginia:  Davis  v.  Demining,  12  \V.  Va.  Huscheon,  12  Puc.  Hep.  410;  Turner  v. 

2;J5 


§  330.]  PAROL  EVIDENCE  TO  PROVE 

but  this  fact  alone  does  not  authorize  a  court  to  declare  a  deed 
absolute  upon  its  face  to  be  a  mortgage/  and  other  circumstances 
may  render  this  of  little  or  no  weiglit.^ 

330,  Delay  in  asserting  an  absolute  deed  to  be  a  mortgage 
has  not  the  same  effect  upon  the  rights  of  the  parties  that  attends 
delay  in  seeking  to  enforce  in  equity  the  performance  of  an  exec- 
utory contract.^  Once  a  mortgage  always  a  mortgage  is  the 
maxim  of  the  law,  and  payment  does  not  stand  on  the  footing  of 
performance  in  equity.  The  character  of  the  deed  being  fixed  by 
the  evidence  as  conditional,  the  mortgagor  has  the  same  time  to 
make  payment  that  any  other  debtor  has.  The  only  effect  that 
delay  can  have  in  such  a  case  is  in  its  bearing  on  the  primary 
question  of  mortgage  or  no  mortgage.  The  poverty  of  the  mort- 
gagor, and  many  other  circumstances,  may  sufficiently  explain 
this.  No  lapse  of  time  short  of  that  which  is  sufficient  to  bar  the 
action  will  prevent  the  introduction  of  parol  evidence  to  show  a 
deed  was  "intended  as  a  mortgage."'^ 

But  lapse  of  time,  in  connection  with  other  evidence,  is  a  cir- 
cumstance to  be  considered.^  When  the  grantor  had  conveyed  by 
a  warranty  deed,  and  possession  followed  the  deed  through  sev- 
eral successive  grantees,  parol  evidence  that  a  mortgage  was  in- 
tended has  been  refused.  Length  of  time  short  of  the  period 
that  will  bar  redemption  affords  a  strong  presumption  against 
such  a  claim.*^  A  lapse  of  fourteen  years  from  the  time  of  the 
transaction  has  been  considered  a  material  circumstance.'^  And 
where  the  bill  to  redeem  was  not  filed  until  thirteen  years  after 
the  conveyance,  and  it  also  appeared  that  more  than  seven  years 
had  elapsed  since  the  grantee  distinctly  refused  to  recognize  the 
grantor's  claim  of  an  equity  of  redemption,  and  there  was  no  suf- 
ficient excuse  for  the  delay,  the  laches  was  held  to  be  such  as  to 
bar  any  right  to  relief.^ 

Wilkinson,  72  Ala.   361  ;   Helm  v.  Boyd  latter  case  the  plaintiff,  after  making  a 

(111.),  16  N.  E.  llep.  85.  deed  absolute  in  form,  made  no  claim  that 

1  Pierce  v.  Traver,  13  Nev.  526  ;  Walker  it  was  a  mortgage  for  six  years,  during 
V.  rarmers'  Bank  (Del.),  14  Atl.  llep.  819.  which  time  he  had  paid  no  taxes,  and  the 

2  Matlieney  v.  Sandford,  26  W.  Va.  386.  grantee  had  made  improvements,  without 

3  Odenbaugh  v.  Bradford,  67  Pa.  St.  any  protest  on  the  part  of  the  plaintiff. 
96.  It  was  held  that  a  court  of  equity  would 

*  Anding  v.  Davis,  38  Miss.  574.  not  interfere. 

s  Tull  P.  Owen,  4  Y.  &  C.  192  ;  Landrum         •*  Conner  v.  Chase,  19  Vt.  764. 
V.  Union  Bank,  63  Mo.  48 ;  Stevenson  v.         ^  j^q  France  v.  De  France,  34  Pa.  St. 

Saline  Co.  65  Mo.  425;  Schradski  v.  Al-  385  ;  Maher  v.  Farwell,  97  111.  56. 
bright  (Mo.),  5  S.  W.  Rep.  807.     In  the         »  Maher  v.  Farwell,  supra. 

236 


AN   ABSOLUTE   DEED   A   MORTGAGE.  [§  331. 

331.  In  equity  it  is  regarded  as  unnecessary  that  the  con- 
veyance should  be  made  by  the  debtor.  It  is  sufficient  that  he 
has  an  interest  in  the  property,  either  legal  or  equitable.  Hav- 
ing such  an  interest,  if  he  procure  a  conveyance  of  the  property 
to  one  who  pays  the  price  of  it,  or  makes  an  advance  upon  it, 
under  an  arrangement  that  he  shall  be  allowed  to  have  the  prop- 
erty upon  repaying  the  money  advanced,  he  has  a  right  to  re- 
deem. The  grantee  in  such  case  acquires  title  by  his  act,  and  as 
security  for  his  debt,  and  therefore  holds  the  title  as  his  mort- 
gagee.i  Thus,  if  a  person  advances  for  another,  at  his  request, 
the  purchase  money  of  land  which  the  latter  contracts  to  buy,  and 
the  deed  be  made  to  the  person  who  advances  the  money,  he  is 
as  much  a  mortgngee  as  if  the  land  had  been  conveyed  to  him  di- 
rectly by  the  debtor.^  If  part  only  of  the  purchase  money  be 
advanced  by  such  grantee,  he  has  a  lien  upon  the  whole  land, 
and  not  merely  upon  an  undivided  interest  in  proportion  to  the 
am.ount  of  his  advance.^ 

But  at  law,  when  a  trustee,  at  the  request  of  the  husband  of 
the  cestui  que  triist,  and  acting  as  her  agent  in  fact,  sold  certain 
trust  land  to  one  who  agreed  to  convey  the  land  to  the  husband 
on  his  repaying  the  purchase  mcney,  it  was  declared  tliat  the 
transaction  did  not  constitute  a  mortgage,  and  could  not  be  dealt 
with  as  such.*  In  like  manner,  where  one  at  the  request  of  a 
debtor,  whose  land  had  been  sold  on  execution,  purchased  the 
land,  agreeing  by  parol  with  the  debtor  that,  upon  his  paying  the 
purchase  money  and  interest,  he  would  convey  it  to  him,  or,  if  the 
land  should  be  sold  for  more  than  this,  to  pay  the  surplus  to  the 
debtor,  it  was  held  that  this  transaction  did  not  constitute  a 
mortcafre,  because  the  debtor  had  no  interest  in  the  land  at  the 
time  of  this  agreement,  and  of  the  purchase  made  in  consequence 
of  it.  The  purchase  was  not  conditional  between  such  purchaser 
and  his  grantor,  who  alone  was  interested  in  the  property  at  that 

1  See  §§  241,  268,  323;    Stoddard  v.  First  Nat.  Bank  r.  Ashniead  (Fla.),  2  So. 

Whiting',  46  N.   Y.    627  ;  Carr   v.   Carr,  Rep.  657. 

52  N.  Y.  251;  MclJurney  w.  Wellmiin,  42  2  Hkuien  v.  Jordan,  21  C«l.  92;  Smith 

Barb.  (N.  Y.)  390  ;  Wri),'ht  v.  Shuinway,  v.  Knocbel,  82  111.  392  ;  Strong  v.  Shea, 

1  Bi«H.  23;  Iloiiseri'.  Lainont,  55  Pa.  St.  83  111.  575;  Barnett  i>.  Nelson,  46  Iowa, 

311;  Stin.hdeld  y.  Milliken,  71  Me.  567,  495;    Hardin  v.   Eanies,   5  Bradw.   (111.) 

570;  Fi>k  <;.  Stewiirt,  24  Minn.  97  ;  Liud-  153;  Bniinfield   r.    Boutall,  24   Ilun  (N. 

say  u.  MaUliew.s,  17  Fla.  575;  Beatty  v.  Y.),  451. 

Brurnniott,    94    Iiid.    76;    Stephenson    v.  »  Hidden  i'.  . Ionian,  su/^ra. 

Arnold,  8'J  Ind.  426  ;  Hector  v.  Shirk,  92  *  Tenn.  Life  Ins.  Co.  v.  Austin,  42  Pa. 

lud.  31  ;  Sweet   v.  MitehcU   15  Wi.s.  641  ;  St.  257.     See  §  323. 

237 


§  332.]  PAROL  EVIDENCE   TO   PROVE 

time.  There  was  no  agreement  that  the  land  was,  under  any  cir- 
cumstances, to  revert  to  his  grantor.  But  if  one  holding  a  bond 
or  agreement  for  a  deed,  after  paying  a  portion  of  the  purchase 
money,  procure  a  third  person  to  pay  the  balance,  and  the  land 
is  conveyed  to  him  as  security,  he  agreeing  to  reconvey  within 
a  certain  time  on  payment  of  his  advances,  the  transaction  is  a 
mortgage.^  Such  holder  of  the  agreement  for  purchase  has  an 
interest  in  the  land  by  reason  of  the  payment  made  by  him. 

If  the  person  who  procures  another  to  purchase  land,  upon  a 
verbal  understanding  that  the  purchaser  will  convey  the  premises 
to  him  upon  being  reimbursed  the  amount  paid  with  interest, 
had  no  interest  in  the  premises  either  legal  or  equitable,  the 
transaction  will  be  regarded  as  a  mere  contract  of  sale,  and  not 
a  mortgage.^ 

332.  One  who  purchases  at  a  foreclosure  or  execution  sale 
for  the  benefit  of  the  mortgagor,  and  thus  acquires  the  title 
at  a  price  below  the  value  of  the  property,  may  be  deemed  a 
trustee  of  the  party  for  whom  he  has  undertaken  the  purchase.^ 
Such  an  agreement,  although  verbal  merely,  is  not  within  the 
statute  of  frauds.  The  trust  in  such  case  arises  or  results  upon 
the  conveyance.  It  is  a  fraud  to  refuse  to  execute  the  agree- 
ment, and  a  court  of  equity  will  not  permit  the  grantee  to  use 
the  statute  of  frauds  as  an  instrument  of  fraud.  It  would  seem, 
however,  that  there  can  be  no  resulting  trust  unless  the  person 
claiming  it  has  some  interest  in  the  property.  "  If  A.  purchases 
an  estate  with  his  own  money,"  says  Chancellor  Kent,  "  and 
takes  the  deed  in  the  name  of  B.,  a  trust  results  to  A.  because  he 
'paid  the  money.  The  whole  foundation  of  the  trust  is  the  pay- 
ment of  the  money,  and  that  must  be  clearly  proved.  If,  there- 
fore, the  party  who  sets  up  a  resulting  trust  made  no  payment, 
he  cannot  be  permitted  to  show  by  parol  proof  that  the  purchase 
was  made  for  his  benefit  or  on  his  account.  This  would  be  to 
overturn  the  statute  of  frauds."  *     This  distinction  is  illustrated 

1  McCliutock  V.  McClintock,  3  Brewst.  *  Botsford  v.  Burr,  2  Johns.  (N.  Y.) 
(Pa.)  76.  Ch.  405  ;  followed  in  Magnusson  v.  John- 

2  Caprez  r.  Trover,  96  III.  456.  son,   73  III    156;  Per>-y  v.  McHenry,  13 

3  §  323 ;  Ryan  v.  Dox,  34  N.  Y.  307  ;  111.  227,  and  cases  cited ;  Stephenson  v. 
Brown  v.  Lynch,  1  Paige  (N.  Y.),147;  Thompson,  lb.  168;  Holmes  v.  Holmes, 
Sandfoss  v.  Jones,  35  Cal.  481,  486;  44  111.186;  Ranstead  y.  Otis,  52  111.  30; 
Reece  i'.  Roush,  2  Mont.  586  ;  McDonough  Robertson  v.  Robertson,  9  Watts  (Pa.), 
V.  O'Niel,  113  Mass.  92  ;  Union  Mat.  L.  32  ;  Haines  v.  O'Conner,  10  lb.  313. 

Ins.  Co.  V.  Slee  (111.)  13  N-  W.  Rep.  222. 
238 


AN   ABSOLUTE   DEED   A   MORTGAGE.  [§  332. 

by  a  case  which  was  twice  before  the  Supreme  Court  of  Illinois. 
Land  having  been  advertised  for  sale  under  a  senior  mortgage, 
the  owner  and  the  junior  mortgagee  arranged  with  a  third  person 
to  bid  the  land  off  for  the  amount  of  both  mortgages,  and  the 
junior  mortgagee  furnished  the  money  to  pay  the  amount  due  on 
the  first  mortgage,  with  the  understanding  that  the  owner  might 
have  further  time  in  which  to  sell  the  land  and  pay  off  the 
amount  due  on  both  mortgages,  with  interest  upon  them.  The 
transaction  was  held  to  amount  to  a  mortgage,  and  to  entitle  the 
owner  to  a  conveyance  upon  payment  according  to  the  under- 
standing.i  gut  -when  the  case  was  first  before  the  court,  it  did 
not  appear  that  the  owner  had  paid  any  portion  of  the  purchase 
money  at  the  sale,  and  therefore  the  bill  to  enforce  the  trust  was 
dismissed.^  In  like  manner  it  may  be  shown  that  one  purchas- 
ing at  a  sheriff's  sale  really  purchased  for  the  benefit  of  the 
debtor,  and  upon  agreement  to  convey  to  him  upon  a  subsequent 
repayment  of  the  amount  paid.'^  The  trust  may  be  supported,  it 
would  seem,  even  when  the  person  who  claims  the  benefit  of  the 
purchase  has  not  actually  paid  any  money  towards  the  purchase, 
if  under  an  arrangement  with  the  purchaser  he  has  abstained 
from  bidding  himself,  so  that  the  purchaser  has  obtained  the 
property  at  a  price  much  below  its  real  value.  The  person  for 
whom  the  property  was  bought  under  such  an  arrangement  is 
considered  as  having  an  interest  in  it.* 

A  transaction  whereby  one  who  is  embarrassed  conveys  land 
to  another,  on  his  promise  to  obtain  a  loan  for  him  to  pay  his 
debts  from  a  building  association,  and  apply  the  rents  to  the  re- 
payment of  the  loan,  and  to  reconvey  the  land  when  the  building 

1  Klock  V.  Walter,  70  111.  416.  See  case  was  regarded  as  a  temporary  privi- 
Illinois  cases  cited  on  rule  that  absolute  lege  and  not  a  mortgage,  in  view  of  the 
conveyance  as  a  security  is  a  mortgage.         circumstances   of     the    case ;     Sahler    v. 

2  Walter  v.  Klock,  55  111.  3G2.  Signer,  37  Barb.  (N.  Y.)  329 ;  Smith  v. 
In  Merritt  v.  Brown,  19  N.  J.  Eq.  28C,     Doyle.  46  III.  451  ;  Roberts  v.  McMahau, 

where  the  purchaber  at  a  foreclosure  sale  *  Greene  (Iowa),  34;  Logue's  App.   104 

agreed  to  allow  the  mortgagor  to  repur-  l''i-   St.  136;    Robinsons   v.  Lincoln  Sav. 

cha.se  within  a  given  time,  it  was  held  that  Bank,  85  Tenn.  363;  3  S.  W.  Rep.  656; 

he  was   not   entitled    to  relief  after   that  Brownlee  v.  Martin  (S.  C),  6  S.  E.  Rep. 

time.     He  had  paid  nothing,  and  no  trust  1-18;    Beatty  v.   Brummett,  94   Ind.   76; 

rcsuiti-d  in  his  favor.  Levy  v.   Brush,  45  N.   V.  589  ;  Ryan  v. 

■^  lleister   v.    Maderia,   3   Watts   &  S.  l>ox,  34  N.  Y.  307  ;  Howe  v.  Carpenter, 

(Pa.)    384;    Guinn    v.     Locke,    1     Head  49  Wis.  697,  702 ;  Schriber  r.  Le  Clair,  66 

(Tenn.),  110;  Barkelew  v.  Taylor,  8  N.  Wis.  579. 

J.   Eq.  206;  Price  v.  Evans,  26  Mo.  30,  *  Barkelew  v.  Taylor,  suin-a ;   Marhut 

where  an  agreement  to  reconvey  in  such  v.  Warwick,  18  N.  J.  K(i.  108. 

239 


§§  333-335.]  PAROL   EVIDENCE   TO   PROVE 

association  shall  expire,  is  a  mortgage  and  not  a  trust.^  When- 
ever there  is  in  fact  an  advance  of  money,  to  be  returned  within  a 
specified  time,  upon  the  security  of  an  absolute  conveyance,  the 
law  converts  the  transaction  into  a  mortgage,  whatever  may  be 
the  understanding  of  the  parties.^  Even  a  sheriff's  sale  will  be 
converted  into  a  mortgage  when  it  is  made  the  means  to  carry 
out  the  agreement  of  the  parties  to  raise  money  by  way  of  loan, 
and  the  loan  is  made  in  consequence  of  it.-^ 

333.  Absolute  assignment  of  a  mortgage  as  collateral.  — 
The  same  rules  that  determine  the  admissibility  of  parol  evi- 
dence to  establish  an  absolute  deed  as  a  mortgage  are  equally  ap- 
plicable to  show  that  an  assignment  of  a  mortgage,  absolute  in 
form,  is  in  fact  not  a  sale,  but  only  collateral  security  for  a  loan.'* 
The  chief  inquiry  always  is,  whether  a  debt  was  created  by  the 
transaction  and  continued  afterwards.  The  character  of  security 
once  having  attached  to  the  mortgage,  this  character  continues 
through  whatever  changes  it  may  undergo  in  the  hands  of  the 
assignee  ;  and  attaches  to  money  collected  upon  the  mortgage, 
and  to  a  title  that  has  become  absolute  by  foreclosure.^ 

334.  An  assignment  of  a  contract  of  purchase  as  security 
is  a  mortgage,  and  when  the  assignee  has  completed  the  pay- 
ments and  taken  a  conveyance  to  himself,  the  relation  of  the  par- 
ties remains  the  same.  Under  the  principle,  once  a  mortgage 
always  a  mortgage,  the  transaction  retains  that  character  until  it 
is  either  foreclosed  or  redeemed.^ 

335.  Strict  proof  required.  —  One  who  alleges  that  his  deed 
in  absolute  form  was  intended  as  a  mortgage  only,  is  required  to 
make  strict  proof  of  the  fact.  Having  deliberately  given  the 
transaction  the  form  of  a  bargain  and  sale,  slight  and  indefinite 
evidence  should  not  be  permitted  to  change  its  character."  The 
proof  must  be  clear,  unequivocal,  and  convincing.^     The  fact  that 

1  Danzeisen's  Appeal,  73  Pa.  St.  65 ;  59  111.  276 ;  Taintor  v.  Keys,  43  111. 
and  see  Church  y.  Cole,  36  Ind.  34.  332;  Dwen   v.   Blake,  44   111.    135;  Par- 

2  Harper's  Appeal,  64  Pa.  St.  315,  320;  melee  v.  Lawrence,  lb.  405;  Sharp  v. 
and  see  Steiuruck's  Appeal,  70  Pa.  St.  Smitherman,  85  111.  153 ;  Knowles  v. 
289.  Kuowles,  86  111.  1. 

3  Sweetzer's  Appeal,  71  Pa,  St.  264.  «  Cadnian  i-.  Peter,  118  U.  S.  73;  How- 
*  Poud  V.  Eddy,  113  Mass.  149;  Briggs     land  v.  Blake,  97  U.   S.  624;  S.   C.  11 

V.  Kice,  130  Mass.  50.  Chicago  L.  N.  139 ;  7  Biss.  40;  Satteifield 

5  Poud  V.  Eddy,  supra.  v.   Malone,  35  Fed.    Rep.  445 ;    Coyle  v. 

e  Smith  V.  Cremer,  71  III.  185.  Davis,  116  U.  S.  108.    Alabama:  Turner 

'     T  Maguusson  i;.    Johnson,  73  111.   156,  r.  Wilkinson,  72  Ala.  361 ;  Parks  y.  Parks, 

ISmith  V.  Cremer,  supia  ;  Price  v.  Karnes,  66  Ala.  326  ;  Knaus  v.  Dreher,  4  So.  Eep. 

*  240 


AN   ABSOLUTE   DEED   A   MORTGAGE. 


[§  335. 


the  grantor  understood  the  transaction  to  be  a  mortgage  is  not 
alone  sufficient  to  prove  it  to  be  so.^  One  who  has  assigned  a 
contract  for  the  purchase  of  real  estate  and  permitted  the  assignee 
to  take  an  absolute  deed  from  the  owner  cannot  be  allowed  to  re- 
deem upon  an  allegation,  without  proof,  that  the  transaction  was 
in  fact  a  mortgage,  and  that  he  assented  to  it  upon  the  confidence 
that  it  would  be  so  treated  by  his  creditor.^  Testimony  of  admis- 
sions by  the  grantee,  made  subsequently  to  the  conveyance,  that 
the  conveyance  was  intended  as  a  mortgage,  may,  with  corroborat- 
ing circumstances,  be  sufficient  to  establish  the  fact,^  but  alone 
is  not  sufficient.* 

When,  however,  it  is  once  admitted  that  the  deed  was  made 


287  ;  Marsh  r.  ]\Iarsh,  74  Ala.  418.  Arkan- 
sas :  Williams  v.  Cheatham,  19  Ark.  278. 
Connecticut :  Adams  r.  Adams,  51  Coun. 
544.  Delaware  :  Walker  v.  Bank,  14  Atl. 
Rep.  819.  Florida:  Matthews  v.  Porter,  16 
Fla.  4G6.  Illinois  :  Shays  v.  Norton,  48  111. 
100 ;  Price  v.  Karnes,  59  111.  276  ;  Hancock 
V.  Harper,  86  111.  445 ;  Jones  v.  Brittan,  1 
Woods,  667 ;  Maher  v.  Farwell,  97  111.  56  ; 
Helm  V.  Boyd,  16  N.  E.  Kep.  85  ;  Bailey  v. 
Bailey,  115  lU.  551 ;  Darst  v.  Murphy,  119 
111.  343 ;  9  N.  E.  Kep.  887.  Indiana  :  Cou- 
well  V.  Evil!,  4  Blackf.  67.  Iowa  :  Ensmin- 
ger  V.  Ensminger,39  N.  W.  Rep.  208  ;  Kib- 
by  f.  Harsh,  61  Iowa,  196  ;  16  N.  W.  Rep. 
85  ;  Allen  v.  Fogg,  66  Iowa,  229  ;  Gardner 
V.  Weston,  18  Iowa,  533,  535  ;  Knight  v. 
McCord,  63  Iowa,  429.  Maine  :  Knapp 
V.  Bailey,  9  Atl.  Rep.  122.  Maryland: 
Cochrane  v.  Price,  8  Atl.  Rep.  361  ;  Far- 
ringer  V.  Ramsay,  2  Md.  365.  Michigan  : 
Case  V.  Peters,  20  Mich.  298;  Tildcu  v. 
Streeter,  45  Mich.  533,  539 ;  8  N.  W.  Rep. 
502  ;  Johnson  v.  Van  Velsor,  43  Mich. 
208;  5  N.  W.  Rep.  223.  Mississippi: 
Williams  r.  Strattou,  18  Miss.  (10  Siu.  & 
M.)  418.  Missouri:  (iiiiek  v.  Turner, 
26  Mo.  App.  2'J.  Nevada  :  Bingliam  v. 
Thompson,  4  Nev.  224  ;  rierco  v.  Traver, 
13  Nev.  520.  New  York :  Holmes  v.  Grant, 
8  Paige,  243  ;  Marks  v.  Pell,  1  Johns.  Cli. 
594,  59'J  ;  Erwin  v.  Curtis,  43  Hun,  292. 
North  Carolina  :  Moore  v.  Ivey,  8  Ired.  Eq. 
192.  Oregon:  Albany,  &.c.  Canal  Co.  v. 
Crawford,  11  (Jreg.  243;  S.  C.  4  Pac. 
Kep.  113.  Pennsylvania:  Pancake  v. 
Cauffman,  114  Pa.  St.  113;  S.  C.  7  Atl. 

la 


Rep.  67  ;  Lance's  App.  112  Pa.  St.  456  ; 
4  Atl.  Rep.  375 ;  Hartley's  App.  103  Pa. 
St.  23 ;  Logue's  App.  104  Pa.  St.  136  ; 
NicoUs  V.  McDonald,  101  Pa.  St.  514; 
Stewart's  App.  98  Pa.  St.  377  ;  Haines 
r.  Thompson,  70  Pa.  St.  434.  South  Car- 
olina :  Arnold  v.  Mattison,  3  Rich.  Eq. 
153.  Texas:  Brewster  ?;.  Davis,  56  Tex. 
478  ;  S.  C.  59  Tex.  93 ;  Miller  v.  Yturria, 
7  S.  W.  Rep.  206.  It  is  error,  however, 
to  instruct  a  jury  that  they  cannot  find  a 
deed  absolute  on  its  face  to  be  a  mortgage, 
unless  the  fact  that  it  was  so  intended 
should  be  established  by  two  witnesses,  or 
by  one  witness  and  strong  corroborating 
circumstances.  Pierce  v.  Fort,  60  Tex. 
464.  This  rule  is  applicable  only  to  cases 
in  which  it  is  sought  to  establish  a  trust 
upon  the  declarations  or  evidence  of  the 
trustee,  as  in  Morcland  v.  Barnhart,  44 
Tex.  275.  Virginia  :  Edwards  v.  Wall,  79 
Va.  321.  West  Virginia:  Kerr  v.  Hill, 
27  W.  Va.  576.  Wisconsin :  Butler  v. 
Butler,  46  Wis.  430  ;  INIcCuruiick  v.  Hern- 
don,  31  N.  W.  Rep.  303;  67  Wis.  648; 
Rockwell  u.  Humphrey,  57  Wis.  410. 

1  Holmes  v.  Fresh,  9  Mo.  201  ;  Phoenix 
V.  Gardner,  13  Miun.  430;  Jones  v.  Biittau, 
supra;  Andrews  v.  Hyde,  3  Cliff.  516. 

-  Ilogarty  v.  Lyuth,  6  Bosw.  (N.  Y.) 
1  ^8. 

8  Beutley  v.  Phelps,  2  Woodb.  &  M. 
426;  ^Iclntyro  v.  llumpiireys,  1  Iluffni. 
(N.  Y.)31. 

*  Todd  V.  Campbell,  32  Pa.  St.  250; 
Ross  V.  Brusio,  64  Cal.  245 ;  Nicolla  i-. 
McDonald,  supra. 

241 


§  336.] 


PAROL   EVIDENCE   TO   PROVE 


merely  to  secure  a  debt,  and  the  question  is,  what  is  the  amount 
of  the  debt,  tlie  burden  is  upon  the  grantee  to  show  it.^ 

336.  The  grantor  on  redeeming  or  seeking  a  reconveyance 
must  comply  with  his  agreement,  and  pay  the    amount  due.^ 


1  Freyta.c:  v.  Hoeland,  23  N.  J.  Eq.  36. 
It  was  admitted  that  the  deed,  though  ab- 
solute on  its  face,  was  given  as  security 
only,  and  therefore  a  mortgage.  The 
plaintiff,  who  sought  to  recover  the  prop- 
erty, claimed  that  it  was  security  for  $700 
only;  the  defendant  claimed  that  it  was 
security  not  only  for  that  sum,  but  for 
previous  advances  of  about  $5,300.  The 
plaintiff  denied  that  these  advances  were 
made  to  him  or  on  his  credit ;  and  said 
that  the  advances  were  made  to  his  wife 
and  daughter  for  a  different  considera- 
tion. 

The  circumstances  of  the  case,  in  the 
language  of  the  Chancellor,  are  "  novel 
and  peculiar."  Hoeland  was  a  butcher, 
and  followed  his  trade  at  Newark,  and 
afterwards  in  California  and  Nevada.  He 
also  speculated  in  mining  rights  in  the 
latter  states.  He  prospered  and  had 
money. 

Freytag  was  a  carpenter  ;  he  worked  at 
his  trade  in  Newark,  where  Hoeland 
boarded  for  a  time  in  his  family.  At  this 
time  either  Mrs.  Freytag  proposed  to  Hoe- 
land, or  Hoeland  proposed  to  Mrs.  Frey- 
tag, to  elope  together.  Each  said  the  of- 
fer came  from  the  other,  and  it  was  vir- 
tuously rejected  by  the  party  testifying. 
The  result  was  that  Hoeland  changed  his 
boarding  place,  and  Mr.  Freytag,  in  an 
encounter  with  him,  got  a  wound  over  his 
eye,  the  scar  of  which  he  still  bore.  But 
notwithstanding  these  inharmonious  cir- 
cumstances, Hoeland  was  again  received 
as  a  boarder  by  Mrs.  Freytag,  with  whom 
he  was  on  very  friendly  and  confidential 
terms. 

Katinka,  the  daughter  of  the  Freytags, 
was  growing  up  towards  womanhood,  and 
Hoeland  took  a  fancy  to  her,  and  pro- 
posed to  make  her  his  wife  when  the 
proper  time  should  arrive.    In  this  he  had 


the  support  of  the  mother.  Katinka  sub- 
mitted passively,  though  it  did  not  appear 
that  she  ever  engaged  herself  to  him. 
Freytag  was  an  easy-going,  submissive 
man,  who  did  not  get  on  in  the  world.  Ka- 
tinka had  some  talent  for  music,  and  took 
lessons  to  fit  her  for  taking  part  in  con- 
certs and  the  opera.  Hoeland,  at  the  so- 
licitation of  the  mother  and  daughter, 
furnished  them  with  money.  In  1868, 
the  Freytags  went  to  Europe;  Freytag 
returned,  but  the  mother  and  daughter 
went  to  Milan,  and  remained  for  Katinka's 
musical  education.  There  Hoeland  sent 
money  to  them,  at  the  earnest  request  of 
the  daughter,  who  in  one  of  her  letters 
almost  promised  to  come  back  to  him  at 
San  Francisco.  The  correspondence  and 
all  the  arrangements  were  conducted 
without  consulting  Freytag. 

"It  would  not  be  strange,"  said  the 
Chancellor,  "  if  a  young  woman  of  prom- 
ise, however  humble  her  origin,  who  had 
taken  lessons  of  masters  of  music,  espe- 
cially in  Italy,  where  the  art  has  reached 
its  highest  cultivation,  should  show  some 
reluctance  to  fulfil  an  engagement  made 
for  her  in  childhood,  and  marry  a  prac- 
tical butcher  far  older  than  herself,  and 
live  with  him  in  Nevada  or  Califor-  • 
nia.  Some  indications  of  this  feeling,  or 
perhaps  a  conclusion  that  mother  and 
daughter  had  been  using  his  attachment 
and  hopes  to  obtain  his  money  without 
any  regard  to  fulfilling  his  expectation, 
seems  to  have  aroused  Hoeland  to  his  sit- 
uation, and  to  have  changed  his  course 
regarding  them." 

In  the  summer  of  1869,  Hoeland  was  in 
Jersey  City;  Freytag  saw  him,  and  being 
pressed  for  money,  applied  to  him  for  a 
loan,  which  was  at  first  refused.  After- 
wards he  consented  to  advance  $700,  on 
receiving   an   absolute    conveyance    of   a 


White  V.  Lucas,  46  Iowa,  319  ;  Westfall  v.  Westfall,  16  Hun  (N.  Y.),  541. 
242 


AN   ABSOLUTE  DEED   A   MORTGAGE.  [§  337. 

On  the  principle  that  "  lie  who  seeks  equity  must  do  equity,"  a 
grantor  who  seeks  to  redeem  land  from  a  conveyance  made  to 
secure  the  performance  of  a  verbal  agreement  to  pay  a  certain 
sum  of  money  in  gold  coin  should  be  held  to  a  full  compliauce 
with  the  terms  of  his  agreement,  as  a  condition  precedent  to  a 
reconveyance.!  On  this  ground  it  has  been  held,  that  although 
a  loan  upon  land  has  been  put  in  the  form  of  an  absolute  deed 
and  an  agreement  to  reconvey,  for  the  purpose  of  covering  up  a 
contract  for  usurious  interest,  the  mortgagor  is  not  entitled  to  the 
statutory  penalties  or  forfeitures  for  usury,  but  must  pay  on  re- 
deeming the  amount  of  the  original  loan,  with  legal  interest.^ 

Equity  will  not  relieve  a  grantor  on  his  own  application  from 
the  consequences  of  an  absolute  deed  made  to  protect  his  prop- 
erty from  his  creditors.^ 

337.  A  judgment  creditor  may  show  the  character  of  his 
debtoi''s  conveyance.  Having  purchased  his  debtor's  land  at  a 
sale  under  execution  issued  upon  his  judgment,  he  may  show  that 
an  absolute  conveyance  of  the  land  made  by  his  debtor  was  in 
fact  a  mortgage,  and  he  is  entitled  to  a  conveyance  of  it  upon 
paying  any  balance  due  upon  the  mortgage.^  And  without  hav- 
ing made  a  purchase  upon  execution,  a  creditor  of  the  grantor 
may  show  that  such  absolute  deed  is  really  a  mortgage,  and  may 
enforce  a  judgment  against  the  property  or  the  proceeds  of  it  to 
the  extent  of  the  surplus,  after  satisfying  the  debt  for  the  secu- 
rity of  which  it  was  conveyed.^  A  judgment  obtained  against 
the  grantor  by  a  creditor,  after  the  making  of  an  absolute  deed, 
which  is  really  a  mortgage,  becomes  a  lien  upon  the  equity  of  re- 
demption, just  as  it  would  if  a  formal  mortgage  had  been  given.^ 

On  the  other  hand,  a  creditor  of  the  grantee  who  levies  upon 
land  held  by  the  latter,  under  an  absolute  deed  which  is  really  a 
mortgage,  can  obtain   no  higher  or  better  title  than  the  grantee 

house  and   lot  suljject  to  a  mortgage  of  ^  See   §    283 ;    Arnold  v.  Mattison,  3 

S8,000,  but  worth  twice  that  sum;    and  Rich.  (S.  C.)  Eq.  153;  liassam  i'.  Barrett, 

MUch  W!i8  the  arrangement  made.     Iloe-  115  Mass.  256. 

land  claimed  thiit  the  conveyance  secured  "*  Judge   v.  Reese,   24   N    J.  Eq.  387 ; 

the  advances  to  the  mother  and  daughter,  Clark  ;;.   Condit,  18  lb.  358;  Vandcgrift 

who  were  still  in  Europe.     The  Chancel-  v.  Herbert,  lb.  466 ;  Van   Hnren  v.  01m- 

lor  held  that  ihi;   burden    was   upon   the  stead,  5  Paige  (N.  Y),  9. 

grantee   to  »how  that  more  tiian  the  $700  ''Alien   v.   Kemp,   29    Iowa,   452;   De 

was  secured  ;  and  that  there  was  no  proof  Wolf  v.   Stradcr,  26    111.   225  ;   Dwen   v. 

that  any  further  sum  was  secured.  Blake,  44  111.  135. 

1  Cowing  V.  Rogers,  34  Cal.  648.  o  Christie  v.  Hale,  46  III.  117. 

'•«  Iltacock  V.  Swartwout,  28  ill.  291. 

243 


§§  338,  339.]  PAROL   EVIDENCE   TO   PROVE 

himself  bad.     The  mortgagor  is  entitled  to  redeem  the  land  upon 
payment  of  the  mortgage  debt.^ 

338.  Election  to  treat  the  conveyance  as  absolute,  —  A 
mortgagor  who  abandons  his  right  to  redeem  from  an  absolute 
conveyance,  and  elects  to  treat  the  conveyance  as  an  absolute 
deed  instead  of  a  mortgage,  is  bound  by  such  election,  and  can- 
not afterwards  redeem.^  He  may  also  verbally  waive  his  right 
of  redemption  in  favor  of  another  person,  and  after  a  long  ac- 
quiescence in  the  transaction,  the  other  in  the  mean  time  having 
redeemed  the  land  and  improved  it,  he  will  not  be  allowed  to 
redeem  from  him.^  When  the  grantee  goes  into  possession  and 
makes  valuable  improvements,  and,  with  the  knowledge  of  the 
grantor,  sells  the  property,  the  latter  is  estopped  to  claim  that  his 
deed  was  a  mortgage.^  In  any  event  redemption  must  be  made 
within  the  time  allowed  by  the  statute  of  limitations.*^ 

339.  As  to  third  persons  the  grantee  may  exercise  all  the 
rights  of  an  absolute  owner,^  whether  the  transaction  be  a  mort- 
gage or  a  conditional  sale.  The  grantor,  in  order  to  maintain  an 
action  for  rent,  cannot  show  that  his  deed  was  intended  as  a  mort- 
gage, and  that  he  is  entitled  to  the  position  and  rights  of  a  mort- 
gagor in  possession.'^ 

A  grantee  by  an  absolute  deed  which  shows  no  defeasance,  nor 
any  right  to  one,  is  entitled  to  the  possession  of  the  property  in 
law;^  for  the  mortgagor  at  most  has  only  an  equity.     But  if  the 

1  Leech  v.  Hillsman,  8  Lea  (Tenn.),  6  Fiedler  v.  Dariiri,  59  Barb.  (N.  Y.) 
747.  651 ;  Groton  Savings  Bank  v.  Batty,  30 

2  Maxfield  v.  Patchen,  29  111.  39,  42.  N.  J.  Eq.  126;  S.  C.  19  Alb.  L.  J.  340; 

3  Carpenter  v.  Carpenter,  70  111.  457.  Frink  v.  Adams,  36  N.  J.  Eq.  485;  Hills 
The  plaintiff  in  this  case,  having  been  un-  v.  Loomis,  42  Vt.  562 ;  Meehan  v.  Forres- 
successful  in  a  love  matter  with  a  girl  in  ter,  52  N.  Y.  277;  Westfall  v.  "Westfall, 
the  neighborhood,  started  for  California,  supra;  McCarthy  v.  McCarthy,  36  Conn, 
and  when  he  reached  Chicago,  on  the  177;  Digby  i>.  Jones,  67  Mo.  104;  S.  C. 
road,  he  wrote  to  his  father  to  redeem  the  18  Am.  L.  Reg.  N.  S.  132;  Pico  v.  Gal- 
land  and  it  should  be  his ;  that  he  would  lardo,  52  Cal.  206 ;  Turner  v.  Wilkin- 
never  return  from  California  until  he  was  son,  72  Ala.  361 ;  Weide  i;.  Gehl,  21  Minn, 
able  to  set  his  heel  upon  the  neck  of  the  449 ;  Wyman  v.  Babcock,  2  Curtis,  386 ; 
Gnil  tribe  (relatives  of  the  girl).  The  Pancake  v.  Cauffman,  114  Pa.  St.  113; 
father  redeemed  the  land,  sold  it,  and  in-  7  Atl.  Eep.  67 ;  Sweetzer  v.  Atterbury, 
vested  the  proceeds  in  other  land.  It  was  100  Pa.  St.  18;  Jenkins  v.  Eoseuberg,  105 
held  that  the  father  was  not  liable  to  ac-  111.  157. 

count,  especially  after  a  lapse  of  eighteen  ^  Abbott  v.  Hanson,  24  N.J.  L.  (4  Zab.) 

years  unexplained.  493. 

*  Woodvvorth  v.  Carman,  43  Iowa,  504.  ^  Bennett  v.   Eobinson,   27    Mich.  26  ; 

5  Westfall  V.  Westfall,  16  Hun  (N.  Y.),  Jeffery  v.  Hursh,  42  Mich.  563 ;  Wether- 

.•iil.  bee  V.  Green,  22  Mich.  311,  321. 

244 


AN  ABSOLUTE  DEED   A   MORTGAGE.  [§  339. 

papers  show  a  defeasance,  or  an  arrangement  which  amounts  to  a 
defeasance,  and  the  mortgagor  is  left  in  possession,  the  mortgagee 
cannot,  in  a  state  where  the  mortgagor  is  entitled  to  possession 
until  foreclosure,  recover  possession.^  A  mortgagor  who  has  de- 
livered possession  to  the  grantee  cannot  recover  possession  from 
him  without  paying  the  debt  and  redeeming  the  mortgage.  But 
if  the  mortgagor  has  not  delivered  possession  to  the  grantee,  he 
can  recover  possession  of  the  land  from  one  who  is  not  the  grantee 
and  does  not  hold  under  him,  without  redeeming.^ 

A  purchaser  who  has  knowledge  that  his  grantor,  though  hold- 
ing the  estate  by  an  absolute  conveyance,  nevertheless  is  in  fact 
only  a  mortgagee,  acquires  a  defeasible  estate  only,  and  it  is 
defeasible  upon  the  same  terms  as  it  was  in  the  hands  of  the  orig- 
inal grantee.3  And  so  a  purchaser  who  has  paid  no  valuable  con- 
sideration for  his  conveyance  occupies  a  position  no  better  than 
his  grantor.^  A  mortgage  was  made  of  certain  mills  to  secure  the 
sum  of  84,000  ;  and  the  mortgagor  also  conveyed  to  the  mort- 
gagee other  land  absolutely,  as  security  for  a  further  sum  of 
■86,000.  The  mortgagee  assigned  the  mortgage  and  conveyed  the 
land  to  a  third  person,  who  had  notice  of  the  character  of  the 
prior  conveyance.  This  assignee  foreclosed  the  mortgage  upon 
the  mills,  and  purchased  them  upon  the  sale.  He  then  mort- 
gaged the  mills  and  the  other  lands  to  the  former  mortgagee  ; 
and  it  was  held  that  this  mortgage  was  a  lien  upon  the  other 
lands  only  to  the  extent  of  the  original  loan  upon  them  of  86,000, 
upon  the  payment  of  which  sum  the  original  owner  was  entitled 
to  redeem.^ 

One  who  deals  with  an  agent  is  bound  to  know  his  authority, 
and  if  he  takes  a  deed  executed  to  him  by  the  principal  he  is 
bound  to  know  the  conditions  imposed  upon  the  agent  as  to  the 
delivery  of  the  deed.  Where  a  married  woman  executed  a  deed 
absolute  in  form  of  her  own  property,  and  delivered  it  to  her 
husband  to  be  delivered  as  security  for  a  certain  amount,  and  the 
husband  delivered  the  deed  to  the  grantee  in  payment  for  a  larger 

1  Ft-rris  V.  Wilcox.  51  Mich.  105  ;  S.  C.  82  III.  392 ;  Lawrence  v.  Du  Bois,  10  W. 
47  Am.  Kep.  551.  Va.  44.3;    Eisiiinan  v.  Gallagher   (Neh.), 

2  Parker  v.  Hul.l.k',  75  Ind.  580.  37  N.  W.  Kep.  941  ;  Jcukiiis  v.  RosoiiberK, 
•■»  See  §§  254.  255;  Ilouser  v.  Lamont,     105  111.  157;  Harilin;,'  v.  IJrasiihn.  102  111. 

.55  I'a.   St.   .{11  ;  iJailford  v.   Folsom,  58  441  ;  Zane  v.  Fink,  18  W.  Va.  693. 

Iowa,  47.'!;   Kiiliri  v.  Rump]).  4C  Cal.  299;  *  Lawrence  r.  l)u  Hois,  .s"/)ra. 

firaham  v.  (iraliatn,  55  Ind.  2.T  ;  Amory  v.  ^  Williams  v.  Tliorn,  1 1    I'uigc  (N.  Y.), 

Lawri.n(-e,  3  Clitl".  52.1;  Sniiili  v.  Knoebel,  459. 

245 


§§  340,  341.]  PAROL  EVIDENCE   TO   PROVE 

sum  lie  owed  tlie  grantee,  who  was  aware  of  the  purpose  for  which 
the  deed  was  made,  the  deed  could  be  held  for  no  other  purpose.^ 

340.  Once  a  mortgage  always  a  mortgage.  —  If  originally 
taken  as  a  mortgage,  nothing  but  a  subsequent  agreement  of  the 
parties  can  change  its  character,  and  deprive  tlie  mortgagor  of  his 
right  of  redemption ;  and  even  such  an  agreement  cannot  change 
its  character  as  to  intervening  interests.^  This  right  cannot  be 
waived  or  abandoned  by  any  stipulation  of  the  parties  made 
at  the  time,  even  if  embodied  in  the  mortgage.^  The  maxim, 
"  Once  a  mortgage  always  a  mortgage,"  applies  to  such  a  deed ; 
and  if  a  purchaser  take  a  conveyance  from  the  grantee,  with  a 
knowledge  that  the  grantor  claims  an  interest  in  the  property,  he 
takes  it  charged  with  the  same  equities  with  which  it  was  charged 
in  the  hands  of  the  mortgagee.*  The  mortgagor  may  make  a 
subsequent  release  of  the  equity  of  redemption  ;  but  an  adequate 
consideration  is  necessary  to  support  it.  It  must  be  for  a  consid- 
eration that  would  be  deemed  reasonable  if  the  transaction  were 
between  other  parties.  The  transaction  must  in  all  respects  be 
fair,  with  no  unconscientious  advantage  taken  by  the  mortgagee.^ 
Such  a  release  will  not  be  inferred  from  equivocal  circumstances 
and  loose  expressions.  It  must  appear  by  a  writing  importing  in 
terms  a  transfer  of  the  mortgagor's  interest,  or  such  facts  must  be 
shown  as  will  estop  him  afterwards  to  assert  any  interest.*^  In 
determining  whether  an  instrument  of  uncertain  import  in  itself 
was  intended  to  operate  as  a  release,  the  fact  that  the  value  of  the 
property  was  at  the  time  greatly  in  excess  of  the  amount  then 
paid,  and  of  that  originally  secured,  and  the  fact  that  the  mort- 
gagor retained  possession  of  the  land  and  cultivated  it,  are  strong- 
evidence  tending  to  show  that  a  release  was  not  intended.'^ 

341.  Grantee's  liability  for  mortgaged  land  sold  by  him.  — 
Although  a  grantee  in  an  absolute  deed,  intended  as  a  mortgage, 

1  Gilbert  v.  Deshon  (N.  Y.),  14  N.  E.         ^  pgugh   v.   Davis,   96   U.  S.  332,  per 
Rep.  318.  Field,  J. ;  Turpie  v.  Lowe  (Ind.),  15  N.  E. 

2  Elliott  V.  Wood,  .53  Barb.  (N.  Y.)  285 ;     Rep.  834. 

Tibbs  V.  Morris,  44  lb.  138;  Bunacleugh  *  Frencb  v.  Burns,  35  Conn.  359. 

V.  Poolman,  3  Daly  (N.  Y.),  236 ;  Clark  v.  ^  Ford  v.  Olden,  L.  R.  3  Eq.  Cas.  461  ; 

Henry,  2  Cow.  (N.  Y.)  324;  S.  C.  Henry  Linnell  v.  Lyford,  72  Me.  280;  Niggeler 

V.   Davis,    7   Johns.    Cli.   40;    Palmer   v.  v.  Maurin,  34  Minn.  118,  124;  Marshall 

Gurnsey,  7  Wend.   (N.  Y.)  248;  Cooper  v.  Thompson  (Minn.),  39  N.  W.  Rep.  309. 

V.  Whitney,  3  Hill  (N.  Y.),  95  ;  Marks  v.  ^  Peugh  v.  Davis,  supra. 

Pell,  1  Johns.  (N.  Y.)  Ch.  594  ;  Williams  '  Peugh  v.  Davis,  supra ;  Walker  v.  Far- 

V.  Thorn,  11  Paige  (N.  Y.),  459;  Parsons  mers'  Bank  (Del.),  14  Atl.  Rep.  819. 

V.  Mumford,  3  Barb.  (N.  Y.)  Ch.  152. 

246 


AN   ABSOLUTE   DEED   A   MORTGAGE.  [§  341. 

has  tlie  power  to  convey  it  by  a  good  indefeasible  title  to  a  pur- 
chaser without  notice,  yet  he  is  liable  to  the  mortgagor  for  the 
value  of  the  land  so  conveyed ;  and  he  cannot  defend  an  action  to 
recover  such  value  by  showing  that  the  mortgagor's  title  was  in- 
valid, and  that  the  legal  title  has  since  been  bought  in  by  the  pur- 
chaser. The  imperfection  of  the  title  did  not  justify  his  placing 
it  beyond  the  reach  of  the  mortgagor.  It  is  the  duty  of  tbe  mort- 
gagee upon  receiving  payment  to  restore  the  land,  without  regard 
to  the  condition  of  the  title,  in  no  worse  condition,  so  far  as  his 
own  acts  could  affect  it,  than  it  was  when  he  received  it.  But  in 
estimating  the  value  of  the  land  sold,  the  sum  paid  for  an  out- 
standing title,  although  paid  by  the  purchaser  and  not  by  the 
mortgagee,  may  be  deducted  from  the  value  of  the  land.^  The 
grantee  in  an  absolute  deed  by  way  of  mortgage,  who  has  sold 
the  land,  is  liable  for  the  proceeds  of  the  sale,  deducting  the 
amount  due  him  and  a  reasonable  compensation  for  effecting  the 
sale.2  He  is  not  allowed  to  show  that  the  price  received  in  con- 
sequence of  liberal  terms  of  payment,  or  for  any  other  reason,  is 
in  excess  of  the  market  value  of  the  lands.^ 

When  the  grantee  has  wrongfully  conveyed  the  property,  the 
grantor  may  at  his  election  claim  the  proceeds  of  the  sale  ;  *  or 
the  value  of  the  land  at  the  time  when  the  debtor's  right  to  have 
it  restored  to  him  is  established.^ 

The  statute  of  limitations  applicable  to  actions  of  assumpsit 
applies  to  an  action  for  an  excess  of  proceeds  of  a  sale  of  such 
land  above  the  mortgage  debt.  A  suit  to  recover  the  land  or  to 
redeem  would  not  be  barred  by  a  lapse  of  time  shorter  than  that 
which  would  bar  an  action  of  ejectment  at  law.  But  a  claim  to 
the  proceeds  of  a  sale  is  not  a  claim  to  real  property,  but  only  for 
the  recovery  of  money.  The  statute  of  limitations  applies  to  pro- 
ceedings in  equity  only  by  analogy  ;  and  the  analogous  case  at 
law  is  an  action  of  assumpsit,  or  an  action  of  account,  and  not  an 
action  of  ejectment.^ 

The  statute  of  limitations  does  not  run  in  favor  of  a  grantee  in 

1  Adkins  r.  Lewis,  5  Orcf,'.  292.  ^  Rudj  y.  Van  Oiden,  53  N.  J.  Eq.  143. 

2  Van  Dusen  v.  Worrell,  4  Abb.  (N.  Y.)  *  Meehan  v.  Forrester,  52  N.  Y.  277. 
App.  Dec.  473.     In  an  action  for  money  ^  Enos  v.   Sutherland,   11    Mich.   538; 
had  and  received.    Jaciison  v.  Stevens,  108  Hart  v.  Ten  Eyck,  2  Jolms.  Ch.  62, 117. 
Mass.  94;  Iliester  v.  Maderia,  3  Watts  &  •>  Hancock  v.  Harjicr,  86  111.  445  ;  Am- 
S.  (Pa.)  384  ;  Barkelcw  v.  Taylor,  8  N.J.  ory  v.  Lawrence,  3  Cliff.  523.     See,  how- 
Eq.  (4  Ualflt.)  206.  ever,  Hunter  v.  Hunter,  50  Mo.  445,  450. 

247 


§  342.]         PAROL  EVIDENCE  TO  PROVE,  ETC. 

a  deed  absolute  on  its  face,  but  intended  to  be  a  mortgage.  His 
possession  is  not  adverse.^ 

342.  A  bill  in  equity  may  be  maintained  to  redeem,  as 
from  a  mortgage,  land  which  the  defendant  holds  by  deed  from 
the  plaintiff  upon  evidence  that  the  deed,  though  absolute  in  form, 
was  really  taken  as  security  for  a  loan.  The  bill  must  necessarily 
admit  the  existence  of  a  debt  on  the  part  of  the  grantor  to  the 
grantee.  If  the  amount  of  the  debt  is  not  agreed  upon,  and  is 
uncertain,  the  amount  should  be  ascertained  by  proper  proceed- 
ings. The  decree  is  for  a  reconveyance  of  the  land  upon  the  pay- 
ment of  the  amount  which  may  be  found  due  the  grantee,  or  upon 
compliance  with  such  terms  as  the  court  may  impose.^ 

It  is  usually  the  grantor  who  seeks  relief  in  equity  to  have  an 
absolute  deed  declared  a  mortgage ;  but  the  grantee  may  also 
have  this  relief  in  a  proper  case.  Thus,  where  an  absolute 
conveyance  was  made  by  a  confidential  agent  and  adviser  to 
his  principal,  and  the  latter  claimed  that  the  conveyance  was 
taken  as  security  for  a  loan,  though  the  former  claimed  that  it 
was  a  sale,  the  court  declared  that  the  burden  of  sustaining  the 
validity  and  good  faith  of  the  dealing  was  upon  the  agent ;  and 
gave  relief  by  decreeing  a  rescission  of  the  sale,  and  payment  by 
the  agent  of  the  money  obtained  with  interest,  upon  the  prin- 
cipal's tendering  to  the  agent  a  deed  properly  executed  reconvey- 
inar  the  land  to  him.  The  court  further  directed  that  execution 
should  issue  against  the  agent  for  the  amount  of  the  loan,  if  the 
money  should  not  be  paid.^ 

1  Wyman  v.  Babcock,  2  Curtis,  386  ;  af-  mortgagor  is  entitled  to  a  reference  to  have 
firmed  in  Babcock  v.  Wyman,  19  How.  the  amount  of  the  debt  ascertained,  and 
289.  to  a  decree  for  the  sale  of  the  premises  for 

2  Campbell  y.  Dearborn,  109  Mass.  130;  its  payment,  and  for  the  payment  of  the 
McDonough  v.  Squire,  111  Mass.  217  ;  surplus,  if  any,  to  the  mortgagor.  Carter 
Westlake  v.  Horton,  85  111.  228.  v.  Evans,  17  I.  C.  458. 

In  South  Carolina  it  is  said   that  the        3  Tappan  v.  Aylsworth,  13  R.  I.  582. 
248 


CHAPTER  IX. 

THE  DEBT  SECURED. 

I.  Description  of  the  debt,  343-363.        i    III.  Mortgage  of  indemnity,  379-387. 
II.  Future  advances,  364-378.  |     IV.  Mortgages  for  support,  388-395. 

I.  Description  of  the  Debt. 

343.  A  general  description  of  the  debt  sufficient.  It  is  not 
essential  that  the  mortgage  itself  should  contain  a  description  of 
the  debt  intended  to  be  secured.  The  nature  and  amount  of  the 
indebtedness  secured  may  be  expressed  in  terms  so  general  that 
subsequent  purchasers  and  attaching  creditors  must  look  beyond 
the  deed,  to  ascertain  both  the  existence  and  amount  of  the  debt.^ 
Even  a  deed  absolute  in  form,  if  in  fact  intended  by  the  parties 
as  a  security  for  subsequent  advances  or  liabilities  to  be  assumed 
by  the  grantee  in  the  grantor's  behalf,^  is  a  valid  security  against 
judgment  or  execution  creditors,  or  other  incumbrancers,  although 
such  intention  does  not  appear  upon  the  deed,  or  by  any  evidence 
in  writing. 

All  the  description  required  to  be  made  of  the  debt  is  a  gen- 
eral one,  which  will  put  those  interested  upon  inquiry.^  A  con- 
dition to  pay  the  mortgagee  "  what  I  may  owe  him  on  book " 
may  cover  not  only  the  present  but  the  future  indebtedness  of 
the  mortgagor,  at  least  until  the  mortgagee  should  receive  express 
notice  of  subsequent  incumbrances  or  interests,  and  he  is  not 
bound  to  watch  the  registry  for  subsequent  conve3'ances.  And  so 
a  mortgage  to  secure  the  payment  of  !^1,500,  which  the  mortgagor 
owed  on  book  account,  and  by  several  notes,  without  specifying 
the  amount  or  date  of  any  particular  note,  sufficiently  describes 
tiie  debt.*  A  mortgage  to  secure  a  claim  on  book  account,  for 
good.s  sold  and  delivered,  in  about  the  sum  of  $5,000,  is  sufficient 

'  See  §  70;  Keagy  v.  Trout  (Va.),  27  Ilurd  v.  Robinson,  11  Ohio  St.  232;  Cur- 

Ccnt.  L.  J.  407 ;  Ricketson  v.  Richardson,  lis  v.  Flinn,  46  Ark.  70. 
19  Cal.  .'WO.  «  Merrills  y.  Swift,  18  Conn.  257.     See, 

2  Gibson  V.Seymour,  4   Vt.   518;  ap-  also,  Shirras  i;.  Cnig,  7  Cranch,  34  ;  Trus- 

proved  in  Seymour  v.  Darrow,  31  Vt.  122.  cott  v.  King,  6  Barb.  (N.  Y.)  346  ;  Stuy- 

'  McDauiels    v.    Coivin,    16    Vt.   300;  veaant  u.  Hall,  2  Barb.  (N.  Y.)  Cii.  151. 

249 


§  344.]  THE   DEBT    SECURED. 

to  secure  the  mortgagee's  actual  claim  not  exceeding  that  siim.^ 
A  mortgage  conditioned  to  pay  the  mortgagee  "  all  the  notes  and 
agreements  I  now  owe  or  have  with  him,"  may  secure  the  mort- 
gagee for  payments  made  as  an  indorser  for  the  mortgagor  under 
an  existing  agreement.^  A  condition  to  pay  "  all  sums  that  the 
mortgagee  may  become  liable  to  pay  by  signing  or  otherwise  "  is 
not  too  indefinite,  and  includes  any  legal  liability  he  may  incur 
for  the  mortgagor.^ 

344.  The  amount  of  an  ascertained  debt  should  be  stated. 
When  the  mortgage  is  given  to  secure  future  advances,  it  is  of 
course  not  practicable  to  state  in  the  mortgage  itself  anything 
more  than  a  limit  to  which  such  advances  may  reach  ;  and  while 
such  a  limit  is  required  by  some  courts,  it  is  generally  held  to 
be  sufficient  that  the  mortgage  sets  forth  the  foundation  of  such 
liability,  or  such  data,  as  will  put  any  one  interested  upon  the 
track  to  find  out  the  extent  of  the  liability.  Moreover,  when  the 
mortgage  is  given  to  secure  a  debt,  the  amount  of  which  is  not 
ascertained,  it  is  sufficient  if  the  mortgage  contains  such  facts 
about  it  as  will  lead  an  interested  party  to  ascertain  the  real  state 
of  the  incumbrance.  But  if  the  mortgage  is  given  to  secure  an 
ascertained  debt,  the  amount  of  that  debt  ought  to  be  stated  ; 
and  accordingly  it  has  been  held  that  a  mortgage  given  to  secure 
an  existing  debt,  of  a  fixed  amount,  which  is  described  in  the 
condition  of  the  mortgage  only  as  a  note  due  from  the  mortgagor 
to  the  mortgagee,  of  a  certain  date,  payable  on  demand  with 
interest,  without  specifying  the  amount,  is  not  a  valid  security 
against  subsequent  incumbrances.*     This  is  required  not  by  any 

1  Lewis  V.  De  Forest,  20  Conn.  427 ;  for  there  would  be  little  more  danger,  in 
Curtis  V.  Flinn,  46  Ark.  70.  that  case,  of  substituting  fictitious  debts, 

2  Seymour  v.  Darrow,  31  Vt.  122.  than  in  this  where  the  sum  is  omitted ;  for 

3  Soule  V.  Albee,  31  Vt.  142.  he  who  would  substitute  fictitious  debts, 
*  Hart  V.  Chalker,  14  Conn.  77.     Chief     under  that  general  description,  would  have 

Justice  "Williams,  delivering  the  opinion  very  little   additional   restraint  from  the 

of  the  court,  said  :  "Whether  this  omis-  fact  that  the  date  and  time  were  given, 

sion  was  owing  to  design  or  accident,  we  It  is  said  that  there  is  enough  to  put  a 

are  not  informed.    In  either  case  the  effect  person  on  inquiry,  and  that  is  all  a  court  of 

would  be  the  same ;  and  the  public  would  equity  requires.     That  principle,  however, 

not  have   that  information  which  it  was  we  do  not  think  is  applicable  to  cases  of 

intended  should   be  given,  and  which,  if  this  class,  where  there  is  a  certain  known 

generally  neglected,  would  make  our  rec-  debt.     If  it  is  to  be  adopted  as  a  general 

ords  of   little  value.     Indeed,  if  such  a  rule,  it  would  overturn   all  the  cases  in 

general  description  is  good,  it  would  seem  which  this  court  have  held  that  the  de- 

as  if  it  were  enough  to  say,  '  This  mort-  scription  was  too  indefinite."     The  cases 

gage  is  intended  to  secure  any  debt  due;'  cited  by  the  Chief  Justice  in  this  connec- 

250 


DESCRIPTION    OF   THE   DEBT. 


[§  344. 


specific  provision  of  the  registry  law  ;  but  the  spirit  of  the  system 
requires  that  the  record  should  disclose,  with  as  much  certainty 
as  the  nature  of  the  case  will  admit  of,  the  real  state  of  the  in- 
cumbrance. 

A  mortgage  describing  as  an  absolute  indebtedness  a  note  given 
as  security  for  a  contingent  liability  assumed  by  the  mortgagee, 
such  as  that  of  an  indorser,  is  not  good  against  a  bond  fide  pur- 
chaser of  the  land  without  notice.^ 

Some  of  the  Connecticut  and  Illinois  cases  require  a  degree 
of  strictness  in  describing  the  indebtedness  not  required  by  the 
weight  of  authoritv  elsewhere.^     It  is  generally  held  to  be  suffi- 


tion  are :  Pettibone  v.  Griswold,  4  Conn. 
158,  162;  Crane  r.  Deming,  7  lb.  387, 
395;  Booth  v.  Barnum.  9  lb.  286,  290; 
BoUes  v.  Chauncey,  8  lb.  390 ;  St.  John 
V.  Camp,  17  lb.  222,  230.  The  rule  is  the 
same   in  Illinois  :  IMetropolitan   Bank  v. 


In  Maryland  no  mortgage  is  valid  ex- 
cept as  between  the  parties  thereto,  unless 
there  be  indorsed  thereon  an  oath  or  af- 
firmation of  the  mortgagee  that  the  con- 
sideration in  said  mortgage  is  true  and 
bond  fide  as  therein  set  forth ;  this  affida- 


Godfrey,  23  111.  579,   604 ;   Battenhausen  vit  may  be  made  at  any  time  before  the 

V.  Bullock,  1 1  Bradw.  665.  mortgage  is  recorded,  before  any  one  au- 

A  similar  decision  was  made  in  a  re-  thorized  to   take  the  acknowledgment  of 

cent  case  in  Kentucky.      Pearce  v.  Hall,  a  mortgage,  and  the  affidavit  shall  be  re- 

12  Bush,  209.     The  condition  was  for  the  corded  with  the  mortgage.     The  affidavit 

payment  of  a  note  fully  described,  with  the  may   be   made  by   one   of   several  mort- 

exception  that  the  amount  was  not  set  out,  gagees,  and  shall  have  the  same  effect  as 

nor  was  there  anything  in  the  conveyance  if  made  by  all;  or  the  affidavit  may  be 

from  which  any  inference  whatever  as  to  made  by  any  agent  of  a  mortgagee,  and 

the  amount  could  be  drawn.     It  was  held,  when  made  by  an  agent  he  shall,  in  addi- 

that  a  subsequent  attaching  creditor  had  tion  to  the  affidavit  above  mentioned,  make 

precedence.     Mr.   Justice    Lindsay    said  :  affidavit  to  be  indorsed  upon  the  mortgage 

"  We  are  satisfied  that  a  mortgage,  to  be  that  he  is  agent  of  the  mortgagee  or  mort- 

good  against  a  purchaser  for  a  valuable  gagees,  or  some  one  of  them,  which  affi- 

consideration,  or  a  creditor,  must  not  only  davit   shall    be    sufficient    proof  of   such 


be  lodged  for  record  in  the  proper  office, 
but  must,  as  far  as  is  reasonably  practica- 
ble, set  out  the  amount  of  the  debt  for  tlie 
payment  of  which  the  parties  intend  it  as 
a  security.  We  do  not  mean  to  intimate 
that  an  omission  to  state  the  date  of  the 


agency ;  and  the  president  or  other  officer 
of  a  corporation,  or  the  executor  of  the 
mortgage,  may  make  such  affidavit.  R. 
Code  of  Md.  1878,  p.  389,  §§  35,  36.  The 
fact  that  the  oath  was  taken  can  only 
be  established  by  a    formal  indorsement 


note,  or  the  time  at  which  it  will  fall  due,  upon  the  mortgage;  it  is  not  the  subject 

or  the  jirecise  amount  of  the  debt,  even  of   parol  proof.      Heiff  v.   Eshlcinan,   52 

when  the  amount  is  ascertained,  is  essen-  Md.  582.     The  affidavit  need   not  be  in 

tial  to  make  the  mortgage  valid ;  but  to  the  words  prescribed  by  statute,  but  it  is 

hold  the  omission  in  this  case  immaterial  sufficient  that  it  is  of  equivalent  import 

would  be  in  effect  to  say  that  a  mortgage  and  effect.     Stanhope  v.  Dodge,  52  Md. 

need  only  show  that  the  mortgagor  is  in-  483. 


debtcd  to  tiie  mortgagee,  and  that  pur- 
chasers and  creditors  must,  upon  that  re- 
cital, ascertain  for  tiiemsclves,  as  Ijest  they 
can,  tlie  amount  of  the  indebtedness." 


1  Steams  v.  Porter,  46  Conn.  313. 

^  Tlie  earlier  cases  in  Connecticut  are 
not  HupjKjrted  by  the  later  dcci.sions  in 
that  state.    Utley  v.  Sniitii,  24  Conn.  290. 

251 


§  345.]  THE  DEBT   SECURED. 

cient  if  it  appear  that  a  debt  is  secured,  and  that  the  amount  of 
it  may  be  ascertained  by  reference  to  other  instruments,  or  by 
inquiry  otherwise.  Accordingly  it  is  held,  contrary  to  the  de- 
cisions above  noticed,  that  a  reference  in  a  mortgage  to  a  note  or 
bond  secured  by  it,  without  specifying  its  contents,  is  sufficient  to 
put  subsequent  purchasers  upon  inquiry  as  to  the  contents  of  the 
note  or  bond,  and  to  charge  them  with  notice  to  the  same  extent 
as  if  the  amount  and  terms  of  the  note  or  bond  had  been  fully  set 
forth. ^  It  is  not  even  necessary  that  the  amount  of  the  note 
should  be  specified  in  the  mortgage,  when  it  is  otherwise  fully 
and  accurately  described.^ 

A  description  of  a  mortgage  note  which  gives  its  date,  the 
names  of  the  maker  and  payee,  the  date  of  its  maturity,  and 
the  rate  and  times  of  payment  of  interest,  though  the  amount  of 
the  note  be  not  stated,  is  a  sufficient  description  to  identify  the 
note,  and  the  recording  of  the  mortgage  gives  notice  to  a  subse- 
quent purchaser  of  the  existence  of  the  lien  and  of  the  amount 
of  it.3 

345.  The  debt  must  come  fairly  within  the  terms  used. 
A  mortgage  to  secure  all  the  debts  due  from  the  grantor  to  the 
grantee,  and  all  liabilities  of  the  latter  as  surety  for  the  former, 
is  valid  without  a  more  particular  description.*  But  when  it  is 
attempted  to  describe  the  debts  secured,  to  entitle  a  debt  to  the 
benefit  of  the  security,  it  must  come  fairly  within  the  terms  used 
in  the  mortgage.  The  debt  described  in  the  mortgage  is  the  debt 
secured.  A  reference  to  a  larger  amount  in  an  unexecuted  agree- 
ment between  the  parties  cannot  control  the  description  in  the 
mortgage.^  A  mortgage  which  correctly  described  other  debts, 
and  then  mentioned  "  a  note  or  notes  for  about  $350,"  was  held 
not  to  include  six  notes  amounting  to  over  •^1,600.'^  In  like  man- 
ner, a  mortgage  securing  "an  account  for  about  $50"  does  not 
include  accounts  exceeding  $900.''     A  mortgage  to  secure  a  gross 

312;  Hurd  ?;.  Robinson,  1 1  Ohio  St.  232,  note  given  for  it   is   otherwise  fully  de- 

238.  scribed,  is  not  notice  of  any  incumbrance, 

1  Pike  V.  Collins,  33  Me.  38.  and  does  not  put  a  subsequent  purchaser 

2  Somersworth  Sav.  Bank  v.  Roberts,  upon  inquiry  as  to  the  amount  of  the  in- 
38  N.  H.  22 ;  Fetes  v.  O'Laughlin,  62  cumbrance.  This  case  should  not  be  re- 
Iowa,  532.  lied  upon  elsewhere  as  an  authority. 

^  Fetes  V.  O'Laughlin,  supra.  *  Vanmeter  v.  Vanmeter,  3  Graft.  ( Va.) 

In  Battenhausen  i;.  Bullock,  11  Bradw.  148;    Michigan    Ins.  Co.    j;.  Brown,    11 

(111.)  66.5,  it  was  claimed  that  the  record  Mich.  265. 

of  a  mortgage  which  does  not  state  the  ^  TurnbuU  v.  Thomas,  1  Hughes,  172. 

amount  of  the  debt  secured,  though  the  6  Storms  v.  Storms,  3  Bush  (Ky.),  67. 

252  ^  Storms  V.  Storms,  supra. 


DESCRIPTION   OF   THE  DEBT.  [§  346. 

sum,  -which  the  mortgagee  was  at  liberty  to  furnish  in  materials 
toward  the  erection  of  a  house  for  the  mortgagor,  does  not  cover 
a  collateral  liability  assumed  by  the  mortgagee  as  surety  or  guar- 
antor for  the  mortgagor.! 

A  mortgao;e  executed  to  secure  a  note  for  five  thousand  dollars 
payable  in  six  months,  does  not  secure  a  note  for  three  thousand 
dollars  payable  in  thirty  days,  if  the  latter  note  was  given  in  a 
new  and  independent  transaction  upon  the  failure  of  negotiations 
for  a  loan  of  the  first-mentioned  sum.^ 

346.  A  mortgage  to  secure  an  unliquidated  debt,  as,  for  in- 
stance, an  open  book  account,  is  good.^  So  is  a  mortgage  by  a 
trustee  to  secure  the  payment  of  the  moneys  in  his  hands  belong- 
ing to  the  trust  estate,  the  amount  of  which  is  then  unascer- 
tained. So  is  a  mortgage  to  secure  the  fidelity  of  an  agent  or 
factor ;  **  or  a  mortgage  to  secure  any  balance  that  may  remain 
after  application  to  the  debt  of  moneys  that  may  be  collected 
upon  other  securities  held  by  the  creditor.^  A  description  of  a 
debt  secured  by  the  mortgage  as  a  certain  sum,  "  or  thereabout," 
is  sufficient  to  put  a  person  upon  inquiry  as  to  the  amount  of  the 
incumbrance,  and  the  mortgage  is  good  for  a  sum  not  very  ma- 
terially larger  than  that  mentioned.*^ 

Although  a  mortgage  be  given  for  a  definite  sum,  it  is  com- 
petent to  prove  by  parol  that  it  was  given  to  secure  an  open  ac- 
count, the  balance  of  which  is  continually  varying  ; "  or  to  secure 
payment  to  be  made  in  materials  under  a  prior  agreement  be- 
tween the  parties.^  A  mortgage  to  secure  future  and  contingent 
debts  is  good  against  a  prior  unregistered  mortgage.^ 

If  a  mortgage  be  given  to  secure  an  unliquidated  debt,  or  an 
unadjusted  account,  or  balance  of  account,  the  burden  is  upon 
the  holder  of  it  to  produce  the  accounts  and  prove  what  is  due.^" 

1  Doyle  y.  White,  26  Me.  341.  cover  unliquidated  damages.    Bethlehem 

A  mortgage  to  secure  the  payment  of  r.  Annis,  40  N.  II.  34. 

dues  to  a  building  association  does  not  *  Stoughton  v.  Pasco,  5  Conn.  442. 

fcccure  the  payment  of  a  sum   in  addition  ^  Clarke  v.  Bancroft,  13  Iowa,  320. 

thereto,  tiiere  being  no  express  agreement  "^  Booth  v.  Barnum,  9  Conn.  286. 

to  pay  sucii   additional   sura.     Wiiij)per-  ''  Esterly  v.   I'urdy,  50   How.  (N.  Y.) 

man  v.  Smitii,  96  Ind.  27.'>.  I'r.  350.     Quoted  with  approval  in  Moses 

^  Wiillicr  V.  Cailetou,  97  III.  582.     See  v.  Hatfield,  3  S.  E.  Kc]).  538,  540. 

§  378,  note,  in  regard  to  liiis  case.  *  Recs  v  Logsdon  (Md.),  11   At).  Hep. 

"  In  ^'ew  llanip>shire,  where  a  titatutc  708. 

requires  tliat  the  debt  bliall  bo  expressed  '••  Moor  i;.  Kagland,  74  N.  C.  343. 

in   the  mortgage,  it  cannot   be  made  to  "^  Do  Mott  v.  Benson,  4  Edw.  (N.  Y.) 

297. 

253 


§§  347-349.]  THE   DEBT   SECURED. 

A  sum  to  be  ascertained  by  an  award  may  be  secured  by  mort- 
gage. But  where  it  was  provided  tliat  the  referees,  taking  cer- 
tain data  stated  in  the  mortgage  as  their  rule  or  guide,  should 
make  their  award  and  return  it  in  writing  to  the  parties  within 
thirty  days  after  their  appointment,  the  award  having  failed  by 
reason  of  the  misconduct  of  the  arbitrators,  it  was  held  that  the 
mortgage  was  security  for  the  amount  of  an  award  to  be  made  in 
this  manner,  and  that  the  mortgagees  could  not  have  relief  in 
equity  upon  a  bill  for  a  sale  of  the  mortgaged  property.^ 

347.  Whether  a  mortgage  given  to  secure  an  antecedent 
debt  entitles  the  mortgagee  to  the  position  of  a  purchaser  for 
value  is  a  question  elsewhere  considered,^  upon  which  the  adjudi- 
cations are  not  in  harmony.  A  recital  in  the  mortgage  that  the 
mortgagor  is  indebted  to  the  mortgagee  in  a  certain  sum,  for 
which  "  he  has  given  his  checks,"  does  not  imply  tliat  the  mort- 
gage was  given  for  an  antecedent  debt.^ 

348.  A  mortgage  given  as  security  for  a  part  of  the  indebt- 
edness of  the  mortgagor  to  the  mortgagee,  such  as  one  given  to 
secure  the  sum  of  $3,000,  when  the  mortgagor  was  indebted  to  the 
mortgagee  in  the  sum  of  $10,000  and  upwards,  the  balance  of 
an  account  current  between  them,  cannot  be  objected  to  on  the 
ground  that  the  mortgagee  could  not,  under  the  recording  system, 
be  allowed  to  take  a  mortgage  to  secure  a  part  of  the  debt,  and 
hold  it  as  a  valid  security  on  the  property  until  the  whole  debt  is 
paid.  The  objection  was  not  to  any  uncertainty  in  the  debt  in- 
tended to  be  secured,  but  rather  to  the  application  of  subsequent 
payments  made  by  the  debtor,  without  any  specific  direction  at 
the  time  as  to  their  application.  But  it  was  held  that  the  pay- 
ments were  properly  applicable  to  the  unsecured  part  of  the  debt, 
and  that  the  mortgage  remained  a  valid  security  for  the  remain- 
der of  the  debt.* 

A  mortgage  given  for  a  greater  sum  tlian  the  amount  due,  in 
the  absence  of  any  fraudulent  intent,  is  valid  to  the  extent  of  the 
actual  debt.^ 

349.  The  description  of  the  note  secured  need  not  be  made 
with  the  utmost  particularity,  but  only  so  that  it  may  be  reason- 

1  Emery  v.  Owings,  7  Gill  (Md.),  488.  *  Chester   v.  Wheelwright,    15    Conn. 

-  See  §§  458-460.  562. 

3  Winchester  v.  Baltimore  &    Siisque-  ^  Gordon   v.  Preston,    1    Watts    (Pa.), 

hanna  R.  R.  Co.  4  Md.  231.  385;    Nazro  v.  Ware  (Minn.),  38  N.  W. 


254 


Eep.  359. 


DESCRIPTION   OF   THE  DEBT.  [§  350. 

ably  identified.^  The  omission  in  the  mortgage  of  the  words  "  or 
order,"  in  describing  a  note  payable  to  the  mortgagee  or  order,  is 
not  such  a  variance  as  to  render  the  note  inadmissible  in  evi- 
dence.2  A  mortgage  conditioned  to  pay  a  note  in  a  certain  penal 
sum,  when  in  fact  the  note  was  without  penalty,  is  not  invalid  for 
want  of  reasonable  certainty.  The  whole  sum  of  the  penalty  may 
be  due,  and  no  one  could  be  misled  except  through  his  own  negli- 
gence to  make  inquiry  as  to  the  amount  due.'^  A  condition  that 
the  mortgage  shall  be  void  upon  the  payment  of  the  notes  de- 
scribed in  another  mortgage  referred  to  by  date  and  record  in 
another  county  of  the  state,  sufficiently  indicates  the  amount 
secured,  and  is  valid.'^  A  mortgage  is  sufficient  which  refers  to  a 
note  which  had  been  made  out  but  not  signed,  and  which,  by  mis- 
take or  fraud,  never  was  signed,  though  it  was  agreed  that  it 
should  be  executed.^ 

A  mortgage  conditioned  to  pay  whatever  sum  the  mortgagor 
might  owe  the  mortgagee,  either  as  maker  or  indorser  of  any 
notes  or  bills,  bonds,  checks,  over-drafts,  or  securities  of  any  kind 
given  by  him,  according  to  the  conditions  of  any  such  writings 
obligatory,  executed  by  him  to  the  mortgagees  as  collateral  secu- 
rity, was  held  to  secure  only  such  debts  as  were  evidenced  by 
writing:.''^ 

The  recitals  in  a  mortgage  are  competent  evidence  against  the' 
mortgagor  to  prove  the  consideration  of  the  note  described  in  it.^ 
It  will  be  presumed  that  a  "note,"  referred  to  in  a  mortgage  or 
deed  of  trust,  is  not  under  seal.^ 

When  the  validity  of  the  mortgage  is  attacked  by  a  creditor 
or  subsequent  purchaser,  parol  evidence  is  admissible  to  show  the 
real  consideration,  and  what  note  was  actually  intended  to  be  de- 
scribed.^ 

350.  It  is  not  necessary  that  all  the  particulars  of  the  note 
or  other  obligation  secured  by  a  mortgage  should  be  specified 
in  tin;  conditions  of  it,  in  order  to  identify  it  as  the  note  intended 
to  be  secured.     If  the  paper  offered  in  evidence  agrees  with  the 

1  Sec  §71;  Winclielly.  Coney,  54  Conn.  '^  Warner  i-.  Brooks,  14  Gniy  (Mass.), 

24  ;  Wl-IjIj  v.  Stone,  24  N.  II.  282.  107. 

■^  Hough  V.  IJiiiley,  32  Conn.  288.  8  Jackson  v.  Sackett,  7  AYend.  (N.  Y.) 

»  Frink  i;.  Brand),  16  Conn.  2C0.  04;    Walker    v.    McCounico,     10     Yerg. 

*  Kellofrg  V.  Frazicr,  40  Iowa,  502.  (Tenn.)  228. 

^  Voliner  v.  Stage  innan,  25  Minn.  234.  »  Nazro  v.  Ware  (Minn.),  38  N.  W.  Hep. 

«  Walker  v.  Tuiue,  31   Barb.    (N.  Y.)  359. 
213. 

266 


§  350.]  THE  DEBT   SECURED. 

description  contained  in  the  mortgage  so  far  as  that  goes,  only 
that  this  description  is  not  complete,  the  possession  and  produc- 
tion of  the  instrument  is  primd  facie  evidence  that  it  is  the  same 
mentioned  in  the  condition.  If,  however,  the  description  in  the 
condition  varies  from  the  paper  offered  in  evidence  in  certain  par- 
ticulars, then  the  mere  possession  of  it  might  not  furnish  even 
primd  facie  evidence  that  it  is  the  obligation  intended  to  be 
secured.^  It  is  only  necessary  that  the  mortgage  should  state 
correctly  sufficient  facts  to  identify  the  paper  with  reasonable 
certainty ;  and  then  if  some  particulars  of  the  description  do  not 
correspond  precisely  with  the  instrument  produced,  it  is  not  ma- 
terial.2 

But  when  a  note  agrees  in  some  respects  with  the  description, 
though  it  varies  in  others,  it  may  be  proved  by  parol  to  be  the  one 
intended  in  the  mortgage.^  If,  however,  the  note  produced  be 
totally  variant  from  that  described  in  the  mortgage,  such  evidence 
is  inadmissible  in  an  action  at  law.* 

It  is  no  objection  to  tlie  validity  of  a  mortgage  that  it  does  not 
state  the  names  of  the  holders  of  the  notes  secured,  when  they 
are  otherwise  identified;  and  such  a  mortgage,  when  duly  re- 
corded, is  notice  to  subsequent  purchasers  of  the  property  of  the 
existence  of  the  notes  intended  to  be  secured,  and  they  are  bound 
by  the  legal  effect  of  the  incumbrance.^  A  mortgage  for  the 
payment  of  a  debt,  according  to  the  condition  of  a  bond  recited  in 
the  mortgage,  will  not  be  avoided  in  equity  for  the  reason  that 
the  day  of  payment  of  the  bond  has  already  passed.  At  law  the 
condition  being  impossible,  the  deed  would  be  regarded  as  abso- 

1  Robertson  v.  Stark,  15  N.  H.  109,  serted  that  it  might  be  paid  by  the  deliv- 
112.  ery  of  a  barge   in  lieu  of  money.     The 

2  This  is  illustrated  by  the  case  of  a  note  was  admitted  in  evidence  as  sufiS- 
mortgage  to  secure  "  a  certain  promissory  ciently  identified  by  the  description  in  the 
note  made  and  delivered  on  or  about  the  mortgage.  Paine  v.  Benton,  32  Wis.  491 ; 
eighth  day  of  August,  1867,  .  .  .  payable  and  see  Williams  v.  Hilton,  35  Me.  547  ; 
on  or  about  one  year  from  date,  to  the  Partridge  v.  Swazey,  46  Me.  414 ;  Johns 
N.  W.  U.  P.  Company,"  signed  by  three  v.  Church,  12  Pick.  (Mass.)  557;  Boody 
persons,  for  a  sum  named.  In  a  foreclos-  v.  Davis,  20  N.  H.  140;  McKiuster  v. 
ure  suit,  the  note  produced  was  dated  Babcock,  26  N.  Y.  378;  Hurd  v.  Robin- 
August  6,  1867,  payable  on  or  before  Sep-  son,  11  Ohio  St.  232. 

tember  1,1868,  to  the  Northwestern  Union         ^  Stanford     v.     Andrews,     12     Heisk. 

Packet  Company,  at  the  National  Bank  of  (Tenn.)  664. 

La  Crosse,  and  was  for  the  same  sum  and         ^  Follett  v.  Heath,  15  Wis.  601. 
signed  by  the  same  persons  named  in  the         ^  Boyd  v.  Parker,  43  Md.  182. 
mortgage;  but  there  was  a  condition  in- 

256 


DESCRIPTION   OF   THE  DEBT.  [§  351. 

lute  ;  but  in  equity  it  is  a  security  merely  like  an  ordinary  mort- 
gage.i 

Where  a  mortgage  was  conditioned  for  the  payment  of  a  sum 
of  money  on  a  day  named,  the  year  being  left  blank,  according  to 
the  tenor  of  a  promissory  note  for  the  same  sum,  and  the  note 
was  never  made,  and  only  a  small  part  of  the  money  loaned,  for 
which  a  receipt  was  given,  it  was  considered  that  the  bargain  was 
incomplete,  and  the  mortgage  of  no  effect.  It  was  considered  as 
never  having  been  executed  and  delivered  for  the  purpose  of 
having  effect  according  to  its  tenor.^ 

It  is  not  necessary  that  the  mortgage  should  set  forth  a  literal 
copy  of  the  note  secured  by  it.  It  is  sufficient  to  describe  its 
legal  effect.^ 

351.  The  note  and  mortgage  are  construed  together. 
When  there  is  any  uncertainty  as  to  the  amount  secured  by  the 
mortgage,  the  notes  referred  to  in  it  are  competent  evidence  to 
explain  the  language  as  against  the  mortgagor,  or  one  who  pur- 
chased the  equity  of  redemption,  with  notice  of  the  notes  intended 
to  be  secured  ;  as  when  the  mortgage  described  the  debt  as  "  two 
promissory  notes,  bearing  even  date  herewith,  for  the  sum  of  five 
hundred  dollars,  one  payable  in  1852,  and  the  other  in  1853,"  and 
the  notes  were  for  five  hundred  dollars  each.  Such  evidence  is 
not  contradictory  to  the  language  of  the  mortgage,  but  explana- 
tory.* Where  a  mortgage  described  a  bond  secured  by  it  as  of  a 
certain  sum,  a  bond  for  a  smaller  sum,  and  dated  one  day  later, 
may  be  shown  in  evidence  to  have  been  substituted  for  the  bond 
described,  and  in  an  action  to  foreclose,  a  conditional  judgment 
may  be  rendered  for  the  amount  of  such  substituted  bond.^^ 

The  note  and  mortgage  may  supplement  each  other  in  stating 
the  debt  secured ;  ^  as  where  the  mortgage  states  the  rate  of  in- 
terest, which  is  omitted  from  the  note,"  or  where  the  note  pro- 
vides for  interest  at  ten  per  cent,  per  annum,  and  the  mortgage 
provides  for  the  same  rate  of  interest  payable  annually  ;  ^  and  in- 

1  Hughes  V.  Edwards,  9  Wheat.  489.  Merrill,  77  Me.  .550 ;  Clcavenger  v.  Beath, 

•^  Parkers.  Parker,  17  Mass.  370.  53  Ind.  172;  Wheeler  &  Wilson  Manuf. 

3  AuU  V.  Lee,  01  Mo.  ICO.  Co.  v.  Howard,  28  Fed.  Rep.  741  ;  Evcn- 

*  Crafts  V.  Crafts,  13  Gray  (Mass.),  eon  t;.  Bates,  58  Wis.  24 ;  McCauyiiriii  v. 
360;  Moses  v.  Hatfield  (S.  C),  3  S.  E.  Williams,  15  S.  C.  505. 

Rep.  538.  ''  Elliott  v.  Dcason,  C4  Ga.  63. 

<>  Baxter  u.  Mclutire,  13  Gray  (Mass.),  «  Winchell  v.Coney,  54  Conu.  24  ;  Rich- 

168.  ards  v.  Holmes,  18  How.  143. 

*  Leedy  v.  Nash,  07  Ind.  311  ;  Stowc  v. 

VOL.  I.  17  257 


§  352.]  THE   DEBT   SECURED.  ' 

asmuch  as  the  mortgage  provides  for  something  respecting  which 
the  note  was  silent,  the  mortgage  governs  the  contract  in  this 
respect.^  But  where  a  mortgage  provides  for  the  payment  of  a 
certain  sum  with  interest,  and  recites  that  upon  such  payment  the 
deed,  as  well  as  a  promissory  note  for  the  amount  stated,  with  in- 
terest, shall  be  void,  but  the  note  makes  no  mention  of  interest, 
parol  evidence  is  admissible  to  show  that  the  note  was  the  only 
debt  secured  by  the  mortgage.^ 

The  note  and  mortgage  may  supplement  each  other  in  other 
ways.^  Thus,  if  the  mortgage  provides  that  upon  any  default  in 
the  payment  of  interest  the  whole  mortgage  debt  shall  become 
due,  a  note  repi-esenting  the  mortgage  debt,  though  it  does  not 
contain  this  provision,  becomes  due  upon  such  default,  and  a  per- 
sonal judgment  may  be  rendered  against  the  maker  of  the  note 
for  the  deficiency  after  applying  the  amount  obtained  from  a  sale 
of  the  mortgaged  property.*  A  like  provision  in  the  mortgage 
note  affects  the  mortgage  from  which  it  is  omitted.^ 

362.  Parol  evidence  is  admissible  to  identify  the  note,  and 
show  that  the  note  produced  is  the  one  referred  to  in  the  mort- 
gage.^ Such  evidence  has  been  admitted  to  show  that  a  mortgage 
made  to  Ebenezer  Hall  3d,  conditioned  for  the  payment  of  a  note 
of  the  same  date,  in  fact  secured  a  note  to  Ebenezer  Hall,  which 
was  dated  several  months  earlier.'^  In  the  same  case  a  further 
discrepancy  of  one  thousand  years  in  the  date  of  the  note  was 
considered  so  palpably  a  mere  clerical  mistake  that  no  explanation 
of  it  was  required.  In  general  it  may  be  said  that  a  mortgage 
is  not  invalid  either  between  the  parties,  or  as  to  third  persons, 
on  account  of  uncertainty  in  the  description  of  the  debt,  when, 
upon  the  ordinar}^  principle  of  allowing  extrinsic  evidence  to  ap- 
ply a  written  contract  to  its  proper  subject  matter,  the  debt  in- 
tended to  be  secured  can  be  shown.^     Very  considerable  latitude 

1  Dobbins  v.  Parker,  46  Iowa,  357  ;  and  Duval  v.  McLoskey,  1  Ala  708  ;  Bell  v. 
see  Mowry  r.  Sanborn,  68  N.  Y.  153.  Fleming,   12  N.   J.  Eq.   13;    Jackson  v. 

2  Hampden  Cotton  Mills  v.  Payson,  130  Bowen,  7  Cow.  (N.  Y.)  13  ;  Johns  v. 
Mass.  88.  Church,  12  Pick.  (Mass.)  557;  Goddard 

3  Wheeler  &  Wilson  Man uf.  Co.  i>.  How-  7\  Sawyer,  9  Allen  (Mass.)  78;  Stowe  v. 
ard,  28  Fed.  Rep.  741  ;  Commercial  Ex-  Merrill,  77  Me.  550;  Jones  v.  Guaranty  & 
change  Bank  v.  McLeod,  67  Iowa,  718;  Indemnity  Co.  101  U.  S.  622  ;  Hallt'.  Tay, 
Shores  v.  Dohcrty,  65  Wis.  153.  131    Mass.  192;  Nazro  v.  Ware  (Minn.), 

*  Gregory  v.   Marks,  8  Biss.  44.     See  38  N.  W.  Rep.  359. 
§  1179.  •?  Hall  0.  Tufts,  18  Pick.  (Mass.)  455. 

5  Pktcher  v.  Daugherty,  13  Neb.  224.  »  q\\\  ^^  pinney,  12  Ohio  St.  38  ;  Tous- 

6  §§  367,  384;  Aull  v.  Lee,  61  Mo.  160;  ley  v.  Tousley,  5  lb.  78  ;  Hurd  v.  Robin- 

258 


DESCRIPTION   OF   THE   DEBT.  [§  353. 

has  been  allowed  in  admitting  evidence  to  show  that  securities 
offered  at  the  trial  of  an  action  to  foreclose  a  mortgage  are  really 
substitutes  for  tho^e  described  in  it ;  and  they  have  been  held  to 
be  secured  by  it,  although  not  corresponding  in  any  particular 
with  those  described  in  the  mortgage. ^ 

A  mortgage  which  recited  that  it  was  given  to  secure  the  pay- 
ment of  a  note  described,  "  and  also  in  consideration  of  the  fur- 
ther sum  of  1500,"  paid  to  the  mortgagor,  was  held  to  be  secu- 
rity for  the  sum  of  $500  in  addition  to  the  note.  Parol  evidence 
of  this  further  indebtedness  of  $*500  was  allowed,  as  not  enlarging 
the  terms  of  the  mortgage,  but  simply  showing  the  true  amount. 
A  mortgage  conditioned  to  pay  a  certain  sum,  and  also  to  secure 
a  bond,  the  condition  of  which  covers  all  liabilities  of  the  debtor 
to  the  mortgagee,  is  construed  to  cover  all  indebtedness  under  the 
bond,  the  amount  and  nature  of  which  may  be  shown  by  parol.^ 

353.  A  deed  of  trust  or  mortgage  is  valid  without  any 
note  or  bond,  although  it  purports  to  secure  a  note  or  bond,  and 
substantially  describes  it.^  An  alteration  of  the  note  secured,  not 
fraudulently  made,  though  it  may  destroy  the  written  evidence  of 
the  debt,  does  not  affect  the  mortgage.^  The  mortgage  debt  ex- 
ists independently  of  the  note.  The  inquiry  is.  Does  the  debt 
exist  ?  If  it  does,  it  is  not  essential  that  there  should  be  any  evi- 
dence of  it  beyond  what  is  furnished  by  the  recitals  of  the  deed.^ 
The  validity  of  a  mortgage  does  not  depend  upon  the  description 
of  the  debt  contained  in  the  deed,  nor  upon  the  form  of  the  in- 
debtedness, whether  it  be  by  note  or  bond  or  otherwise  ;  it  de- 
pends rather  upon  the  existence  of  the  debt  it  is  given  to  secure.^ 
Although  there  be  no  note  or  bond,  and  no  time  is  specified  for 
the  payment  of  the  mortgage  debt,  the  mortgage,  if  given  to 
secure  a  debt  that  actually  exists,  is  valid,  and  may  be  enforced 

son,  11  lb.  232;  Clark  r.  Hynian,  55  Iowa,  ^  Eaclio  v.  Cosby,  26  Gratt.  (Va.)  112; 

14,  26.  and  see  Flagg  v.  Mann,  2  Sumn.  480,  534  ; 

1  Baxter  ('.  Mclntire,  13  Gray  (Mass.),  Goodhue  i?.  Berrien,  supra;  630;  Burger 

168,  per  Dewey,  J.;  Gunn  v.  Jones    67  v.  Hughes,   5  Hun  (N.  Y.),  180. 

(ia.  398.  8  Ilodgdon  v.  Shannon,  44  N.  H.  572  ; 

-  Babcock  v.  Lisk,  57   111.  327  ;   New  Griflin  v.  Cranston,  1  Bosw.  (N.  Y.)  281  ; 

Hampshire  Bank  f.Willard,  ION.  11.210.  Jacksou  v.   Bowen,  7    Cow.  (N.  Y.)  13; 

^  Smith  V.  People's  Bank,  24  Me.  185;  Farmers'  Loan  &  Trust  Co.  v.  Curtis,  7 

Mitchell  V.  Burnham,  44  Me.  286  ;  Good-  N.  Y.  466  ;  Coutant  v.  Scrvoss,  3  Barb, 

liue  V.  Berrien,  2  Sandf.  (N.  Y.)  Ch.  630;  (N.  Y.)  128.     Quoted  with   approval   in 

Baldwin  V.  llapUe,  4  Ben.  433.  Moses    v.    Hatfield,   3    S.   E.    Kep.    538, 

*  Clough  V.  Seav,  49  Iowa,  111.  540. 

259 


§§  354,  355.]  THE  DEBT   SECURED. 

immediately.^  A  mortgage  to  secure  a  note  thereto  attached  is 
binding  though  the  note  attached  is  not  signed.  The  note  may 
be  read  in  evidence  as  a  part  of  the  morrgage.^ 

If  a  mortgage  be  taken  to  secure  the  payment  of  an  account 
for  present  and  future  advances,  a  promissory  note  taken  for  a 
part  of  such  advances  is  entitled  to  a  proportionate  part  of  the 
mortgage  security.^ 

354.  The  lien  of  a  mortgage  is  not  affected  by  a  clerical 
inaccuracy  in  the  description  of  the  debt ;  as,  for  instance,  in 
the  date  of  the  note  secured,  or  in  time  of  its  payment.^  The 
amount  of  the  bond  secured  by  a  mortgage  having  been  left 
blank,  and  the  mortgage  having  been  recorded  without  the  blank 
being  filled,  the  mortgagor  afterwards  executed  a  writing  under 
seal,  stating  that  the  sum,  two  thousand  dollars,  was  omitted,  and 
should  have  been  inserted,  and  this  writing  was  attached  to  the 
page  on  which  the  registry  was  made.  This  was  held  to  be  a 
sufiicient  record  as  against  a  subsequent  mortgage.^  A  mistake 
in  describing  the  mortgage  note  does  not  ordinarily  invalidate  the 
security .6  Parol  evidence  is  admissible  to  prove  that  the  note 
produced  is  the  note  intended  to  be  described.'' 

A  description  in  a  deed  of  trust  of  the  debt  secured  as  being  a 
note  signed  by  the  maker  and  indorsed  by  another,  may  be  cor- 
rected in  equity  so  as  to  cover  a  bond  signed  by  the  principal, 
and  also  signed  by  a  surety  as  such.^  But  ordinarily  it  is  not 
necessary  to  first  correct  the  mortgage  before  introducing  parol 
evidence  to  show  the  I'eal  consideration.^ 

355.  The  renewal  of  the  original  note  of  the  mortgagor 
does  not  affect  the  security .^^     But  a  mortgage  given  to  secure 

1  Brookings  v.  White,  49  Me.  479 ;  Car-  5  Wis.  534  ;  Bank  of  S.  C.  v.  Eose,  1 
nail  V.  Duval,  22  Ark.  136  ;  McCaughrin  Strobh.  (S.  C.)  Eq.  257  ;  Enston  v.  Friday, 
V.  Williams,  15  S.  C.  515,  516,  quoting  2  Rich.  (S.  C.)  427 ;  AValters  v.  Walters, 
text.  73  Ind.  425  ;  Hyman  v.  Devereux,  63  N.  C. 

2  McFadden  v.  State,  82  Ind.  558.  624 ;  Kidder  v.  Mcllhenny,  81  N.  C.  123  ; 

3  Adger  v.  Pringle,  11  S.  C.  527.  McCaughrin    v.  Williams,  15  S.  C.  505, 
<  Tousley  v.  Tousley,  5  Ohio  St.  78.  517  ;  Lover  v.  Bessenger,  9  Bax.  (Tenn.) 

5  Lambert!;.  Hall,  7N.J.Eq.  (SHalst.)  393,  395.  In  California  the  renewal  of 
410,  651.  the  note   or  other  contract  for   the  pay- 

6  Porter  v.  Smith,  13  Vt.  492.  ment  of  the  mortgage  debt  does  not  create 
'  Nazro  v.  Ware  (Minn.)  38  N.  W.  Rep.     a  new  mortgage  after  the  original  mort- 

359;    Bourne  v.  Littleficld,  29  Me.  302;  gage  has  been  barred  by  the  statute  of 

Williams  v.  Hilton,  35  Me.  547.  limitations;    for  the  Civil  Code,  §  2922, 

^  In  re  Clarke,  2  Hughes,  405.  provides  that  a  mortgage  can  be  created, 

9  Kazro  v.  Ware,  supra.  renewed,  or  extended  only  by  writing,  exe- 

1''  See  §§  924-942;    Williams  r.  Starr,  cutcd  with  the  formalities  required  in  the 

260 


DESCRIPTION   OF   THE  DEBT.  [§§  356,  357. 

the  payment  at  maturity  of  the  notes  of  another  Joes  not  se- 
cure renewal  notes  substituted  in  place  of  them.  The  mortgagor 
stands  in  the  relation  of  surety  for  the  debtor,  and  his  obligation 
cannot  be  continued  without  his  consent. ^ 

It  is  questioned  whether  a  mortgage  can  be  modified  by  sub- 
stituting for  a  part  of  the  bond  secured  by  it  a  due  bill  payable 
at  a  different  time,  and  to  a  different  person ;  it  certainly  cannot 
be  so  changed  and  the  security  transferred  to  the  due  bill,  except 
upon  a  clear  showing  that  such  was  the  agreement  when  the  ex- 
change was  made.^  An  agreement  that  a  promissory  note  shall 
be  substituted  for  notes  of  a  larger  amount  already  secured  by  a 
mortgage,  and  if  paid  at  maturity  shall  be  considered  a  pa3'ment 
and  discharge  ^^ro  tanto  of  those  notes  and  of  the  mortgage,  and 
that  the  mortgage  shall  be  held  as  collateral  security  for  the  new 
note,  and  not  be  discharged  or  cancelled  until  that  is  paid,  does 
not  create  a  lien  upon  the  mortgaged  property  to  secui-e  its  pay- 
ment. The  note  is  not  given  in  renewal  or  consolidation  of  the 
mortgage  notes,  or  any  of  them.  The  relation  of  the  parties  is 
not  changed.  No  new  right  in  the  mortgaged  property  is  given, 
and  no  new  lien  is  created.'^ 

356.  When  several  mortgages  are  made  of  distinct  parcels 
of  land,  to  secure  one  and  the  same  debt,  they  constitute  in 
effect  one  mortgage,  and  their  unity  is  determined  by  the  debt 
secured.*  Parol  evidence  is  admissible  for  this  purpose,  and 
whether  the  debt  be  described  in  the  same  way  in  the  different 
mortgages  or  not,  it  may  be  shown  that  they  are  only  additional 
security  for  the  same  debt.^  A  mortgage  given  to  secure  sepa- 
rate debts  to  several  persons  is  several  in  its  nature,  as  much  as 
if  several  instruments  had  been  simultaneously  executed.*^ 

357.  A  mortgage  for  a  specific  sum  cannot  be  enlarged  or 
extended  to  cover  other  debts  or  further  advances,*^  as  against 

case  of  a  grant  of  real  property.     Wells  ^  Anderson  v.  Davies,   6  Muuf.  (Va.) 

V.  Ilarter,  56  Cal.  342.     See  §  1207.  484. 

1  Ayres  y.  Wattson,  57  Pa.  St.  3C0.  «  Gardner  v.   Diederichs,   41    111.   158; 

2  Tucker  v.  Alger,  30  Mich.  07.  Thayer  v.  Campbell,  9  Mo.  280  ;  Burnett 

*  Howe  V.  Wilder,  II  Gray  (Ma.=s.)  267.     v.  Pratt,  22  Pick.  (Mass.)  55G  ;  Eccleston 
This  agreement  was  regarded  the  same     v.  Clipsham,  1  Saund.  153. 

a.s  if  the  mortgagee  had  said,  "Give  me  ''  Stoddard    v.    Hart,    23    N.    Y.    556; 

your  note  for  SCOO;  if  paid,  I  will  indorse  Townsend  v.  Einjiiic  Stone  Dressing  Co. 

it  on  the  mortgages;  if  not,  the  mortgages  6   Duer   (N.    Y.),  208,  and    cases  cited; 

are  to  stand  as  they  are."  Largo  i'.   Van   Doren,   14  N.  J.  Eq.  208. 

♦  See  §  135;  Franklin  v.  Gorham,  2  Sec  Beckman  F.  Ins.  Co.  v.  First  M.  E. 
Day  (Conn.),  142.  Churcii,  2'J  Barl).  (N.  Y.)  G58;  S.  C.  18 

261 


§  357.]  THE  DEBT   SECURED. 

others  who  have  acquired  rights  in  the  property.  Neither  can  the 
mortgagor  as  against  them  increase  the  charge  upon  the  land  by 
confessing  judgment,  and  thus  compounding  the  interest ;  ^  or  by 
making  the  debt  payable  in  gold  coin  instead  of  currency  ;2  or  by 
increasing  the  rate  of  interest.^  The  mortgage  being  given  to 
secure  a  certain  debt  is  valid  for  that  purpose  only  ;  but  what- 
ever form  the  debt  may  assume,  so  long  as  it  can  be  traced,  the 
security  remains  good  for  that.^ 

As  against  the  mortgagor,  his  agreement  that  the  mortgage 
shall  stand  as  security  to  the  mortgagee  for  further  advance- 
ments, although  it  be  oral  only,  is  valid,  and  after  the  advances 
have  been  made  upon  the  faith  of  it,  a  court  of  equity  will  not 
allow  the  mortgagor  to  redeem  without  performing  it.^  It  will 
apply  to  him  the  maxim,  that  he  who  seeks  equity  must  do  equity. 
It  will  also  apply  the  same  rule  to  any  one  claiming  under  him 
with  notice.  Therefore,  where  the  assignees  in  insolvency  of  the 
mortgagor  have  conveyed  the  equity  of  redemption  to  his  wife, 
without  consideration  and  with  notice  of  such  agreement,  a  court 
of  equity  will  decline  to  aid  her  to  redeem  the  mortgage  in  vio- 
lation of  this  contract.^  So,  in  answer  to  a  bill  in  equity  by  an 
assignee  in  bankruptcy  to  redeem  a  mortgage,  it  is  competent 
for  the  holder  of  the  mortgage  to  show  that  the  bankrupt  had, 
for  a  valuable  consideration,  orally  agreed  that  a  mortgage  made 
by  him  to  anotlier  person,  and  paid  in  large  part,  should  not  be 
discharged,  but  should  be  assigned  to  the  creditor  as  security  for 
further  loans  and  debts.  Such  oral  agreement  could  not  be  set 
up  against  a  subsequent  mortgagee,  or  against  an  attaching  cred- 
itor ;  nor  could  it  be  set  up  against  the  mortgagor  or  his  assignee 
in  a  suit  at  law,  but  it  may  be  in  equity.''' 

But  in  Pemisylvania  the  courts  say  they  will  not  tolerate  an  oral 
mortgage  or  secret  lien  ;  and  therefore  where  the  mortgage  has 
been  given  by  tenants  in  common,  to  secure  a  partnership  debt, 

How.  Pr.  431 ;  Tunno  v.  Robert,  16  Fla.  Iron  Co.  v.  Walker,  76  N.  Y.  521 ;  Chap- 

738;  Perrin  r.  Kellogg,  38  Mich.  720.  man  v.  Jenkins,  31    Barb.    (N.   Y.)   164; 

1  McGready  v.  McGready,  17  Mo.  .597.  Wilkerson  v.  Tillman,  66  Ala.  532  ;  Mc- 

2  Belloc  V.  Davis,  38  Cal.  242  ;  Talylor  Caughrin  v.  Williams,  15  S.  C.  505,  517. 
V.  Atlantic  &  Great  Western  Ry.  Co.  55  &  Walker  v.  Walker,  17  S-  C.  329,  337. 
How.    (N.    Y.)    Pr.    275.      See,   however,  6  Stone  v.  Lane,  10  Allen  (Mass.),  74  ; 
Poett  V.  Stearns,  31  Cal.  78.  and  see  Joslyn  v.  Wyman,  5  Allen  (Mass.), 

3  Burchard  v.  Frazer,  23  Mich.. 224.  62  ;  Crafts   v.   Crafts,    13    Gray    (Mass.), 
*  §§  924-942 ;  Patterson  v.  Johnston,  7     360. 

Ohio,  225 ;  Van  Wagner  v.  Van  Wagner,         ''  Upton  r.  Nat.  Bank  of  South  Read- 
7  N.  J.Eq.  (3  Halst.)  27.     And  see  Jagger     ing,  120  Mass.  153. 

262 


DESCRIPTION   OF    THE   DEBT.  [§  358. 

the  mortgage  cannot,  after  payment,  be  kept  alive  as  security  for 
an  individual  debt  of  one  of  them  to  the  mortgagee,  even  as  against 
his  interest.^ 

358.  Taxes  and  assessments.-  —  There  is  an  apparent  ex- 
ception to  the  rule  that  the  mortgage  debt  cannot,  as  against 
third  persons,  be  increased  after  the  execution  of  the  mortgage ; 
and  that  is,  that  money  paid  by  the  mortgagee,  to  redeem  the 
premises  from  a  tax  sale,  or  from  any  charge  which  is  a  para- 
mount lien  upon  the  property,  becomes  a  part  of  the  mortgage 
debt,  and  may  be  enforced  by  foreclosure.^  The  mortgage  is 
usually  so  drawn  that  in  terms  it  includes  under  the  security 
any  payments  that  may  be  made  by  the  mortgagee  in  conse- 
quence of  any  default  of  the  mortgagor.  But  without  any  such 
provision,  the  payment  by  the  mortgagee  of  charges  which  are  a 
prior  lien,  and  the  removal  of  which  is  essential  to  his  own  pro- 
tection and  safety,  gives  him  in  equity  not  only  a  right  to  retain 
the  amount  paid  out  of  the  proceeds  of  the  land  when  sold  upon 
foreclosure,  as  against  the  mortgagor,^  but  also  preference  by  way 
of  subrogation  over  even  prior  incumbrancers,  who  have  been 
protected  by  such  payment.^ 

If,  however,  the  mortgage  contains  no  covenant  for  the  pay- 
ment of  taxes,  and  the  mortgagor  conveys  the  equity  of  redemp- 
tion, the  grantee  assuming  the  mortgage,  and  afterwards  the  prop- 
erty becomes  incumbered  by  taxes  which  the  mortgagee  is  forced 
to  pay,  upon  a  foreclosure  of  the  mortgage,  in  determining  the 
deficiency  for  which  the  mortgagor  is  liable,  the  amount  paid  by 
the  mortgagee  for  taxes  cannot  be  deducted  from  the  proceeds 
of  the  sale,  because  the  mortgagor  is  not  bound  to  pay  the  taxes 
after  his  conveyance.^  Taxes  and  assessments  upon  mortgaged 
lands,  whether  ordinary  taxes,  or  assessments  for  sewers  or  the 

1  Thomas's   Appeal,   30    Pa.    St.   378,  *  Silver  Lake  Bauk  v.  North,  4  Johns. 

reversinff  3  Phila.  62 ;  S.  C.  under  name  (N.  Y.)  Ch.  370 ;    Kapel^e   v.  Prince,  4 

Pechin  v.  Brown,   dissenting  opinion,  p.  Hill  (N.    Y.),   119;    Dale  v.  M'Evers,   2 

'J'J ;  and    to   same    effect,   see   O'Neill   v.  Cow.    (N.    Y.)    118.      Contra,   Savage   v. 

Capelle,  C2  Mo.  202.  Scott,  45  Iowa,  130.     But  a  later  case  in 

^  See  §§  77,  1134.  Iowa  leaves  the  (juestion  in  doubt  in  that 

8  \Vrit,'ht  i;.  Lungley,  36  111.  381  ;  Mi.x  state.      Barthell   v.   S>verson,    54   Iowa, 

t;.  Hotthkiss,  14  Conn.  32;  Hill  v.  Eldred,  160. 

49    Cal.   398;  Burr  v.  Veeder,   3   Wend.  ^  §1080;  Cook   v.    Kraft,  3    Lans.  (N. 

(N.  Y.)  412;  Faure  v.  Winans,  Ilopk.  (N.  Y.)  512.     Contra,  Manning  v.  Tuthill,  30 

Y.)  283  ;  Kortright  v.  Cady,  23  Barb.  (N.  N.  J.  Eq.  29 ;  S.  C.  7  Reporter,  212. 

Y.)  490;  S.  C.  5  Abb.  Pr.  358;  Robinson  «  Marshall  v.  Davies,  16  lluu  (N.  Y.), 

1^.  Hyan,  25  N.  Y.  320,  606. 

263 


§  359.]  THE  DEBT   SECURED. 

like,  and  water  rates,  are  preferred  debts  under  tlie  bankrupt  and 
insolvent  laws.  If,  therefore,  such  taxes  and  assessments  be 
laid  upon  mortgaged  land  before  the  bankruptcy  of  the  owner, 
they  should  be  paid  by  the  assignee  in  full  out  of  the  estate  in 
his  hands  in  exoneration  of  the  mortgage.^  If  the  mortgaged 
premises  be  foreclosed  and  purchased  by  the  mortgagee,  he  is 
still  entitled,  upon  application  to  the  bankruptcy  court,  to  have 
an  order  directing  the  assignee  to  pay  the  taxes  in  full  out  of  the 
bankrupt's  estate.  Although  the  law  makes  the  taxes  a  lien  upon 
the  premises  in  respect  of  which  they  are  levied  and  made,  yet 
they  are  personal  debts  of  the  owner  of  the  premises,  and  can  be 
collected  fi'ora  his  personal  property.  If  the  taxes  be  not  paid, 
and  the  land  be  sold  to  pay  them,  the  sale  would  be  a  sale  to 
satisfy  a  liability  of  the  bankrupt.  No  formal  proof  of  the  debt 
is  necessary  before  granting  such  application. 

A  water  tax  which  becomes  due  upon  the  mortgaged  premises 
after  the  adjudication  of  bankruptcy,  should  be  paid  by  the  as- 
signee as  a  part  of  the  proper  expenses  of  his  administration  of 
the  estate.^ 

359.  Solicitor's  fee.  —  In  addition  to  the  mortgage  debt,  the 
mortgage  may  be  made  to  secure  the  payment  of  a  reasonable 
fee  of  a  solicitor,  in  case  of  a  foreclosure  of  the  mortgage.^  The 
amount  of  such  fee  may  be  specified  in  the  mortgage,  or  left  to 
the  discretion  of  the  court.  The  stipulation  may  be  enforced  as 
well  against  subsequent  purchasers  and  incumbrancers  as  against 
the  mortgagor  himself.*  Such  fee  is  presumed  to  be  in  addition 
to  the  taxable  costs  allowed  by  law.^  Such  a  stipulation,  if  not 
unreasonable  in  amount,  has  been  regarded  as  imposing  a  pen- 
alty, rather  than  as  giving  compensation  to  the  mortgagee  for 
expenses  incurred  in  consequence  of  the  mortgagor's  default.*^ 
Equity  will  not  relieve  against  such  a  contract  fairly  entered  into, 
unless,  under  the  color  of  a  provision  for  the  costs  and  expenses 
of  enforcing   the  mortgage  lien,  an  unreasonable  and  oppressive 

1  In  re  Moller,  8  Benedict,  526.  C.  13  "West.  Jur.  204,  overruling  Robin- 

2  In  re  Moller,  supra.  son  v.  Loomis,  51   Pa.  St.  78,  which  de- 

3  See  §  635 ;  Bronson  v.  La  Crosse  R.  clared  the  stipulation  not  to  be  a  penalty. 
R.  Co.  2  Wall.  283;  Rice  v.  Cribb,  12  See,  also,  Renshaw  v.  Richards,  30  La. 
Wis.  179;  Hitchcock  v.  Merrick,  15  Wis.  Ann.  398.  The  stipulation  in  these  latter 
522.  See,  however.  Sage  v.  Riggs,  12  cases  was  five  per  cent.  But  in  Daly  v. 
Mich.  313.  Maitland,  supra,  where  the  mortgage  was 

*  Pierce  w.  Kneeland,  16  Wis.  672.  for  $14,000,  the   court   declared  live  per 

^  Hitchcock  V.  Merrick,  15  Wis.  522.  cent,  to    be  unreasonable,  and  suggested 

6  Daly  V.  Maitland,  88  Pa.  St.  384  ;  S.     that  two  per  cent,  would  be  ample. 

264 


DESCRIPTION   OF   THE   DEBT.  [§§  360,  361. 

exaction  be  made  of  the  debtor,  so  that  the  stipulation  amounts, 
in  fact,  to  a  penalty,  which  he  incurs  by  his  default.  In  such 
case  equity  will  interpose  her  shield  to  protect  the  debtor.^  If, 
however,  the  provision  be  a  reasonable  compensation  to  the  mort- 
gagee for  expenses  that  may  be  incurred  by  the  default  of  the 
mortgagor,  it  is  a  proper  addition  to  the  mortgage  debt,  and  it  is 
not  collected  as  costs,  but  is  a  part  of  tlie  judgment  to  which  the 
mortgagee  is  entitled.^  The  lien  of  the  mortgage  covers  sucb  a 
provision  as  much  as  the  debt  itself  ;  and  it  also  attaches  equally 
to  the  costs  of  suit,  and  to  expenses  necessarily  incurred  in  en- 
forcing the  mortgage,  although  not  specially  provided  for  in  the 
mortgao'e.^ 

360.  The  mortgagee  cannot  tack  to  his  mortgage  any  debt 
not  secured  thereby,  and  require  its  payment  by  the  mortgagor 
as  a  condition  to  his  right  to  redeem."*  A  mortgage  executed  to 
secure  the  payment  of  notes  of  a  definite  amount  cannot,  after 
the  payment  of  the  notes,  be  made  available  to  secure  further 
advances,  unless  it  is  so  provided  in  the  mortgage,  or  by  a  legal 
contract  between  the  parties.^  A  verbal  agreement  is  insufficient 
for  that  purpose.  But  when  such  was  the  purpose  of  the  mort- 
gage in  the  beginning,  there  is  no  objection  that  it  secures  an 
existing  demand  and  also  future  advances.^ 

A  penalty  of  twenty  per  cent,  imposed  by  statute  for  omitting 
prompt  payment  of  school  money  loaned  upon  mortgage,  is  not  a 
lien  under  the  mortgage,  but  is  imposed  upon  the  borrower  only.'^ 
Under  a  mortgage  to  a  building  association,  expressly  securing 
only  monthly  payments,  the  payment  of  fines  and  other  dues  to 
the  association  is  not  secured.^ 

361.  Increasing  the  rate  of  interest.  —  The  parties  to  a  mort- 
gage cannot,  as  against  subsequent  parties  in  interest,  stipulate 
by  an  unrecorded  agreement  for  a  higher  rate  of  interest  than 
that  provided  in  the  mortgage  as  recorded,  nor  can  they  by  such 
means  incorporate  into  the  mortgage  any  additional  indebtedness. 
The  interest  cannot  be  changed  from  currency  to  gold,  which  is 

1  Daljr  V.  Maitland,  88  Pa.  St.  384.  Schiffer  v.  Feagin,  51  Ala.  335  ;  Edwards 

2  Daly  V.  Maitland,  supra.     See,  how-     i;.  Dwight,  68  Ala.  389. 

ever,  Alexandric  v.   Saloy,  14   La.  Ann.         6  Johnson  v.  Anderson,  30  Ark.  74.5. 
327.  0  §  1078 ;  North  v.  Crowell,  1 1   N.  II. 

'■'  Iliinl  V.  Coleman,  42  Me.  182.  251. 

*  §  1081  ;  Huron  v.  Cottrell,  13  Minn.         ^  Bradley  v.  Snyder,  14  III.  202. 
194;  liarlliell  v.  Syveri-oiJ,  54  Iowa,  160;         «  Hamilton  Building  Ass'u  u.  Reynolds, 

Duer(N.  Y.),  671. 

265 


§§  362-364.]  THE  DEBT   SECURED. 

tlien  at  a  premium.^  A  subsequent  mortgagee  or  purchaser  has 
the  right  to  redeem,  by  paying  the  amount  due  according  to  its 
terms.^  But  the  owner  of  the  equity  of  redemption  may  bind 
himself  and  charge  the  land  for  the  payment  of  an  increased  rate 
of  interest  by  an  agreement  in  writing.^  There  must  be,  how- 
ever, a  consideration  to  support  his  agreement.  Future  indul- 
gence of  the  debtor  for  an  indefinite  period,  his  debt  being  already 
due,  is  consideration  enough.* 

362.  Redelivery  of  mortgage  for  a  new  obligation.  —  Gen- 
erally it  is  held  that  a  mortgage  which  has  been  satisfied  and 
delivered  up  to  the  mortgagor  without  being  cancelled  may  be 
again  delivered  by  him  as  a  valid  security,  except  as  against  in- 
tervening securities.  The  delivery  of  the  security  gave  it  eificacy 
in  the  beginning ;  and  if,  after  having  used  it  for  one  purpose,  he 
redeliver  it  for  another  purpose,  the  redelivery  gives  it  vitality 
again. ^ 

363.  A  mortgage  already  recorded  may  be  made  to  secure 
a  further  sum,  by  an  indorsement  upon  the  mortgage  executed 
and  acknowledged  with  the  usual  formalities  of  a  deed,  and  re- 
corded with  a  proper  reference  to  the  record  of  the  mortgage. 
This  has  been  done  where  the  mortgage  was  given  to  secure  an 
acceptor  of  drafts,  and  by  such  an  indorsement  it  was  made  to 
apply  in  all  its  provisions  and  terms  as  security  for  other  drafts. 
The  record  of  the  indorsement  made  a  valid  extension  of  the  con- 
dition of  the  mortgage  as  first  made  and  recorded  to  the  further 
liability  incurred  by  the  mortgagee.^ 

II.  Future  Advances. 

364.  In  general.  —  There  has  been  much  diversity  of  opinion 
among  courts  and  law  writers  on  the  question  of  the  validity  of 
mortgages  to  secure  future  advances,  and  as  to  the  rights  of  mort- 
gagees under  such  mortgages  against  subsequent  purchasers  and 
incumbrancers.  Although  the  record  must  show  the  existence  of 
the  mortgage  in  order  to  avail  anything  as  a  notice,  yet  it  is  gen- 
erally conceded  that  it  need  not  show  the  exact  amount  of  the 
incumbrance.  But  while  according  to  some  authorities  the  limit 
of  these  advances  should  be  named,  so  that  an  inquirer  may  know 

1  Taylor  v.  Atlantic  &  Great  Western         ^  Taylor  v.  Thomas,  61  Ga.  472, 

Ky.  Co.  55  How.  (N.  Y.)  Pr.  275.  &  §§  338,  947,   948 ;    Underbill   v.  At- 

2  Gardner  v.  Emerson,  40  111.  296.  water,  22  N.  J.  Eq.  16,  per  Zabriskie,  Ch. 

3  Smith  V.  Graham,  34  Mich.  302.  ^  Choteau  v.  Thompson.  2  Ohio  St.  114. 

266 


FUTURE  ADVANCES.  [§  365. 

that  the  incumbrance  cannot  exceed  a  certain  amount,^  according 
to  others  there  is  no  necessity  for  limiting  the  amount  of  the  in- 
tended advances  in  any  way.^  But  even  where  a  limitation  is 
necessary  in  order  to  constitute  a  continuing  security  which  will 
not  be  affected  by  subsequent  conveyances,  a  recorded  mortgage 
for  an  unlimited  sum  is  notice  to  a  subsequent  incumbrancer  as 
to  all  sums  advanced  upon  the  mortgage  before  the  subsequent 
lien  attached.  Moreover,  the  record  of  the  subsequent  mortgage 
is  no  notice  to  such  prior  mortgagee  that  any  subsequent  lien  has 
attached.^  The  subsequent  mortgagee  can  limit  the  credit  that 
may  be  safely  given  under  the  mortgage  for  future  advances  only 
by  giving  the  holder  of  it  express  notice  of  his  lien,  and  a  notice 
also  that  he  must  make  no  further  advances  on  the  credit  of  that 
mortgage.^  The  mortgage  will  then  stand  as  security  for  the  real 
equitable  claims  of  the  mortgagee,  whether  they  existed  at  the 
date  of  the  mortgage  or  arose  afterwards,  but  prior  to  the  receipt 
of  such  notice.^  If  such  mortgagee  is  not  under  any  obligation 
to  make  advances,  and  after  notice  of  a  subsequent  mortgage  does 
make  further  advances,  to  the  extent  of  such  advances  the  sub- 
sequent mortgagee  has  the  right  of  precedence.^  But  if  such 
mortgagee  is  under  obligation  to  make  the  advances,  he  is  en- 
titled to  the  security  whatever  may  be  the  incumbrances  subse- 
quently made  upon  the  property,  and  whether  he  has  notice  of 
them  or  not.^ 

365.  Mortgages  to  secure  future  advances  have  always 
been  sanctioned  by  the  common  law.  An  early  case  is  thus 
stated  in  Viner's  Abridgment:  A.  mortgages  to  B.  for  a  term  of 
years  to  secure  a  certain  sum  of  money  already  lent  to  the  mort- 
gagor, as  also  such  other  sums  as  should  thereafter  be  lent  or  ad- 
vanced to  him.  Afterwards  A.  makes  a  second  mortgage  to  C. 
for  a  certain  sum,  with  notice  of  the  first  mortgage,  and  then  the 

1  Bell  V.  Fleming,  12  N.J.  Eq.  13  ;  S.  C.  «  Eipley  v.  Harris,  3  Biss.  199  ;  Nelson 
lb.  490;  Beekman  v.  Frost,  18  Johns.  (N.  v.  Boyce,  7  J.  J.  Marsh.  (Ky.)  401 ;  Speer 
y.)  544.  V.  Wliitfield,  10  N.  J.  Eq.  (2  Stockt.)  107; 

2  Witczinski  i;.  Everman,  51  Miss.  841 ;  Farnum  v.  Burnett,  21  N.  J.  Eq.  87;  Bu- 
Lovelace  v.  Webb,  62  Ala.  271.  chanan  v.  International  Bank,  78  111.  500. 

8  Freiberg  v.  Magale  (Tex.).  7  S.  W.  ^  Frye  v.  Bank  of  111.  11  HI.  307  ;  Spa- 
Rep.  684.  der  v.  Lawler,  17  Ohio,  371.    This  decision 

*  See  Robiii.son   v.   Williams,  22  N.  Y.  was  based  somewhat  upon  thceflect  of  the 

380;  and  §  372.  statute  of  that  state  relating  to  mortgages. 

^  MeDaniels    i-.    Colvin,    16   Vt.   300;  Ladue  v.  Detroit  &  Milwaukee  K.  11.  Co. 

Ward   V.   Cooke,  17    N.  J.  Eq.  93.     See  13  Mich.  380. 

§  371.  "  See  §  372. 

207 


§  365.]  THE  DEBT   SECURED. 

first  mortgagee,  having  notice  of  the  second  mortgage,  lends  a 
further  sum.  The  question  was,  upon  what  terms  the  second 
mortgagee  should  be  allowed  to  redeem  the  first ;  and  Cowper, 
the  Lord  Chancellor,  held  that  he  should  not  redeem  without 
paying  all  that  was  due,  as  well  the  money  lent  after  as  that  lent 
before  the  second  mortgage  was  made  ;  "  for  it  was  the  folly  of 
the  second  mortgagee,  with  notice,  to  take  such  a  security."  i 
This  case,  however,  was  critically  examined  by  Lord  Chancellor 
Campbell,  before  the  House  of  Lords,  in  the  case  of  Hopkinson  v. 
Rolt,'^  and  he  declared  the  representation  made  by  the  reporters, 
that  the  first  mortgagee  had  notice  of  the  second  mortgage,  to  be 
without  foundation.  The  doctrine  supposed  to  have  been  laid 
down  in  Grordon  v.  Graham  is  declared  unsound,  and  is  over- 
ruled ;  and  the  doctrine  in  England  is  therefore  settled,  that  a 
first  mortgagee  cannot  claim  the  benefit  of  the  security  for  op- 
tional advances  made  by  him  after  notice  of  a  second  mortgage 
upon  the  property.'^  This  question  is  examined  elsewhere  ;  *  and 
these  two  cases  are  referred  to  in  this  connection  as  the  leading 
cases  in  England  upon  the  subject,  and  as  showing  that  future 
advances  may  be  secured  if  the  mortgage  be  properly  made  for 
that  purpose.^ 

Li  this  country  mortgages  made  in  good  faith  for  the  purpose 
of  securing  future  debts  have  generally  been  sustained,  both  in 
the  early  and  in  the  recent  cases.^     It  does  not  matter  that  the 

1  Gordon  v.  Graham,  7  Via.  Abr.  52,  ?;.  Tucker,  23  How.  14 ;  National  Bank  v. 
pi.  3 ;  2  Eq.  Gas.  Abr.  598.  Whitney,  103  U.  S.  99  ;  Jones  v.  Guaranty 

2  9  H.  L.  Gas.  514;  S.  C.  7  Jur.  N.  S.  &  Indemnity  Co.  101  U.  S.  622;  S.  C.  2 
1209.  Fed.  Rep.  747  ;  Schuelenburg  v.  Martin, 

The   English    cases    are    carefully   re-  1  McCrary,  348  ;    Schulze  v.  Bolting,  8 

viewed  in   Eolt  v.   Hopkinson,  25  Beav.  Biss.  174;  Leeds  v.  Cameron,  3  Sum.  488. 

461.  Louisiana :  New  Orleans  Bank  v.  Le  Bre- 

3  The  opinion  of  the  court  was  deliv-  ton,  120  U.  S.  765.  The  Civil  Code,  art. 
ered  to  this  effect  by  Lords  Campbell  and  3292,  provides  that  a  mortgage  may  be 
Chelmsford;  but  Lord  Cran worth  gave  a  given  for  an  obligation  which  has  not  yet 
dissenting  opinion,  to  the  effect  that  the  risen  into  existence  ;  as  when  a  man 
law  was  recently  laid  down  by  Lord  Cow-  grants  a  mortgage  by  way  of  security  for 
per,  as  reported.  indorsement  which   another   promises   to 

*  See  §§  368-374.  make  for  him.     Maine  :  Doyle  v.  White, 

^  See,  also.  Burgess  v.  Eve,  L.  R.  13  26  Me.  341.    Massachusetts:  Commercial 

Eq.  450  ;  Daun  v.  London  Brewery  Com-  Bank  v.  Cunningham,  24  Pick.  270  ;  God- 

pany,  L.  R.  8   Eq.  155;  Menzies  v.  Light-  dard  v.  Sawyer,  9  Allen,  78;  Hall  v.  Tay, 

foot,  L.  R.  11  Eq.  459.  131    Mass.   192.     Michigan  :  Brackett  ?;. 

s  Jones  on  Chattel  Mortgages,  §§  94-  Sears,  15  Mich.  244  ;  Newkirk  v.  Newkirk, 

98 ;  United  States  v.  Hooe,  3  Cranch,  73  ;  56    Mich.  525.      Minnesota  :   Madigan  v. 

Shirras  v.  Caig,  7  Cranch,  34  ;  Lawrence  Mead,  31  Minn.  94,  98.    New  York :  Trus- 

268 


FUTURE  ADVANCES.  [§  366. 

future  advances  are  to  be  made  to  a  third  person,  or  for  his  ben- 
efit at  the  request  of  the  mortgagor.^  Neither  is  the  validity  of 
a  mortgage  to  secure  future  advances  affected  by  the  fact  that 
the  advances  are  to  be  made  in  materials  for  building  instead  of 
money.- 

366.  Statutory  requirements.  —  In  Maryland  it  is  provided 
by  statute  that  no  mortgage,  or  deed  in  the  nature  of  a  mortgage, 
shall  be  a  lien  or  charge  on  any  estate  or  property  for  any  other 
or  different  principal  sum  or  sums  of  money  than  appear  on  the 
face  of  the  mortgage,  and  are  specified  and  recited  in  it,  and  par- 
ticularly mentioned  and  expressed  to  be  secured  thereby  at  the 
time  of  executing  it ;  and  further,  that  no  mortgage,  or  deed  in 
the  nature  of  a  mortgage,  shall  be  a  lien  or  charge  for  any  sum 
or  sums  of  money  to  be  loaned  or  advanced  after  the  same  is  exe- 
cuted, except  from  the  time  said  loan  or  advance  is  actually  made  ; 
and  that  no  mortgage  to  secure  such  future  loans  or  advances 
shall  be  valid  unless  the  amount  or  amounts  of  the  same,  and  the 
times  when  they  are  to  be  made,  shall  be  specifically  stated  in 
said  mortgages.^  This  provision  is  not,  however,  applicable  to 
mortgages  given  to  indemnify  the  mortgagee  against  loss  from 
being  indorser  or  security.  A  mortgage  to  secure  future  advances 
not  to  exceed  a  limited  amount  may  be  enforced  to  the  amount  of 
the  advances  made  upon  it  within  that  limit,  although  such  ad- 
vances were  made  after  the  mortgagee  had  received  notice  of  a 
junior  incumbrance.*  The  statute  requiring  the  amount  to  be 
stated  is  a  modification  of  the  common  law,  under  which  the  mort- 
gage would  be  equally  valid  without  such  limitation. 

In  New  Hampshire  it  is  provided  that  no  conveyance  in  writ- 
ing of  any  lands  shall  be  defeated,  or  any  estate  incumbered  by 
any  agreement,  unless  it  is  inserted  in  the  condition  of  the  con- 
cot «.  Kinf^,6N.  Y.  147  ;  James  v.  Morey,  art.  66,  §  43.  This  restriction  does  not 
2  Cow.  246,  292  ;  BrinckerhofFu.  Lansing,  apply  to  mortgages  to  indemnify  the  mort- 
4  Johns.  Ch.  e.'i,  7.3  ;  Fas.sett  v.  Smith,  gagee  against  loss  from  being  indorser 
2.3  N.  Y.  252.  Pennsylvania  :  Garber  v.  or  security,  nor  to  any  mortgage  given  by 
Henry,  6  Watts,  57.  South  Carolina  :  Sea-  brewers  to  maltsters  to  secure  the  pay- 
roan  V.  Fleming,  7  Rich.  E(i.  28.3.  Texas  ;  ment  to  the  latter  of  debts  contracted  by 
Klein  v.  Glass,  53  Tex.  37.  West  Vir-  the  former  for  malt  and  other  material 
ginia:  McCarty  v.  Chalfant,  14  W.  Va.  used  in  the  making  of  malt  liquors. 
^•^'-  This   amendment   and  addition   to  the 

»  Maffitt  r.  Kynd,  69  Pa.  St.  380,  and  Code  docs  not  ai.ply  to  Anno  Arundel, 
cases  ciU'd.  Baltimore,  St.  Mary's,  and  Prince  George's 

2  Brooks  V.  Lester,  36  Md.  65  ;  Doyle     counties. 
V.  White,  26  Me.  341.  *  Wilson  v.  liussell,  13  Md.  494. 

'  Laws  1872,  ch.  213  ;  K.  Code,  187  8, 

2G9 


§  367.]  THE  DEBT   SECURED. 

veyance  and  made  a  part  thereof,  stating  the  sum  of  money  to  be 
secured,  or  other  thing  to  be  performed.  And  it  is  also  provided 
that  no  estate  conveyed  in  mortgage  shall  be  holden  by  the  mort- 
gagee for  the  payment  of  any  sum  of  money,  or  the  performance 
of  any  other  thing,  the  obligation  or  liability  to  the  payment  or 
performance  of  which  arises,  is  made,  or  contracted  after  the  exe- 
cution and  delivery  of  such  mortgage.^  It  is  held,  however,  that 
a  mortgage  executed  in  good  faith,  conditioned  to  secure  a  defi- 
nite sum,  part  of  the  consideration  of  which  is  the  agreement  of 
the  mortgagee  to  pay  certain  sums  to  and  for  the  use  of  the  mort- 
gagor, and  to  perform  certain  labor  for  the  mortgagor,  is  neither 
prohibited  nor  fraudulent  as  against  the  creditors  of  the  mort- 
gagor.2  But  the  court  did  not  wish  to  be  understood  as  holding 
that  a  mortgage  given  to  secure  an  absolute  note,  intended  as  a 
security  for  advances  hereafter  to  be  made,  would  be  valid,  if  at 
the  time  of  the  execution  of  the  mortgage  the  amount  of  the  ad- 
vances was  not  agreed  upon,  or  the  mortgagee  was  under  no  obli- 
gation to  make  them.  Under  this  statute  the  mortgage  may  be 
void  as  to  the  part  of  the  consideration  which  is  altogether  future, 
but  valid  for  the  part  which  was  a  debt  at  the  time  the  mortgage 
was  executed.^ 

In  Georgia  a  mortgage  may  be  made  to  secure  future  advances 
not  limited  in  amount,^  although  the  statute  of  the  state  provides 
that  a  mortgage  sball  "  specify  the  debt  to  secure  which  it  is 
given."  ^  So  long  as  the  means  for  determining  the  amount  of 
the  debt  are  pointed  out,  it  is  immaterial  that  the  amount  is  not 
stated,  or  is  from  its  very  nature  indefinite.^ 

367.  The  future  liabilities  intended  to  be  secured  should 
be  described  with  reasonable  certainty.  If  the  nature  and 
amount  of  the  incumbrance  is  so  described  that  it  may  be  ascer- 
tained by  the  exercise  of  ordinary  discretion  and  diligence,  this  is 
all  that  is  required.^     On  this  principle  a  mortgage  for  the  pay- 

1  G.  S.  ch.  122,  §§  2,  3  ;  G.  L.  1878,  ch.  Hampshire  Bank  v.  Willard,  10  N.  H. 
136,  §§2,3.  210. 

2  Stearns  v.  Bennett,  48  N.  H.  400,  402.  *  Allen  v.  Lathrop,  46  Ga.  133.  The 
A  mortgage  conditioned  to  secure  a  note  debt  was  described  as  advances  in  supplies 
the  consideration  of  a  part  of  which  is  a  and  money  for  the  purpose  of  carrying  on 
credit  of  an  agreed  sum  by  the  mortgagee,  the  farm  for  the  year  1870. 

on  his  books,  to  the  mortgagor,  is  not  pro-  ^  Code,  §  1945. 

hibited.     Abbot  v.  Thompson,  58  N.  H.  ^  ^llen  v.  Lathrop,  supra. 

255.  ^  United  States  v.  Hooe,  3  Cranch,  73  ; 

3  Leeds  v.  Cameron,  3  Sum.  488  ;  John-  Shirras  v.  Caig,  7  Cranch,  34  ;  United 
son  V.  Richardson,  38  N.  H.  353  ;  New  States  v.  Sturges,  1  Paine,  525;  Hubbard 

270 


FUTURE   ADVANCES. 


[§  367. 


ment  of  such  sums  of  money  as  the  mortgagee  might  advance,  in 
pursuance  of  an  agreement  mentioned  in  the  condition  of  a  cer- 
tain bond  given  by  the  mortgagee  to  the  mortgagor  of  even  date, 
contains  reasonable  notice  of  the  incumbrance.^ 

A  mortgage  for  $200  was  executed  as  a  basis  of  credit  to  that 
extent  for  goods  which  the  mortgagee  might  sell  to  the  mort- 
gagor, with  the  understanding  that  the  mortgagor  should  make 
such  payments  that  the  balance  against  him  should  at  no  time 
exceed  that  amount.  An  account  was  opened  and  continued  for 
some  years.  It  was  held  that  the  condition  of  the  mortgage  was 
not  exceptionable  as  not  disclosing  with  sufficient  certainty  the 
nature  and  extent  of  the  incumbrance.^     When  the  condition  of 


V.  Savage,  8  Conn.  215.  This  case  did 
away  with  the  doubt  with  which  such 
mortgages  were  spoken  of  in  the  earlier 
cases  of  Pettibone  v.  Griswold,  4  Conn. 
158;  Stoughton  v.  Pasco,  5  Conn.  442; 
Shepard  v.  Shcpard,  7  Conn.  387.  See 
Brewster  i'.  Ciamfit,  33  Ark.  72;  Collier 
V.  Faulk,  69  Ala.  58. 

1  Crane  i-.  Deming,  7  Conn.  38. 

2  Mix  I'.  Cowles,  20  Conn.  420.  The 
Supreme  Court  of  the  United  States  in 
Townsend  v.  Todd,  91  U.  S.  452,  in  a  case 
arising  in  Connecticut,  followed  the  de- 
cisions of  that  state  upon  this  point.  Af- 
ter referring  to  the  earlier  decisions  of 
that  state,  the  court  said:  "In  Mix  v. 
Cowles,  siipra,  and  Potter  v.  Holden,  31 
lb.  385,  the  Supreme  Court  of  that  state 
held  to  its  principles  in  words,  but  in 
effect  considerably  relaxed  the  rule.  If 
those  cases  stood  alone,  or  if  there  was  no 
later  case,  there  would  be  some  room  for 
doubt  what  the  rule  should  be.  The 
very  recent  case,  however,  of  Bramhall  v. 
Flood  41  Conn.  72,  fully  and  distinctly 
reasserts  the  rule  laid  down  in  the  earlier 
cases.  It  is  there  held  that  the  mortgage 
must  truly  describe  the  del)t  intended  to 
be  secured,  and  that  it  i.s  not  sufficient 
that  the  debt  be  of  such  a  character  that 
it  mitiht  have  been  secured  by  the  mort- 
gage had  it  been  truly  described.  In  most 
of  the  .states,  a  morlgago  like  the  one  be- 
fore us,  reciting  a  spccilic  indebtedness, 
bnt  given  in  fact  to  secure  advances  or 
indorsements  thereafter  to  be  made,  is  a 


valid  security,  and  would  be  good  to  se- 
cure the  $6,000  actually  advanced  before 
other  incumbrances  were  placed  upon  the 
property." 

Where  the  mortgagor,  being  insolvent, 
made  a  mortgage  to  secure  a  note  of 
$2,600  to  a  creditor  to  whom  he  was  in- 
debted in  the  sum  of  $1,500,  and  who  was 
surety  for  him  in  the  sum  of  $1,100  more, 
the  mortgage  was  held  a  valid  security 
for  the  $1,500,  but,  as  against  the  mort- 
gagor's creditors,  not  for  the  part  which 
was  intended  to  indemnify  the  mortgagee 
against  his  liabilities  as  surety,  because 
that  is  a  claim  not  described  in  the  mort- 
gage ;  and  the  real  nature  of  the  transac- 
tion should  appear  in  the  condition  of  the 
mortgage.  San  ford  v.  Wheeler,  13  Conn. 
165.  On  this  principle  the  same  court 
held,  in  North  i;.  Belden,  13  Conn.  376, 
that  a  mortgage  to  secure  a  note  of  $500, 
when  in  fact  the  mortgage  was  intended 
as  security  for  such  indorsements  as  the 
mortgagee  might  make  for  the  mortgagor 
to  that  amount,  and  which  were  actually 
made  and  the  notes  paid  by  the  mort- 
gagee, was  not  valid  against  subsequent 
incumbrances.  And  so  a  condition  to  pay 
all  notes  which  the  mortgagee  might  in- 
dorse or  give  for  the  mortgagor,  and  all 
receipts  which  the  mortgagee  might  hold 
against  the  mortgagor,  was  held  to  be  too 
indefinite  and  uncertain  to  make  the  mort- 
gage valid  against  bubscipicnt  parties  in 
interest.  There  is  nothing  to  limit  tlie 
liability,  or  to  give  others  the  means  of 

271 


§  367  a.]  THE    DEBT   SECURED. 

a  deed  was,  that  "  in  case  the  grantor  pays  to  the  grantee  the 
sum  of  $1,600,  with  interest,  on  or  before  the  first  of  January, 
18i3,  then  this  deed  shall  be  void  and  of  no  effect,  otherwise  to 
remain  in  full  force,"  and  the  grantor  then  owed  the  grantee 
about  $1,100,  and  it  was  agreed  that  the  grantee  should  advance 
him  a  further  sum  to  make  up  the  full  amount  of  the  mortgage, 
it  was  held  that  the  condition  sufficiently  described  the  nature 
and  character  of  the  indebtedness  to  be  secured,  to  constitute  a 
valid  security  against  subsequent  incumbrances. ^ 

A  mortgage  conditioned  for  the  payment  of  all  sums  due  and 
to  become  due  is  sufficiently  certain.^  So  is  a  mortgage  to  "  se- 
cure all  past  indebtedness  due  and  owing  "  from  the  mortgagor  to 
the  mortgagee.^  A  mortgage  conditioned  to  pay  the  mortgagee 
"what  I  may  owe  him  on  book"  was  construed  to  refer  to  future 
accruing  accounts,  upon  its  appeai'ing  that  there  was  no  account 
subsisting  between  the  parties  when  the  mortgage  was  given.^ 
Upon  its  appearing  that  the  mortgage  was  given  in  part  to  cover 
future  advances,  the  burden  is  upon  the  mortgagee  to  show  what 
advances  have  been  made.^ 

But  it  is  not  to  be  inferred  that  it  is  generally  essential  that 
the  amount  of  the  intended  advances  should  be  stated,  or  in  any 
way  limited.  On  the  contrary,  by  the  weight  of  authority,  mort- 
gages to  secure  indefinite  future  advances  are  valid.^ 

A  mortgage  for  future  advances  may  be  made  a  continuing 
securit}^  for  advances  made  at  any  time,  so  that  when  advances 
have  been  made  to  the  amount  limited  by  the  mortgages,  and 
these  are  paid  either  wholly  or  in  part,  the  mortgage  will  continue 
as  a  security  for  new  advances  within  the  limit  named.'^ 

367  a.  Parol  evidence  is  admissible  to  identify  the  future 
advances  intended  to  be  secured  by  a  mortgage.  Though  the 
mortgage  on  its  face  is  for  the  payment  of  a  specific  sum  of 
money,  parol  evidence  is  admissible  to  show  that  it  was  really  in- 
tended to  secure  future  advances  to  be  made  from  time  to  time.^ 

finding  out  the  extent  of  it.     Pettibone  v.  ^  See  §§  373-375  ;  Jarratt  v.  McDaniel, 

Griswold,  4  Conn.  158.  32   Ark.   598;     Brewster  v.   Clamfit,   33 

These  Connecticut  cases,  however,  are  Ark.  72. 

without  general  support  elsewhere.  ''  Douglass   v.  Reynolds,  7    Pet.    113; 

1  Bacon  v.  Brown,  19  Conn.  29.  Brown  v.  Kiefer,  71  N.  Y.  610;  Shores  v. 

2  Michigan  Insurance  Co.  v.  Brown,  11  Doherty,  65  Wis.  153;  Jones  on  Chattel 
Mich.  266.  Mortgages,  §  94. 

3  Machette  v.  Wanless,  1  Colo.  225.  8  §§    352^    357  a ;    Shirras    v.  Caig,    7 

*  McDaniels  v.  Colvin,  16  Vt.  300.  Cranch,  34  ;   McKinster  v.  Babcock,  26  N. 

*  Fisher  v.  Otis,  3  Chaud.  (Wis.)  83.  Y.  378 ;  Wilkerson  v.  Tillman,  66  Ala.  .532. 

272 


FUTURE   ADVANCES.  [§§  368,  369. 

A  mortgage  made  by  a  married  woman  as  security  for  sales  of 
goods  to  be  made  by  the  mortgagee  to  her  husband  may  be  shown 
by  parol  evidence  to  have  been  intended  to  secure  sales  made  to 
the  husband  by  a  firm  of  which  the  mortgagee  was  a  member.^ 

368.  Advances  made  after  notice  of  subsequent  liens  upon 
the  same  premises,  according  to  some  authorities,  create  a  lien 
subordinate  to  such  subsequent  liens.^  As  will  be  presently  no- 
ticed, this  general  proposition  is  subject  to  qualifications ;  but 
whenever  a  subsequent  mortgage  has  precedence,  as  a  general 
rule  a  subsequent  judgment  has  precedence  under  like  circum- 
stances ;  2  but  a  mortgage  for  future  unlimited  advances  is  good 
agaifist  all  advances  made  before  recovery  of  the  judgment.*  Ad- 
vances covered  by  a  mortgage  have  preference  over  the  claims 
of  junior  incumbrancers,  who  have  become  such  with  notice  of  an 
agreement  under  the  mortgage  for  the  advances.^  Mortgages  to 
secure  future  advances  or  liabilities  are  valid  and  fixed  securities 
against  subsequent  purchasers,  or  attaching  creditors  of  the  mort- 
gagor, although  the  advances  are  made  or  the  liabilities  assumed 
after  the  record  of  such  later  deeds  or  attachments  ;  and  although 
it  is  optional  with  the  mortgagee  whether  he  will  make  such  ad- 
vancements or  assume  such  liabilities  or  not,  if  they  are  made 
or  assumed  in  good  faith,  and  without  notice  of  any  subsequent 
intervening  incumbrance.*^ 

369.  But  where  the  mortgagee  is  not  bound  to  make  the 
advances  or  assume  the  liabilities,  and  he  has  actual  notice 
of  a  later  incumbrance  upon  the  property  for  an  existing  debt 

"1  Hall  V.  Tay,  131   Mass.   192.     Eadi-  der  v.  Lawlcr,  17  Ohio,  371;  Hughes  v. 

cott,  J.,   said:    "We  can  see   no  reason  Worlej,  I  Bibb  (Ky.),  200;  Bell  v.  Flem- 

■why,  in  tlic  absence  of  any  specific  state-  ing,  12  N.  J.  Eq.  13,  490;  Hall  v.  Grouse, 

ment  in  the  mortgage  as  to  the  character  13  Hun  (N.  Y.),  557;  Todd  r.  Outlaw,  79 

of  the  advances,  parol  evidence  may  not  N.  C.  235. 

be  introduced  to  identify  and  prove  what  ^  Brinkerhoff  v.  Marvin,  5  Johns.  (N. 

advances  were  in  fact  intended   by   the  Y.)  Ch.  320;   Craig  v.  Tappin,  2   Sandf. 

parties.    It  is  competent  for  the  purpose  (N.  Y.)  Ch.  78  ;    Yelverton   v.  Shelden, 

of  showing  the  actual  consideration.  There  lb.  481  ;  Goodhue  v.  Berrien,  lb.  G30. 

certainly  would  be  no  objection  to  it  if  *  Robinson  v.  Williams,  22  N.  Y.  380. 

the  mortgage  had  been  made  in  the  same  ^  Kramer    v.    Farmers'   &   Mechanics' 

terms  to  the  firm  by  name.     And  if  made  Bank  of  Steubenville,  15  Ohio,  253 ;  Trus- 

to  one  of  the  firm  for  the  benefit  of  the  cott  v.  King,  6  N.  Y.  147. 

firm,  and  in  consequence  thereof  the  ad-  •*  Crane  v.  Deming,  7  Conn.  387  ;  Mc- 

Yances  were  made  by  the  firm,  evidence  Daniels  v.  Colviu,  16  Vt.  300;  Shirras  v. 

of  the  actual  advances  made  by  the  firm  Caig,  7   Cranch,  34 ;  Conard  v.   Atlantic 

would  be  competent."  Ins.  Co.  1   Peters,  38G;  Truseott  v.  King, 

2  Frye  v.  Bank  of  111.  IJ  111.  :U)7  ;  Spa  G  Barb.  (N.  Y.)  .340. 

VOL.  I.  f  18  273 


§  370.]  THE  DEBT   SECURED. 

or  liability,  such  later  incumbrance  will  take  precedence~of  the 
mortgage  as  to  all  advances  made  after  such  notice.^  Whether 
constructive  notice  by  the  record  of  the  later  incumbrance  should 
have  the  same  effect  as  actual  notice,  and  whether  the  option  of 
the  mortgagee  to  make  the  advances  should  operate  to  give  the 
mortgage  effect  as  to  subsequent  incumbrances  only  from  the  time 
the  advances  are  in  fact  made,  are  questions  upon  which  the  cases 
are  not  agreed.^  A  mortgage  was  made  to  secure  the  mortgagee 
for  his  liability  as  indorser  of  such  notes  as  the  mortgagor  might 
desire  him  to  indorse  within  a  certain  time  and  amount,  and  at  his 
option  to  do  so.  A  second  mortgage  in  similar  terms  was  made 
to  another  indorser.  It  was  held  that  the  first  mortgagee,  for  such 
indorsements  as  he  made  after  actual  notice  of  the  incumbrance 
of  the  second  mortgage,  and  of  the  indorsements  made  under  the 
security  of  it,  should  be  postponed  to  such  claims  under  the  sec- 
ond mortgage.^  The  principle  of  the  decision  is,  that  the  mort- 
gagee not  being  hound  by  his  contract  to  make  the  indorsements 
or  future  advances,  the  equity  of  a  junior  incumbrancer  for  an 
existing  debt,  or  of  an  attaching  creditor,  will  intervene  and  take 
precedence  of  any  advances  made  or  liabilities  incurred  after  ac- 
tual notice  of  the  subsequent  lien.  Such  junior  incumbrancer  or 
creditor  acquires  a  lien  upon  the  property  as  it  then  is  ;  and  as  it 
is  optional  with  the  prior  mortgagee  whether  he  will  advance  or 
indorse  any  further,  he  is  not  allowed  knowingly  to  prejudice  the 
rights  of  subsequent  incumbrancers,  or  destroy  their  lien,  by  add- 
ing voluntarily  to  his  own  incumbrance.  They  have  an  equity 
superior  to  his  right  to  make  further  advances. 

370.  A  mortgage  for  obligatory  advances  is  a  lien  from 
its  execution.  If  by  the  terms  of  the  mortgage  an  obligation  is 
imposed  upon  the  mortgagee  to  make  the  advances,  the  mortgage 
will  remain  security  for  all  the  advances  he  is  required  to  make, 
although  other  incumbrances  may  be  put  upon  the  property  be- 
fore they  are  made,  and  he  has  knowledge  of  such  incumbrances.^ 

1  Boswell  V.  Goodwin,  31  Conn.  74;  *  Nelson  v.  Iowa  Eastern  R.  R.  Co.  8 
Ladue  v.  Detroit  &  Milwaukee  R.  R.  Co.  Am.  Railroad  Rep.  82 ;  Moroney's  Ap- 
13  Mich. 380, and  cases  cited;  Brinkmeyer  peal,  24  Pa.  St.  372  ;  Lyle  v.  Ducomb,  5 
?;.  Browneller,  55  Ind.  487;  S.  C  4  Cent.  Binn.  (Pa.)  585;  Wilson  v.  Russell,  13 
L.  J.  370;  Ripley  v.  Harris,  3  Biss.  199;  Md.  494;  Griffin  v.  Burtnett,  4  Edw.  (N. 
National  Bank  v.  Gunhouse,  17  S.  C.  489  ;  Y.)  673;  Crane  v.  Deming,  7  Conn.  387  ; 
Seaman  v.  Fleming,  7  Ricli.  Eq.  (S.  C.)  Brinkmeyer  v.  Helbling,  57  Ind.  435; 
283.  Brinkmeyer  v.  Browneller,  supra;  Love- 

2  See  §  372.  lace   v.  Webb,   62   Ala.  271  ;  Ackerman 

3  Boswell  V.  Goodwin,  supra,  v.  Hunsicker,  21  Hun  (N.  Y.),  53. 

274 


FUTURE   ADVANCES. 


[§  371. 


Thus,  where'  a  raih-oad  company  made  a  mortgage  to  a  trustee 
upon  all  its  property  then  owned,  or  afterwards  to  be  acquired, 
to  secure  bonds  which  the  company  had  agreed  to  issue  to  a  con- 
tractor in  part  payment  for  the  building  of  its  road,  it  was  held 
that  the  mortgage  took  precedence  of  a  lien  for  material  after- 
wards furnished  the  company,  and  used  upon  the  road,  although 
the  advances  were  made  after  notice  of  the  material-man's  claim 
of  a  lien.i 

371.  Hopkinson  v.  Rolt.^  —  The  question  in  this  case  was 
accurately  and  tersely  stated  by  Lord  Chancellor  Chelmsford  in 
the  judgment  appealed  from :  "  A  prior  mortgage  for  present  and 
future  advances  ;  a  subsequent  mortgage  of  the  same  description  ; 
each  mortgagee  has  notice  of  the  other's  deeds;  advances  are 
made  by  the  prior  mortgagee  after  the  date  of  the  subsequent 
mortgage,  and  with  full  knowledge  of  it :  is  the  prior  mortgagee 
entitled  to  priority  for  these  advances  over  the  antecedent  advance 
made  by  the  subsequent  mortgagee  ?  "  In  Gordon  v.  Graham  ^ 
this  question  was  answered  aflBrmatively ;  but  the  House  of  Lords 
overruled  this  case,  and  answered  the  question  in  the  negative. 
Lord  Chancellor  Campbell  forcibly  presents  the  argument  for  this 
view  of  the  question.* 

with  his  own.  The  consequence  certainly 
is,  that  after  executing  such  a  mortgage 
as  we  are  considering,  the  mortgagor,  by 
executing  another  such  mortgage,  and 
giving  notice  of  it  to  the  first  mortgagee, 
may  at  any  time  give  a  preference  to  the 
second  mortgagee,  as  to  subsequent  ad- 
vances, and,  as  to  such  advances,  reduce 
the  first  mortgagee  to  the  rank  of  puisne 
incumbrancer.  But  the  first  mortgagee 
will  have  no  reason  to  complain,  knowing 
tliat  this  is  his  true  position,  if  he  chooses 
voluntarily  to  make  further  advances  to 
the  mortgagor.  The  second  mortgagee 
cannot  be  charged  with  any  fraud  upoa 
the  first  mortgagee,  in  making  the  ad- 
vances, with  notice  of  the  first  mortgage  ; 
for,  by  the  hypothesis,  each  has  notice  of 
the  security  of  the  other,  and  the  first 
mortgagee  is  left  in  full  possession  of  his 
option  to  make  or  to  refuse  further  ad- 
vances as  he  may  deem  it  prudent.  The 
hardship  upon  bankers  from  this  view  of 
the  subject  at  once  vanishes,  when  we  con- 
sider that  the  security  of  the  first  mort- 

275 


1  Nelson  v.  Iowa  Eastern  R.  R.  Co. 
8  Am.  Railroad  Rep.  82. 

2  9  H.  L.  C.  514. 

3  See  §  365.  This  decision  had  previ- 
ously been  questioned  by  Mr.  Coventry, 
in  a  note  to  Powell  on  Mort.  534,  note  (e), 
and  by  Lord  St.  Leonards,  2  Dru.  &  War. 
431 ;  S.  C.  6  H.  L.  C.  589,  597. 

*  Hopkinson  v.  Rolt,  supra.  "  The  first 
mortgagee  is  secure  as  to  past  advances, 
and  he  is  not  under  any  obligation  to 
make  any  further  advances.  He  has  only 
to  hold  his  hand  when  asked  for  a  further 
loan.  Knowing  the  extent  of  the  second 
mortgage,  he  may  calculate  that  the  he- 
reditaments mortgaged  are  an  ample  se- 
curity to  the  mortgagees  ;  and  if  he  doubts 
this,  he  closes  his  account  with  the  mort- 
gaf;or,  and  looks  out  for  a  better  security. 
The  benefit  of  the  first  mortgage  is  only 
lessened  by  the  amount  of  any  interest 
which  the  mortgagor  afterwards  conveys 
to  another,  consistent  with  the  rights  of 
the  first  mortgagee.  Thus  far  the  mort- 
gagor ia   entitled   to  do  what  he  pleases 


§  372.]  THE   DEBT   SECURED. 

372.  A  prior  mortgagee  is  aflFected  only  by  actual  notice  of 
a  subsequent  mortgage,  and  not  by  constructive  notice  from  the 
recording  of  the  second  mortgage.  Such,  it  is  conceived,  is  the 
rule,  supported  by  reason  and  the  weight  of  authority.^  Where 
a  person  having  mortgaged  land  to  secure  a  present  loan  and  also 
future  advances,  afterwards  declared  a  homestead  upon  it,  and 
subsequently  obtained  further  advances  without  disclosing  the 
fact  that  he  had  declared  a  homestead,  the  mortgagee  was  pro- 
tected as  to  such  advances  made  on  the  faith  of  the  security .2 
The  recording  of  the  declaration  is  not  notice  to  the  prior  mort- 
gagee. Nothing  short  of  actual  notice  to  the  mortgagee  of  such 
declaration  would  affect  him.  It  is  elsewhere  observed  that  the 
recording  acts  give  notice  to  subsequent  purchasers  and  incum- 
brancers, and  do  not  affect  those  whose  rights  are  already  fixed 
by  the  previous  record  of  their  own  deeds.^  Whether  the  mort- 
gage intended  to  secure  future  advances  discloses  the  nature  of 
the  transaction  or  not,  there  is  no  good  reason  why  it  should  not 
remain  a  valid  security  for  all  advances  that  may  be  made,  until 
the  mortgagee  receives  actual  notice  of  subsequent  claims  upon 
the  property.  The  burden  of  ascertaining  the  amount  of  an  ex- 
isting incumbrance  should  rest  upon  him  who  takes  a  conveyance 
of  the  property  subject  to  the  mortgage.  He  has  notice  by  the 
record  of  the  existence  of  a  mortgage  for  the  full  amount  of  the 
intended  advances ;  and  if  he  wishes  to  stop  the  advances  where 
they  are  at  the  time  of  recording  his  subsequent  deed,  it  is  only 
reasonable  to  require  him  to  give  actual  notice  of  his  claim  upon 
the  property  ;  otherwise^  he  should  not  be  heard  to  complain  that 

gage  is  not  impaired  without  notice  of  a  29  Conn.  282.     In   the   latter  case,  how- 
second,  and  that  when  this  notice  comes,  ever,  the  advances  were  obligatory, 
the  bankers  have  only  to  condder,  as  they  ^  /„  re  Haake,  7  N.  B.  E.  61,  71  ;  S.  C. 
do,  as  often  as  they  discount  a  bill  of  ex-  2  Sawyer,  231,  241. 

change,  what  is  the  credit  of  their  cus-  ^  See  §  562.     See  article  on  this  sub- 

tomer,  and  whether  the  proposed  transac-  ject,  11  Am.  Law  Reg.  N.  S.  273,  by  Judge 

lion  is  likely  to  lead  to  profit  or  to  loss."  Mitchell,  the  learned  editor,  who  in  con- 

1  McDaniels  y.Colvin,  16 Vt.300;  Trus-  elusion  remarks:  "So  far  as  we  may  ven- 

cott  V.  King,  6  Barb.  (N.  Y.)  147,  346;  ture   a    personal    opinion,   therefore,   we 

S.  C.  6  N.  Y.   166;  "Ward  v.  Cooke,  17  think  the  rule,  that  the  recording  of  the 

N.  J.  Eq.  93  ;  Eobinson  v.  Williams,  22  second  mortgage  is  not  notice  to  the  first 

N.  Y.  380 ;  Wilson  v.  llussell,  13  Md.  494  ;  mortgagor,  is  supported  by  the  better  rea- 

Nelson  v.  Boyce,  7  J.  J.  Marsh.   (Ky.)  sons,  and  that  the  weight  of  authority  is 

401  ;  M'Carty  v.  Chalfant,  15  W.  Va.  514,  still  in  its  favor,  though  we  are  bound  to 

548,  per  Haymond,  J.,  but  point  not  de-  concede  that  of  late  there  is  an  apparent 

cided;  Rowan  v.  Sharps'  Rifle  Man.  Co.  tendency  to  the  opposite  rule." 
276 


FUTURE  ADVANCES. 


[§  372. 


the  prior  incumbrance  amounts  at  any  future  time  to  the  full  sum 

for  which  it  appeared  of  record  to  be  an  incumbrance.^ 

Nevertheless,  there  are  some  authorities  to  the  effect  that  the 

first  mortgagee  has  constructive  notice  of   the  second  mortgage 

from  the  record  of  it.^     This  position  is  supported  by  Mr.  Justice 

Christiancy,   of  Michigan,  in    an   elaborate  opinion,    in   which  a 

mortgage  for  future  optional  advances  is  treated  as  effectual  only 

from  the  time  the  advances  are  actually  made.^ 

to  bind  either  of  the  parties,  till  subse- 
quently assented  to  or  adopted  by  both." 

As  to  the  inconvenience  which  is  sup- 
posed to  result  to  the  first  mortgagee  by 
requiring  him  to  examine  the  record  every 
time  he  makes  advances  upon  such  a 
mortgage,  the  learned  judge  says  :  "  It  is, 
at  most,  but  the  same  inconvenience  to 
which  all  other  parties  are  compelled  to 
submit  when  they  lend  money  on  the  se- 
curity of  real  estate,  —  the  trouble  of  look- 
ing to  the  value  of  the  security.  But,  in 
truth,  the  inconvenience  is  very  slight. 
Under  any  rule  of  decision  they  would  be 
compelled  to  look  to  the  record  title  when 
the  mortgage  is  originally  taken.  At  the 
next  advance  they  have  only  to  look  back 
to  this  period;  and  for  any  future  ad- 
vance, only  back  to  the  last,  which  would 
generally  be  but  the  work  of  a  few  min- 
utes, and  much  less  inconvenience  than 
they  have  to  submit  to  in  their  ordinary 
daily  business  in  making  inquiries  as  to 
the  responsibility,  the  signatures,  and 
identity  of  the  parties  to  commercial  pa- 
per. But  if  there  be  any  hardship,  it  ia 
one  which  they  can  readily  overcome  by 
agreeing  to  make  the  advances ;  in  other 
words,    by   entering   into    some  contract 


1  Lovelace  v.  "Webb,  62  Ala.  271,  an 
important  case.  A  mortgage  which  ex- 
pressly provides  that  it  shall  secure  any 
future  indebtedness  of  the  mortgagor  to 
the  mortgagee  on  account  of  sales  of 
goods,  or  that  may  arise  iu  any  other 
manner,  will  secure  the  payment  of  debts 
of  the  mortgagor  of  a  ditferent  nature 
from  the  debts  which  the  mortgage  was 
primarily  given  to  secure,  Freiberg  v. 
Magale  (Tex.),  7  S.  W.  Rep.  684. 

2  Spader  v.  Lawler,  17  Ohio,  371,  by 
a  divided  court  ;  Bank  of  Montgomery 
County's  Appeal,  36  Pa.  St.  170;  S.  C. 
sub  nomine  Parker  v.  Jacoby,  3  Grant's 
(Pa  )  Cas.  300  ;  Ter-Hoven  v.  Kerns,  2  Pa. 
St.  96;  Stone  v.  Welling,  14  Mich.  514; 
Griffin  V.  New  Jersey  Oil  Co.  11  N.  J.  Eq. 
49  ;  Fryev.  Bank  of  111.  11  111.  367,  381  ; 
Ketcham  v.  Wood,  22  Hun  (N.  Y.),  64. 

This  question  was  discussed  but  not  de- 
cided in  Boswell  v.  Goodwin,  31  Conn.  74; 
S.  C.  12  Am.  Law  Reg.  79,  note  by  Judge 
Kedtield  ;  and  see  11  lb.  I. 

3  Ladue  v.  Detroit  &  Milwaukee  R.  R. 
Co.  13  Mich.  380.  He  says:  "The  in- 
strument can  only  take  effect  as  a  mort- 
gage or  incumbrance  from  the  time  when 
pome  debtor  liability  shall  be  created,  or 


some  binding  contract  is  made,  which  is     for    the    performance   of    which,   by   the 


to  be  secured  by  it.  Until  this  takes  place, 
neither  the  land,  nor  the  parties,  nor  third 
persons,  are  bound  by  it.  It  constitutes, 
of  itself,  no  binding  contract.  Either 
party  may  disregard  or  repudiate  it  at  his 
pleasure.  It  is  but  a  jiart  of  an  arrange- 
ment merely  contem[)lated  as  probal)le, 
and  which  can  only  be  rendered  effectual 
by  the  future  consent  and  further  acts  of 
the  parties.  It  is  hut  a  kind  of  conditional 
proposition,  neither  binding  nor  intended 


other  party,  the  mortgage  may  operate  as 
a  security.  They  can  hardly  be  heard  to 
complain  of  it  as  a  hardship,  that  the 
courts  refuse  to  give  them  the  benefits  of 
a  contract,  which,  from  prudential  or 
other  considerations,  they  were  unwilling 
to  make,  and  did  not  make  until  after  the 
rights  of  otiier  parties  have  intervened. 
Courts  can  give  effect  only  to  the  con- 
tracts the  parties  have  made,  and  from 
the  time  they  took  effect." 

277 


§  373.]  THE  DEBT   SECURED. 

When  there  is  no  obligation  upon  the  mortgagee  to  make  the 
advances,  and  the  amount  of  them  and  the  times  when  they  are 
to  be  made  are  not  agreed  upon,  some  authorities  hold  that  the 
mortgage  is  a  lien,  as  against  intervening  incumbrances,  only  from 
the  time  the  advances  upon  it  are  made,  and  not  from  the  time 
of  the  execution  of  the  mortgage.^  This  was  the  decision  with 
reference  to  a  mortgage  given  to  secure  the  payment  of  notes  and 
bills  to  be  discounted  for  the  mortgagor,  and  for  all  liabilities  of 
every  kind  he  might  be  under  to  the  mortgagee.^  When  a  mort- 
gage is  given  to  secure  future  accommodation  indorsements,  the 
amount  of  which  is  wholly  undefined,  a  subsequent  mortgage  or 
deed  taken  in  good  faith  is  held  to  have  precedence  over  the  prior 
mortgage  as  to  any  indorsements  made  afterwards.^ 

373.  The  rule  that  a  mortgage  for  definite  advances  has 
priority  in  all  cases  has  strong  support  in  recent  discussions. 
Notwithstanding  all  the  distinctions  and  refinements  which  have 
been  introduced  into  the  law  of  this  subject  by  the  many  conflict- 
ing adjudications  upon  it,  there  is  strong  reason  and  authority 
for  the  rule  that  a  mortgage  to  secure  future  advances,  which  on 
its  face  gives  information  enough  as  to  the  extent  and  purpose  of 
the  contract,  so  that  any  one  interested  may  by  ordinary  diligence 
ascertain  the  extent  of  the  incumbrance,  whether  the  extent  of 
the  contemplated  advances  be  limited  or  not,  and  whether  the 
mortgagee  be  bound  to  make  the  advances  or  not,  will  prevail 
over  the  supervening  claims  of  purchasers  or  creditors,  as  to  all 
advances  made  within  the  terms  of  such  mortgage,  whether  made 
before  or  after  the  claims  of  such  purchasers  or  creditors  arose, 
or  before  or  after  the  mortgagee  had  notice  of  them.  If  the 
mortgage  contains  enough  to  show  a  contract  between  the  parties, 
that  it  is  to  stand  as  a  security  to  the  mortgagee  for  such  indebt- 
edness as  may  arise  from  the  future  dealings  between  the  parties, 
it  is  sufficient  to  put  a  purchaser  or  incumbrancer  on  inquiry, 
and  if  he  fails  to  make  it  he  is  not  entitled  to  protection  as  a 
bond  fide  purchaser.  Such  a  mortgage  is  considered  as  good 
against  subsequent  incumbrances  to  the  full  amount  of  the  ad- 
vances provided  for,  and  the  mortgagee  is  held  to  have  a  right  to 
rely  upon  it,  and  to  make  such  advances  without  regard  to  what 

1  Nicklin  v.  Betts  Spring  Co.  11  Oreg.  52  lb.  458;  Parker  v.  Jacoby,  3  Grant's 
406;  50  Am.  Eep.  477.  (Pa.)  Cas.  300. 

2  Bank  of  Montgomery  County's  Ap-  3  Babcock  v.  Bridge,  29  Barb.  (N.  Y.) 
peal,  36  Pa.  St.  170  ;  McClure  v.  Koman,  427 

278 


FUTURE  ADVANCES. 


[§  373. 


other  incumbrances  may  afterwards  have  been  put  upon  the  prop- 
erty.^ 

This  view  of  the  doctrine  of  mortgages  to  secure  future  ad- 
vances is  strongly  expressed  by  Mr.  Justice  Campbell  in  a  recent 
case  in  Mississippi.^ 

1  Kejeav.  Bump,    59  Vt.   391  ;  9  Atl.     and  purpose   of  the    contract,   so  that  a 
Kep.   598;  Lewis  v.  Hartford  Silk  Man-     purchaser  or  junior  creditor  may,  by  an 

inspection  of  the  record,  and  by  ordinary 
diligence  and  common  prudence,  ascertain 
the  extent  of  the  incumbrance,  will  pre- 
vail over  the  supervening  claim  of  such 
purchaser  or  creditor  as  to  all  advances 
made  by  the  mortgagee  within  the  terms 
of  such  mortgage,  whether  made  before 
or  after  the  claim  of  such  purchaser  or 
creditor  arose.     It  is  not  necessary  for  a 


uf'g  Co.  (Conn.)  12  Atl.  Eep.  G37 ;  Frei- 
berg V.  Magale  (Tex.),  7  S.  W.  Rep.  684. 
2  Witczinski  v.  Everman,  51  Miss.  841- 
845.  He  says :  "  There  has  been  much 
diversity  of  views  between  courts  and  law 
writers  on  the  question  of  the  validity  of 
mortgages  for  future  advances,  and  the 
rights  of  mortgagees  in  such  mortgages 
as  against  purchasers  and  junior  incum- 
brancers of  the  mortgaged  property.  Some  mortgage  for  future  advances  to  specify 
have  held  that  a  mortgage  which  does  not  any  particular  or  definite  sum  which  it  is 
specify  that  for  which  it  is  given  so  to  secure.  It  is  not  necessary  for  it  to  be 
distinctly  as  to  give  definite  infonnation  so  completely  certain  as  to  preclude  the 
on  the  face  of  the  mortgage  of  what  it  necessity  of  all  extraneous  inquiry, 
secures,  so  as  to  render  it  unnecessary 
for  the  inquirer  to  look  beyond  the  mort- 
gage and  seek  information  aliunde,  is 
void  as  against  creditors  and  purchasers. 
Others  have  held  that  a  mortgage  for 
future  advances  is  valid  as  to  all  advances 
made  under  it  before  notice  by  the  mort- 
gagee of  the  supervening  rights  of  pur- 
chasers  or  incumbrancers.     Others    have     The  law  requires  mortgages  to  be  recorded 


If  it 

contains  enough  to  show  a  contract  that 
it  is  to  stand  as  a  security  to  the  mort- 
gagee for  such  indebtedness  as  may  arise 
from  future  dealings  between  the  parties, 
it  is  sufficient  to  put  a  purchaser  or  in- 
cumbrancer on  inquiry,  and  if  he  fails  to 
make  it  in  the  proper  quarter,  he  cannot 
claim  protection  as  a  bond  fide  purchaser. 


announced  that  a  mortgage  for  future 
advances  to  be  made,  or  liability  to  be  in- 
curred, when  duly  recorded,  is  valid  as  a 
security  for  indebtedness  incurred  under 
it,  in  accordance  with  its  terms.  There 
have  been  suggested  modifications  of 
these  views,  and  a  distinction  has  been 
drawn  between  mortgages  in  which  the 
mortgagee  is  obligated  to  advance  a  given 
Bnm  and  those  in  which  he  is  not  so 
bound.  We  decline  to  follow  the  devious 
ways  to  which  we  are  pointed  by  conflict- 
ing adjudications  and  suggestions,  and 
prefer  to  pursue  the  plain  path  in  which 
principle  directs  us,  and  will  declare  the 
rule  to  be  observed  in  the  courts  of  this 
state  on  the  subject  under  consideration, 
which,  stranijely    enough,    has    not  been 


for  the  protection  of  creditors  and  pur- 
chasers. When  recorded,  a  mortgage  is 
notice  of  its  contents.  If  it  gives  informa- 
tion that  it  is  to  stand  as  security  for  all 
future  indebtedness  to  accrue  from  the 
mortgagor  to  the  mortgagee,  a  person  ex- 
amining the  record  is  put  upon  inquiry  as 
to  the  state  of  dealing  between  the  parties, 
and  the  amount  of  indebtedness  covered 
by  the  mortgage,  and  is  duly  advised  of 
the  right  of  the  mortgagee,  by  the  terms 
of  the  mortgage,  to  hold  the  mortgaged 
property  as  security  to  him  for  such  in- 
debtedness as  may  accrue  to  him.  Thus 
informed,  it  is  the  folly  of  any  one  to  buy 
the  mortgaged  property,  or  take  a  mort- 
gage on  it,  or  give  credit  on  it ;  and  if  he 
does  so,  his  claim  must  be  subordinated  to 


heretofore  decided  in  this  .state.  A  mort-  the  paramount  right  of  tlio  senior  mort- 
gage to  secure  future  advances,  which  on  gagee,  who,  in  thus  securing  himself  by 
ts  face  gives  information  as  to  the  extent     mortgage,  and  filing  it  for  record,  as  rc- 

279 


§  374.]  THE   DEBT    SECURED. 

374,  It  is  not  necessary  that  the  mortgage  should  express 
on  its  face  that  it  is  given  to  secure  future  advances.  It  may 
be  given  for  a  specific  sum,  and  it  will  then  be  security  for  a 
debt  to  that  amount.^  This  definite  sum  will  then  limit  the  ex- 
tent of  the  lien.  There  must  be  some  limit  to  the  amount  which 
the  mortgage  is  to  secure,  either  by  express  limitation  or  by  stat- 
ing generally  the  object  of  the  security.  If  the  limit  be  not  de- 
fined in  any  way,  it  can  be  good  only  for  the  advances  made 
at  the  time,  and  such  others  as  may  afterwards  be  made  before 
any  other  incumbrances  are  made  upon  the  property  mortgaged.^ 
The  sum  expressed  by  the  mortgage  may  cover  a  present  indebt- 
edness as  well  as  future  advances,  and  it  is  not  necessary  that  the 
one  should  be  separated  from  the  other  on  the  face  of  the  mort- 
gage.^ The  sum  or  amount  named  as  the  consideration  of  the 
mortgage  is  of  no  moment,  as  the  mortgage  stands  as  security  for 
the  amount  of  liability  or  indebtedness  incurred  under  the  con- 
tract for  advances  set  forth  in  the  condition  of  the  mortgage.  It 
is  not  essential  even  that  any  sum  be  named  in  the  consideration 
clause.* 

A  mortgage  which  in  terms  secures  a  promissory  note  for  a 
specified  amount  may  actually  be  intended  to  secure  future  ad- 
vances to  that  amount.^  If  in  such  case  the  mortgagee  assigns 
the  note  before  it  is  due  to  one  taking  it  in  good  faith,  and  with- 
out notice  that  the  note  was  given  for  future  advances,  the  as- 
quired  by  law,  has  advertised  the  world  of  Snediker,  Hoff.  145;  Townsend  v.  Em- 
his  paramount  claim  on  the  property  cov-  pire  Stone  Dressing  Co.  6  Duer,  208. 
ered  by  his  mortgage,  and  is  entitled  to  Missouri  :  Foster  v.  Eeynolds,  38  Mo. 
advance  money  and  extend  credit  accord-  553.  New  Jersey :  Griffin  v.  New  Jersey 
ing  to  the  terms  of  his  contract  thus  made  Oil  Co.  11  N.  J.  Eq.  49.  Alabama  :  For- 
with  the  mortgagor,  who  cannot  com-  syth  v.  Freer,  62  Ala.  443.  West  Virgi- 
plain,  for  such  is  his  contract;  and  third  nia:  McCarty  v.  Chalfant,  14  W.  Va.  531. 
persons  afterwards  dealing  with  him  can-  Oregon  :  Hendrix  v.  Gore,  8  Oreg.  406. 
not  be  heard  to  complain,  for  they  are  Louisiana :  Pickersgill  v.  Brown,  7  La. 
affected  with  full  notice,  by  the  record,  of  Ann.  297.  South  Carolina :  Moses  v.  Hat- 
what  has  been  agreed  on  by  the  mortgagor  field,  3  S.  E.  Kep.  538,  540,  quoting  text, 
and  mortgagee."  Followed  in  Gray  v.  -  Robinson  v.  Williams,  22  N.  Y.  380 ; 
Helm,  60  Miss.  131.  Fassett  i-.  Smith,  23  N.  Y.  252. 

Quoted   and    followed   in    Lovelace   v.         ^  TuUy  v.  Harloe,  35  Cal.    302  ;    Sum- 
Webb,  62  Ala.  271.  mers  v.   Roos,  42   Miss.  749;  Hendrix  v. 

1  Illinois :    Collins   v.   Carlisle,    13   111.     Gore,  supra ;  Evenson  v.  Bates,  58  Wis. 
254;    Darst   v.    Gale,   83   111.  136.     New     94. 

York :    Bank  of  Utica  v.  Finch,  3  Barb.         *  Keyes  v.  Bump,  59  Vt.  391 ;    9  Atl. 
Ch.  293  ;  Murray  v.  Barney,  34  Barb.  336 ;     Rep.  598. 

Craig  V.  Tappin,  2  Sandf.  Ch.  78 ;  Wes-         ^  Bassett  v.  Daniels,  136  Mass.  547. 
cott  V,   Gunn,  4  Duer,  107 ;    Walker   v. 

280 


FUTURE   ADVANCES.  [§  375. 

signee  takes  it  subject  to  no  equities  in  favor  of  the  mortgagor ; 
but  the  latter  must  pay  the  full  amount  of  the  note  upon  redemp- 
tion or  foreclosure.!  The  fact  that  the  mortgagee  in  assigning 
the  note  and  mortgage  assigns  his  "  interest "  in  them,  is  not 
notice  to  the  assignee  that  the  mortgage  was  given  to  secure 
future  advances.^ 

An  absolute  conveyance  may  be  used  to  secure  future  advances, 
or  to  secure  an  existing  debt  and  also  future  advances.  The 
agreement  to  reconvey  when  the  advances  are  repaid  is  sufficient, 
although  it  exists  in  parol  only.'^ 

375.  The  agreement  under  which  advances  to  a  certain 
amount  are  to  be  made  need  not  be  in  writing,  to  be  binding 
and  effectual  against  subsequent  liens.  Thus,  if  a  mortgage  is 
made  to  secure  future  advances  to  be  used  in  the  construction  of 
a  building  on  the  mortgaged  land,  and  a  mortgage  for  the  con- 
templated amount  is  made  and  recorded,  it  has  priority  against  a 
mechanic's  lien  for  materials  furnished  in  the  construction  of  such 
building  to  the  full  amount  of  the  mortgi^ge,  if  the  advances  are 
actually  made  to  that  amount,  although  the  agreement  under 
which  they  are  made  is  verbal  only.*  If  such  agreement  be  in 
writing  it  is  not  necessary  that  it  should  appear  of  record.^  But 
a  parol  agreement  that  a  mortgage  shall  cover  any  indebtedness 
of  the  mortgagor  to  the  mortgagee  for  goods  afterwards  to  be 
purchased,  will  not  cover  an  indebtedness  for  goods  purchased  of 
the  mortgagee  by  a  partnership  subsequently  entered  into  by  the 
mortgagor ;  for  an  indebtedness  of  the  partnership  is  not  withm 
the  terms  of  the  original  agreement.^ 

a  The  agreement  for  the  advances  must  be  contemporaneous:  a 
mortgage  cannot  be  made  available  to  secure  future  advances  by 
any  subsequent  parol  agreement,  in  preference  to  the  lien  of  a 
junior  incumbrance.'' 

1  Bassett  v.  Daniels,  136  Mass.  547.  remark.'tliat  in  each  of  these  eases  there 

2  Bassett  v.  Daniels,  supra.  was  a  written  aKreement  on  the  part  of 
8  Harper's  Appeal,  64  Penn.  St.  31.^;     the  mortgagee  binding  him  to  furnish  the 

S.  C.  7   Phila.  276;  Rhines  v.  Bainl,  41  money,  but  regard  this  circumstance  as  of 

Penn.  St.  2.'J6 ;  Kellum  i'.  Smith,  33  lb.  no  consequence.    Fully  sustained  in  Love. 

158 ;  Fessler's  Appeal,  75  lb.  483  ;  Myers's  lace  r.  Webb,  62  Ala.  271,  281. 

Appeal,  42  lb.  518.     See,  however,  Met-  ^  Taylor  v.  Cornelius,  60  Pa.  St.  187; 

ropolitHn  Bank  v.  Godfrey,  23  III.  579.  Moroney's  Appeal,  si//jra;  Thomas  v.  Da- 

*  Piatt   V.  Griffith,    2/  N.  J.  Eq.  207.  vis,  3  Phila.  (I'a.)  171. 

The  court,  citing   Moroney's   Appeal,  24  «  Parkes  v.  Purkcr,  57  Mich.  57. 

Pa.  St.  372;   Taylor  v.  La  Bar,  25  N.  J.  ">  Truscott  i'.   King,  6   N.  Y.   147,  161, 

Eq.  222;  Macintosh  v.  Thurston,  lb.  242,  per  Jewett,  J. ;  Walker  v.  Sncdiker,  Hoff. 

281 


§§  376,  377.]  THE  DEBT  SECURED. 

376.  The  omission  to  state  on  the  face  of  J  the  mortgage 
the  time  when  the  first  advances  are  to  be  made  is  not  ma- 
terial. It  is  sufficient  that  they  are  to  be  made  from  time  to 
time,  as  the  mortgagor  may  desire,  during  a  specified  period.^ 
The  amounts  of  the  several  advances,  and  the  times  when  they 
were  actually  made,  and  the  object  of  the  mortgage,  may  be 
shown  by  extrinsic  proof,  for  in  such  case  the  proof  does  not  con- 
tradict the  mortgage,  or  alter  its  legal  operation  and  effect  in  any 
way .2  Although  the  deed  purports  to  be  in  considei'ation  of  a 
definite  sum  in  hand  paid  at  the  time,  it  may  be  shown  by  parol 
evidence  that  the  deed  was  made  to  secure  advances  made  and  to 
be  made  to  that  extent.^ 

Parol  evidence  is  also  admissible  to  show  that  the  mortgage 
was  given  to  secure  advances  to  be  made  by  a  party  not  named  in 
the  mortgage.^ 

When  a  mortgage  has  been  given  in  terms  to  secure  future  ad- 
vances and  acceptances,  and  the  mortgagee,  in  a  suit  to  enforce 
the  mortgage,  produces  drafts  of  the  mortgagor  upon  him,  there 
is  no  presumption  that  the  drafts  were  drawn  against  funds  of 
the  drawer,  but  the  burden  is  upon  the  mortgagor  to  show  this  if 
he  makes  the  claim.^ 

377.  All  limitations  of  the  security  must  be  observed. 
Although,  as  already  seen,  a  mortgage  made  in  good  faith  to 
secure  future  debts  expected  to  be  contracted,  or  advances  to  be 
made  in  the  course  of  dealing  between  the  parties,  is  a  good  and 
valid  security,^  yet  if  limited  by  the  terms  of  the  mortgage,  either 
as  to  amount  or  the  time  within  which  the  advances  are  to  be 
made,  or  the  nature  of  them,  the  limitation  must  be  strictly  ob- 
served ;  thus  a  mortgage  to  secure  credits  or  advances  to  be  made 
within  a  limited  time  secures  none  made  afterwards.''' 

A  limitation  in  terms  of  the  amount  of  the  advances  to  be 
made  may  be  controlled  by  other  expressions  in  the  mortgage  as 

(N.  Y.)  145;  Hall  v.  Grouse,  13  Hun  (N.  6  United   States  v.  Hooe,  3  Cranch,  73; 

Y.),  557.  Shirras  v.  Caig,  7  Cranch,  34.     Massaclm- 

1  Wilson  V.  Kussell,  13  Md.  494;  and  setts:  Commercial  Bank  v.  Cunningham, 
see  Ahern  v.  White,  39  Md.  409.  24  Pick.  270.    New  York  :  James  v.  Morey, 

2  Hall  V.  Crouse,  supra.  2  Cow.  246,  292  ;  S.C.&  Johns.  Ch.  417  ; 

3  Foster  v.  Eeynolds,  38  Mo.  553  ;  Cole  Brinckerhoff  v.  Lansing,  4  Johns.  Ch.  65, 
V.  Albers,  1  Gill  (Md.),  412;  Moses  v.  73;  Bank  of  Utica  v.  Finch,  3  Barb.  Ch. 
Hatfield  (S.  C),  3  S.  E.  Rep.  .538,  540.  293;  Walker  v.  Snediker,  Hoff.  145;  Yel- 

*  Hall  V.  Crouse,  supra.     See  Craig  v.     verton  v.  Shelden,  2  Sandf.  Ch.  481. 
Tappin,  2    Sandf.    (N.  Y.)  Ch.  78.  '  Miller  v.  Whittier,  36  Me.  577. 

6  Lewis  V.  Wavne,  25  Ga.  167. 

'  282 


FUTURE  ADVANCES.  [§  378. 

to  the  purpose  of  the  advances ;  thus  where  the  controlling  pur- 
pose was  to  secure  advances  sufficient  to  enable  the  mortgagor  to 
raise  a  crop  of  cotton,  advances  beyond  the  sum  specified  were 
protected.^ 

If  limited  in  amount  and  time,  and  the  full  amount  be  once 
advanced  and  repaid,  and  further  loans  are  made  within  the  time 
limited,  these  are  covered  by  the  mortgage  as  against  subsequent 
purchasers.^ 

378.  If  the  mortgagee  advance  only  a  part  of  the  sum  con- 
templated in  the  mortgage,  it  is  a  valid  security  for  so  much  as 
he  does  advance,^  and  for  so  much  only.  For  the  advances  actu- 
ally made  the  mortgage  is  good  against  the  mortgagor's  assignee 
in  bankruptcy.*  Likewise  if  a  mortgage  be  given  for  a  loan  and 
for  the  price  of  lands  to  be  conveyed,  and  the  mortgagee  wrong- 
fully refuses  to  convey  the  land,  the  mortgage  can  be  enforced 
only  for  the  money  advanced.^ 

If  the  mortgagee  fails  or  refuses  to  make  any  advances  accord- 
ing to  his  agreement,  and  retains  possession  of  the  lands  under 
an  absolute  deed  intended  as  a  mortgage,  the  mortgagor  cannot 
recover  the  amount  of  the  promised  advances.  He  can  recover 
such  special  damages  as  have  resulted  from  the  mortgagee's  re- 
fusal to  make  the  advances  ;  but  in  case  no  special  damages  are 
shown,  the  mortgagor  can  recover  only  nominal  damages.*^  Of 
course  he  can  have  mortgage  or  conveyance  released. 

When  a  mortgage  is  an  open  one,  as,  for  instance,  one  made  by 
an  absolute  conveyance,  or  to  secure  undefined  future  advances, 
the  mortgagee  is  entitled  to  recover  under  it  only  so  much  as  he 
shows  affirmatively  to  be  due.  Any  doubt  and  uncertainty,  it  is 
said,  should  operate  against  the  mortgagee  and  not  in  his  favor.^ 

1  Bell  V.  RadcliflF,  32  Ark.  645.  This  decision   seems   to   be  erroneous. 

2  Wilson  r.  Russell,  13  Md.  494.  Craig,   Scott,    and    Sheldon,  JJ.,  dissent- 
*  See  Dart  v.  McAdam,  27  Barb.  187  ;     ing,  take  the  correct  view  of  the  case  when 

and  see  Freeman   v.  Auld,  44  Barb.  (N.  they  say :  "  Equity  regards  substance,  not 

Y.)  14;  Coleman  v.  Galbreath,  .W  Miss.  form.     The  substance  of  the  transaction 

303  ;  Forsyth  v.  Freer,  62  Ala.  443.     See,  was  that  there  was  but  $3,000  furnished, 

in  this   connection,   the  case  of  Walker  instead  of  $5,000,  and  the  former  was  ac- 

V.  Carleton,  97  111.  582,  where  a  loan  for  cepted  in  lieu  of  the  latter;  and  the  trust 

$5,000  had  been  agreed  upon,  and  a  note  deed    to    the  extent  of  $3,000  was  valid 

and  trust  deed  for  that  sum  executed,  and  and  euforciblc." 

the  deed   recorded,  when   the  lender  was  ■*  Scliulzc  v.  Bolting,  8  Biss.  174. 

able  to  furnish  only  $3,000  of  the  amount,  ''  Robinson  v.  Cromelein,  15  Mich.  316. 

for  whicii  sum   he  took  a  separate  note  ''  Turpic  v.  Lowe  (lud.),  15  N.  K.  Rep. 

payable  in  a  short  time.     A  majority  of  834. 

the  court  held  that  the  trust  deed  did  not  ''  Kline  /.'.  McGuckin,  25  N.J.  Eq.  433. 

secure  the  smaller  note.  283 


§  379.]  THE  DEBT   SECURED. 

III.  Mortgage  of  Indemnity. 

379.    Description  of   the  indemnity.  —  Very  mucli  of  what 
has  already  heen  stated,  in  regard  to  present  and  future  debts 
secured  by  mortgages,  is  applicable  to  mortgages  made  to  indem- 
nify a  mortgagee  against  liabilities  incurred  or  to  be  incurred  by 
him  in   behalf  of  the  mortgagor.      Mortgages  of  indemnity  are 
perhaps  most  often  given  as  security  for  liabilities  to  be  incurred 
in  the  future,  so  that  they  are  to  this  extent  mortgages  to  secure 
future  advances.     Such  mortgages  generally  declare  the  purpose 
for  which  they  are  given,  and  set  out  particularly  the  liabilities 
incurred  or  to   be  incurred   by  the  mortgagee.     But  this  is  not 
essential.     A  mortgage  given  for  a  definite  sum,  without  specify- 
ing the  liabilities  secured,  may  be  shown  by  parol  evidence  to 
have  been  given  to  indemnify  the  mortgagee  against  his  liability 
as   an   indorser  or  surety   for    the   mortgagor. i      Thus,  where  a 
mortgage  recited  that  the  mortgagor  was  indebted  to  the  mort- 
gagee in  a  certain  sum,  "  being  for  money  advanced,"  and  that 
the  mortgage  was  made  to  secure  the  payment  of  such  debt,  the 
mortgagee  was  not  precluded  from  showing  that  the  real  con- 
sideration of  the  mortgage  was  the   indorsement  by  him  of  the 
mortgagor's  note  for  that  sum.     "  The  question  of  consideration 
was  raised  by  the  defendant's  proving,  by  the  mortgagee,  that  no 
money  was  advanced  to   him.   upon   the  mortgage.      It  thus   be- 
came proper,  if  not  necessary,  to  show  what   the  real  considera- 
tion was,  and  this  was  all   that  was  done.     The  plaintiff  had  a 
valid   mortgage,  as  to  the  mortgagor."      He  would  not  be  per- 
mitted to  impeach  it  by  showing  that  the  consideration  was  not 
money  advanced  to  him,  and  shut  out  evidence  of  the  true  consid- 
eration.2     u  xhere  cannot  be  a  more  fair,  bond  fide,  and  valuable 
consideration  than  the  drawing  or  indorsing  of  notes  at  a  future 
period,  for  the  benefit  and  at  the  request  of  the  mortgagor  ;  and 
nothing  is  more   reasonable    than    the  providing  a  sufficient  in- 
demnity beforehand."  ^     It  is  undoubtedly  desirable  that  the  true 
consideration  be    fully   stated,   and   when    this   is    not  done   the 
instrument  may  be  open  to  the  suspicion  that  it  was  made  to  de- 

1  Shirras  v.  Caig,  7  Cranch,  34;  Law-  ^  Per  Tilghman,  C.  J,  in  Lyle  v.  Du- 
rence  v.  Tucker,  23  How.  U;  McKinster  comb,  5  Binu.  (Pa.)  58.5,  590.  See,  also, 
V.  Babcock.  26  N.  Y.  378;  Batik  of  Utica     Duncan  v.  Miller,  64  Iowa,  223;  Forbes 

[Finch,  3  Barb.  (X.  Y.)  Ch.  293.  v.  McCoy,    15  Neb.  .632  ;  Adams  ,v.  Nie- 

2  Per  Marvin,  J.,  in  McKinster  v.  Bab-     mann,  46_Mich.  135. 
cock,  supra. 

284 


MORTGAGE   OF   INDEMNITY.  [§  380. 

ceive  the  moitgngor's  creditors ;  but  the  t^ue  consideration  may 
in  all  cases  be  explained.^ 

380.  A  general  description  of  the  liability  is  suflQcient.  A 
mortgage  to  indemnify  an  indorser  for  liability  on  notes  to  be 
indorsed  within  two  years  from  the  date  of  the  mortgage,  to  an 
amount  not  exceeding  f  16,000  at  any  one  time,  and  a  renewal  of 
such  notes,  was  sustained  as  against  a  purchaser  from  the  moi't- 
gagee.^  A  mortgage  to  indemnify  one  for  indorsing  "  a  note  of 
f  2,000,  made  payable  to  the  order  of  the  grantor,  and  by  him 
signed  and  indorsed,"  is  not  void  for  uncertainty.  The  note  in- 
tended may  be  identified  by  parol  evidence.^  In  like  manner,  as 
under  a  mortgage  conditioned  to  indemnify  the  mortgagee  for  in- 
dorsements of  certain  notes  payable  at  two  banks  specified,  parol 
evidence  is  admissible  to  show  what  notes  had  been  indorsed  by 
the  mortgagee  and  were  intended  to  be  secured.*  A  condition  to 
indemnify  the  mortgagee  against  liability  as  surety  for  the  mort 
gagor,  a  certain  sum  being  mentioned,  be  the  debts  more  or  less, 
covers  all  debts  for  which  the  mortgagee  is  surety,  be  they  more 
or  less.^  A  mortgage  conditioned  to  save  the  mortgagee  harm- 
less for  indorsing  notes  for  the  mortgagor,  when  thereafter  re- 
quested, to  the  amount  of  $7,000,  and  also  renewal  notes,  is  not 
invalid  for  uncertainty  as  against  subsequent  incumbrances.^  Nor 
is  a  mortgage  invalid  which  is  given  to  secure  an  "  accommoda- 
tion indorser  and  signer  on  sundry  notes,  drafts,  and  bills  of 
exchange,  now  maturing  in  sundry  banks,  and  in  the  hands  of 
sundry  individuals,  to  the  amount  of  -150,000,  a  particular  de- 
scription of  which  we  are  not  able  to  give,  or  in  whose  hands 
they  are."  "'  A  recital  in  a  mortgage  that  the  mortgagee  had  in- 
dorsed two  bills  of  exchange,  when  in  fact  he  had  indorsed  only 
one,  and  had  paid  the  other  for  the  honor  of  the  drawer,  does 
not  invalidate  the  security.^  A  mortgage  for  a  definite  sum,  but 
expressed  to  be  "  given  to  secure  whatever  indebtedness  may  at 

1  McKinstcr  v.  Babcock,  20  N.  Y.  378;  or  fifteen  years  have  gone  further,  and 
Gardner  v.  Webber,  17  Pick.  (Mass.)  407,  established  the  hiw  to  be  liberal  enough  to 
414  ;  Commercial  Bank  v.  Cunningham,  sustain  mortgages  quite  as  iudctinitc  and 
24  lb.  270.  vague  as  the  present." 

2  Utley  V.  Smith,  24  Conn.  290.  The  »  Goddard  v.  Sawyer,  9  Allen  (Mass.), 
court,  Ellsworth,  J.,  said  :  "  Were  this  an  78. 

original  question,  it  would  be  difficult,  we  *  Benton  v.  Sumner,  57  N.  H.  117. 

think,  to  sustain   the  deeds  against  this  ^  Orr  v.  Hancock,  1  Root  (Conn.),  265. 

objection,  but  it  is  not ;  and  alihoujih  our  "  Kctchuni  v.  Jauncey,  23  Conn.  123. 

early  decisions  would  hold  them  void   for  ^  Lewis  v.  Do  Forest,  20  Conn.  427. 

vagueness,  our  dccihions  for  the  last  ten  ^  Fetter?;.  Cirodc,  4  B.  Mon.  (ivy.)  482. 

2«o 


§  381.]  THE   DEBT    SECURED. 

any  time  exist  from  the  mortgagor  to  the  mortgagee,"  does  not 
restrict  the  indebtedness  secured  to  such  debts  as  may  be  con- 
tracted directly  from  the  mortgagor  to  the  mortgagee,  but  in- 
cludes also  any  obligations  the  mortgagor  may  incur  by  indorsing 
the  notes  of  another  party.  The  terms  of  the  mortgage  are  broad 
enough  to  cover  any  kind  of  indebtedness.^ 

A  mortgage  made  to  indemnify  one  against  loss  by  reason  of 
his  becoming  a  surety  for  the  mortgagor,  which  provides  that  the 
property  shall  be  liable  for  "  no  more  than  $5,000,"  is  a  limita- 
tion upon  any  increase  of  the  debt  secured  above  that  amount, 
yet  interest  is  recoverable  as  an  incident  to  the  debt.^ 

A  mortgage  made  to  secure  indorsers  upon  a  note  contemplated 
to  be  discounted  at  a  particular  bank,  and  so  expressed  in  the 
deed,  is  valid,  although  the  note  be  discounted  in  a  bank  other 
than  that  named,  and  is  subsequently  transferred  to  a  third  bank. 
A  subsequent  incumbrancer  cannot  invalidate  the  mortgage  for 
this  reason,  unless  he  can  show  that  he  was  misled  by  this  de- 
scription, and  advanced  money  upon  the  land,  or  acquired  an  in- 
terest in  it  after  inquiry,  and  in  the  confidence  [that^no  such  lien 
existed."^' 

381.  All  limitations  of  the  security  must  be  observed.]'But 
if  the  sum  for  which  the  mortgage  of  indemnity  is  given  be  lim- 
ited, the  security  cannot  be  extended  beyond  that  amount.  But 
on  the  other  hand  a  mortgage  conditioned  to  be  void  upon  the 
payment  of  a  certain  sum  upon  a  note  of  another  for  a  much 
larger  amount  does  not  entitle  the  mortgagor  to  the  benefit  of 
payments  upon  the  note  by  the  promisor.*  In  order  to  create  a 
liability  upon  a  mortgage  made  to  guarantee  a  contemplated  loan 
to  another,  the  loan  must  correspond  with  the  recital  of  it  in  the 
mortgage.^ 

A  mortgage  made  to  secure  one  from  all  liability,  which  he 
may  incur  by  reason  of  his  becoming  surety  or  indorser  on  the 
notes  of  the  mortgagor,  does  not  secure  notes  given  to  the  mort- 
gagee for  money  loaned  by  him,  and  as  evidence  of  such  loan;  ^ 
and  a  mortgage  conditioned  for  the  payment  of  all  sums  of  money 

1  First  Nat.  Bank  r.  Byard,  26  N.  J.  Eq.  Ryan  v.  Shawneetown,  14  111.  20;  Grif- 
255.  fiths,  re,  1  Lowell,  431 ;  Townsend  v.  Em- 

2  Stafford  v.  Jones,  91  N.  C.  189.  pire  Stone  Dressing  Co.  6  Duer  (N.  Y.), 

3  Patterson  v.  Johnston,  7  Ohio,  225.  208. 

*  Popple  u.  Day,  123  Mass.  520.  ^  ciark    v.   Oman,    15    Gray   (Mass.), 

6  Thomas  v.  Olney,  16  HI.  53;  and  see     521. 

286 


MORTGAGE   OF  INDEMNITY.  [§  382. 

owing  by  the  mortgagor  to  the  mortgagee  as  maker  or  indorser  of 
any  notes,  bills  of  exchange,  bonds,  checks,  or  securities  of  any 
kind  given  by  him,  does  not  secure  a  debt  not  evidenced  by  an 
instrument  in  writing.^ 

382.  A  continuing  security.  —  A  mortgage  given  to  in- 
demnif}'^  an  indorser  or  surety  on  a  note  is  a  continuing  security 
for  all  renewals  of  such  note  until  it  is  finally  paid.^  So  long  as 
the  liability  continues,  the  security  continues  also.^  Although 
made  for  a  definite  sum  to  a  bank  to  secure  the  liabilities  of  a 
firm  for  the  payment  of  certain  notes,  the  bank  stipulating  to 
discharge  the  mortgage  when  the  mortgagors  should  cease  to  be 
under  any  liabilities  to  the  bank,  it  is  a  valid  security  for  new 
notes  given  to  the  bank  in  renewal  of  the  original  notes,  and  sub- 
sequent purchasers  cannot  object  to  it  because  the  agreement  of 
the  bank  was  not  recorded,  or  that  the  new  notes  were  made  or 
indorsed  by  a  new  firm,  formed  by  taking  in  another  partner.^ 
Under  a  mortgage  given  to  secure  the  maker  of  accommodation 
notes,  and  renewals  of  them  from  time  to  time,  it  is  not  necessary, 
in  order  to  constitute  the  new  notes  renewals,  that  they  should  be 
given  for  the  same  amounts  and  at  the  same  periods  as  the  orig- 
inal notes,  or  that  each  should  be  applied  to  discharge  its  immedi- 
ate predecessor .° 

A  mortgage  to  two  persons,  who  were  in  fact  copartners,  though 
not  so  described  in  the  mortgage,  intended  "  as  a  continuing  se- 
curity and  indemnity  "  for  indorsements  in  any  form  incurred 
and  to  be  incurred  for  the  mortgagors,  includes  not  merely  such 
liabilities  as  were  incurred  by  the  mortgagees  jointly  as  copart- 
ners, but  such  as  were  incurred  by  either  of  them,  separately  and 
individually.^ 

A  mortgage  to  secure  a  partnership  against  liability  for  in- 
dorsements embraces  such  a  liability  for  indorsements  made  in 

1  Walker  v.  Paine,  31  Barb.  (N.  Y.)  to  pay  the  original  note.  Ncsbit  v.  Worts, 
213;   and  see  Lauderdale  v.   Hallock,   15     37  Oiiio  St.  378, 

Miss.  (7  S.  &  M.)  622.  s  Hawkins  v.  May,  12  Ala.  673  ;  Mayer 

2  Chapman  v.  Jenkins,  31  Barb.  (N.  Y.)  v.  Grottendick,  68  Ind.  1,  quoting  text. 
164;  Brinckerhoif  v.  Lansing,  4  Johns.  *  Commercial  Bank  u.  Cunuin^^ham,  24 
(N.  Y.)  Ch.  65;  Babcock  v.  Morse,  19  Pick.  (Mass.)  270.  The  mortgage  may 
Barb.  (N.  Y.)  140.  The  protection  of  a  properly  jirovide  in  terms  that  it  shall  be 
mortgage  given  to  a  mortgagee  as  surety  a  continuing  security.  Passett  r.  Smith, 
on  the  mortgagor's  note  extends  to  a  lia-  23  N.  Y.  252. 

bility  incurn.-d    by   the  morlgiigeo  jointly         '>  Gault  v.  McGrath,  32  Pa.  St.  392. 
with  the  mortgagor  for  money  borrowed         "^  National  Bank  v.  Biglor,  83  N.  Y.  51. 

287 


§  383.]  THE   DEBT   SECURED. 

the  name  of  the  firm  after  the  secret  withdra-wal  of  one  of  its 
members.^ 

An  assignment  -  of  a  mortgage  of  indemnity  carries  only  the 
right  to  recover  the  amount  for  which  the  mortgagee  could  then 
enforce  it.  The  assignment  is  a  limitation  of  the  security  to  the 
amount  then  actually  paid  ;  and  a  reassignment  of  the  mortgage 
does  not  restore  the  security  for  more  than  the  amount  for  which 
it  was  a  security  before  the  assignment.^ 

A  mortgage  to  indemnify  a  surety  upon  a  guardian's  bond  ap- 
plies to  a  renewal  of  the  bond.^ 

383.  A  mortgage  of  indemnity  to  a[:  surety  is  a  lien  from, 
the  time  of  its  execution  and'_  delivery,  and  not  merely  from 
the  time  when  the  mortgagee  pays  the  debt  on  which  he  is 
surety  ;^  and  therefore  it  takes  precedence  of  a  conveyance  made 
by  the  mortgagor,  or  of  a  judgment  rendered  against  him,  after 
the  execution  of  the  mortgage  and  before  the  mortgagee  has 
paid  the  debt  so  as  to  become  entitled  to  enforce  the  security.^ 
It  is  sometimes  said  that  a  mortgage  given  to  secure  one  who  is 
expected  to  make,  indorse,  or  accept  negotiable  paper  for  the  ac- 
commodation of  another,  is  a  lien  from  the  time  such  liability  is 
incurred ;  ^  but  whenever  there  is  a  legal  obligation  to  incur  the 
liability,  the  mortgage  is  a  lien  from  the  time  of  its  delivery.''' 
When  there  is  no  obligation  to  incur  such  future  liabilities,  the 
mortgage  constitutes  a  lien  from  the  time  the  liability  is  incurred, 
and  is  preferable  to  a  judgment  rendered  afterwards,^  but  not  to 
incumbrances  made  before  advances,  of  which  the  mortgagee  had 
notice  at  the  time  of  the  advances. 

An  executor  gave  to  his  sureties  a  mortgage  to  indemnify  them 
against  "all  loss,  cost,  damage^ and  expense  which  they  could  or 
might  be  put  to  by  reason  of  their  being  sureties  on  his  bond." 
The  executor  filed  his  account  showing  a  certain  balance  in  his 
hands.     The  court  approved  the  account,  and  ordered  the  fund  to 

1  Buffalo  City  Bank  v.  Howard,  35  M.)  608;  Burdett>.  Clay,  8  B.  Mon. 
N.  Y.  500.  (Ky.)  287. 

2  O'Hara?;.  Baum,  88  Pa.  St.  114.  e  Choteau   v.   Thompson,   2   Ohio    St. 

3  Bobbitt  V.  Flowers,  1  Swan  (Tenn.),  114;  Bank  of  Montgomery  County's  Ap- 
511.  peal,  36  Pa.  St.  170;  Bank  of  Commerce 

*  Krutsinger  v.   Brown,   72   Ind.    466.  Appeal,  44  lb.  423. 

This   case  further  holds  that  of  two   in-  '  Taylor  d.  Cornelius,  60  Pa.   St.  187; 

demnifying  mortgages,  that  which  is  first  Lyle  v.  Ducomb,  5  Binn.  (Pa.)  585. 

executed  and  duly  recorded  is  the  prior  «  Kramer  v.    Farmers'   &    Mechanics' 

lien.  Bank,  15  Ohio,  253;  Hartley  v.  Kirlin,  45 

6  Watson  V.  Dickens,  20  Miss.  (12  S.  &  Pa.  St.  49. 

288 


MORTGAGE  OF   INDEMNITY.  [§  384. 

be  distributed.  The  executor  was  at  this  time  insolvent,  and  one 
of  the  sureties  advanced  the  money  to  pay  the  legacies.  These 
payments  were  made  before  suit  was  brought,  and  before  any  de- 
mand was  made  upon  the  sureties  by  the  legatees.  It  was  held 
that  the  surety  was  entitled  to  all  the  benefit  of  the  mortgage  as 
against  an  intervening  judgment  creditor  who  obtained  judgment 
shortly  after  the  mortgage  was  executed.^ 

384.  Parol  evidence  is  admissible  to  show  the  true  charac- 
ter of  a  mortgage,  and  for  what  purpose  and  what  consideration 
it  was  given.  Although  it  is  for  a  definite  sum,  and  secures  the 
payment  of  notes  for  definite  amounts,  it  may  be  shown  that  it  is 
simply  one  of  indemnity .2  When  the  object  is  simply  to  indem- 
nify the  mortgagee  for  a  liability  he  has  incurred  or  may  incur, 
the  amount  of  the  mortgage,  or  of  the  mortgage  note,  serves 
merely  to  limit  the  extent  of  the  security.  Upon  the  foreclosure 
of  such  a  mortgage,  the  amount  for  which  judgment  is  to  be  ren- 
dered is  the  amount  the  mortgagee  has  been  compelled  to  pay 
under  the  Hability  for  which  he  was  secured,  with  interest  from 
the  date  of  the  payment.  The  amount  and  date  of  the  mortgage 
note  are  wholly  disregarded  in  ascertaining  this  sum.^ 

A  distinction  is  taken  between  a  mortgage  conditioned  to  se- 
cure against  a  specific  thing,  and  one  of  indemnity  against  dam- 
age by  reason  of  the  non-performance  of  the  thing  specified. 
Where  the  indemnity  provided  is  against  a  "  charge  "  or  "  fixed 
legal  liability,"  the  obligee  is  to  be  saved  from  the  thing  speci- 
fied, and  the  right  of  action  becomes  complete  on  the  defendant's 
failure  to  do  the  particular  thing  he  agreed  to  perform ;  while,  on 
the  other  hand,  where  the  covenant  is  for  indemnity  only,  and 
against  resultant  damages,  these  must  be  actually  suffered  before 
an  action  can  be  maintained.* 

A  mortgage  given  as  a  continuing  security  and  indemnity  for 
and  against  all  liabilities  the  mortgagees  had  incurred  or  might 
thereafter  incur  for  the  mortgagor  as  indorsers,  is  not  a  mort- 
gage of  indemnity  merely,  but  one  of  security  as  well,  and  there- 

1  §§352,  367  a;  Smith  v.  Hairy,  91  I'a.  ^  Athol  Savings  Bnuk  i-.  Pomroy,  115 
St.  ii<j.  Mass.  573;  Vogan  v.  Caininetti,  65  Cal. 

2  Price  V.  Cover,  40  Md.  102  ;  Jones  v.     438;  aud  see  §  64. 

Guaranty  &  Indemnity  Co.  101  U.S.  622;  *  Gilbert  v.   Wimau,  1   N.  Y.  550;  as 

United  States  v.  Sturges,  1  Paine,  525  ;  i-tated  by  Fincli,  J.,  in  National  Bank  v. 

Mayer  v.  Groltendick,  68  Ind.  1,  quoting  Bigler,  83  N.  Y.  51,  61. 
text;  Moses  v.  Hatfield  (S.  C),  3  S.  E. 
Rep.  538,  540,  quoting  text. 

VOL.  I.                 19  289 


§  385.]  THE  DEBT   SECURED. 

fore  it  is  not  essential  to  a  recovery  to  show  that  damages  have 
been  sustained ;  but  the  right  of  the  mortgagees  to  resort  to  the 
security  arises  when  tlieir  liability  is  fixed. 

If  a  mortgage  given  to  secure  the  mortgagee  from  loss,  by  rea- 
son of  his  having  become  a  surety  upon  a  note  executed  by  one 
of  the  mortgagors,  stipulates  that  the  mortgagors  "  will  pay  the 
sum  of  money  above  secured,"  a  cause  of  action  accrues  to  the 
mortgagee  upon  failure  of  the  maker  of  the  note  to  pay  the  note 
when  it  becomes  due,  without  the  mortgagee's  first  paying  the 
note.i 

385.  The  principal  creditor  is  entitled  to  the  benefit  of  a 
mortgage  given  for  the  indemnity  of  a  surety.^  Three  joint 
indorsers  of  the  paper  of  a  manufacturing  company  executed  sep- 
arate mortgages  to  a  trustee  under  an  agreement  that  if  either 
should  pay  more  than  his  equal  proportion  of  the  notes  indorsed, 
he  should  recover  from  each  of  the  others  the  shares  they^  ought 
respectively  to  contribute.  It  was  held  that  the  agreement  and 
mortgages  secured  not  merely  equality  of  payment  between  the 
sureties,  but  also  secured  the  payment  of  the  indorsed  notes  to 
the  holders  who  might  join  with  the  trustee  in  enforcing  the  mort- 
gages.3 

The  principal  creditor  is  not  entitled  to  the  benefit  of  a  mort- 
gage given  to  a  surety  until  the  liability  of  the  latter  is  fixed.* 
If  the  indorser  is  discharged  by  the  laches  of  the  creditor,  he  can- 
not claim  the  benefit  of  the  mortgage.^  The  condition  of  such  a 
mortgage  is  broken  when  the  mortgagor  fails  to  pay  the  debt  at 
the  time  stipulated,  so  that  the  mortgagee  is  exposed  to  a  suit.^ 
He  may  then  at  once  proceed  to  foreclose  the  mortgage  without 
notice  or  further  action  on  his  part.*"  When  the  condition  is  to 
indemnify  the  mortgagee  against  the  support  of  a  third  person,  it 
is  a  sufficient  bi-each  that  the  mortgagee  is  compelled  to  pay  for 
such  support  for  a  part  of  the  time.^ 

If  the  mortgage  to  the  surety  include  a  debt  due  to  himself,  as 
well  as  the  debt  for  which  he  is  liable  as  surety,  as  between  him- 

1  Gunel  V.  Cue,  72  Ind.  34;  Thomas  *  Tilford  v.  James,  7  B.  Mon.  (Ky.) 
V.  Allen,  1  Hill  (N.  Y.),  145  ;  Gilbert  v.     336. 

Wimiin,  1  N.  Y.  550;  Wilson  ?>.  Stilwell,  ^  Tilford  y.  James,  supra. 

9  Ohio  St.  467  ;  Loosemore  v.  Kadford,  ^  ghaw  v.  Loud,  12  Mass.  447. 

9  M.  &  W.  657.  "^  Butler  D.  Lpdue,  12  Mich.  173. 

2  Jones  on  Pledges,  §§  523-533.  ^  Whitton  v.  Whitton,  38  N.  H.  127. 
8  Seward  v.  Huntington,  26   Hun  (N. 

Y.),  217. 

290 


MORTGAGE   OF   INDEMNITY.  [§§  386,  387. 

self  and  the  principal  creditor,  the  latter  is  entitled  to  be  first 
paid  out  of  the  proceeds  of  the  mortgage,  on  the  ground  that  such 
mortgagee  is  a  quasi  trustee  for  the  creditor  in  respect  of  the  in- 
demnity thus  obtained.^ 

386.  Under  what  circumstances  one  who  has  taken  a 
mortgage  solely  for  his  own  indemnity  may  release  the  se- 
curity does  not  seem  to  be  determined.  As  against  the  principal 
creditor,  who  is  entitled  to  the  benefit  of  the  securities  held  by 
the  surety,  it  would  seem  at  any  rate  that  after  a  default  on  the 
part  of  the  principal  debtor,  and  the  liability  of  the  surety'  had 
thus  become  fixed,  he  could  not  i-elease  the  securities  held  b}^  him. 
As  against  his  own  creditors,  after  he  has  become  insolvent,  it 
would  also  seem  that  he  could  not  release  a  mortgage  or  other 
security  held  by  him  as  indemnity .^  If  the  mortgage  held  by  him 
be  anything  more  than  one  of  indemnity,  if,  for  instance,  it  in 
terms  secures  the  original  debt,  he  has  no  right  to  discharge  it. 

An  indorser  of  certain  notes  took  from  the  maker  of  them  a 
mortgage  as  security  from  any  loss  the  indorser  might  sustain 
from  the  non-payment  of  the  notes.  The  proviso  was  that  the 
mortgagor  should  pay  the  notes  at  their  matwrity  "  to  the  holders 
of  them,"  or  to  the  indorser,  should  the  latter  be  compelled  to 
take  them  up ;  the  mortgagee  subsequently  released  the  mort- 
gage before  the  notes  were  paid,  and  the  mortgagor  conveyed 
the  premises  to  a  purchaser.  The  holder  of  the  mortgage  notes 
then  filed  a  bill  to  foreclose  the  mortgage  ;  and  it  was  held  that 
the  mortgage  was  a  security  for  the  payment  of  the  notes,  as  well 
as  an  indemnity  to  the  indorser ;  that  it  enured  to  the  benefit  of 
any  one  in  whose  hands  the  notes  might  be,  provided  he  is  a 
bona  fide  holder  of  them  ;  and  that  consequently  the  mortgagee 
had  no  power  to  release  the  mortgage,  so  as  to  deprive  the  holder 
of  the  notes  of  the  benefit  of  this  security.^ 

387.  Not  after  liability  is  fixed.  —  A  mortgage  given  to  in- 
demnify a  surety  or  indorser  does  not,  in  the  first  instance,  attach 
to  the  debt;  and  Avhatever  equity  may  arise  in  favor  of  the  cred- 
itor with  regard  to  tiie  security  arises  afterwards,  and  in  conse- 
quence of  the  iiisolvi-ney  of  the  parties  primarily  holders  for  tlie 
(hibt.  Until  this  equity  arises,  the  surety  has  a  right  in  equity  as 
well  as  at  law  to  release  the  security.  Even  after  such  insol- 
vency the  mortgagee  may  surrender  the  security,  if  he  does  it  in 

'  Ten  Kyck  u.  Holmes,  3  Sandf.  (N.  Y.)         2  Woodville  v.  Kced,  20  M,l.  179,  181. 
Ch.  428.  8  Boyd  v.  Parker,  43  Md.  182. 

291 


§  387.]  THE  DEBT   SECURED. 

good  faith,  and  before  any  claim  is  made  upon  him  for  it.  The 
application  of  it  for  the  benefit  of  third  persons  can  only  be  ac- 
complished by  the  interposition  of  a  court  of  equity,  and  in  case 
the  mortgagee  still  retains  the  security.^ 

But  after  the  principal  debtor  has  become  insolvent,  the  surety 
cannot  make  a  valid  agreement  with  the  holder,  or  any  party  in 
terested  in  one  of  the  notes  on  which  he  is  indemnified  by  the 
mortgage,  that  the  security  shall  be  first  applied  to  such  note ; 
the  holders  of  all  such  notes  are  entitled  in  equity  to  share  in 
the  property  in  proportion  to  their  respective  claims.^ 

When  a  mortgage  is  given  to  indemnify  an  indorser,  the  cred- 
itor has  an  equitable  claim  to  the  security,  and  after  the  liability 
is  fixed  is  entitled  to  have  the  mortgage  assigned  to  him.  This 
is  the  rule  not  only  where  the  condition  is  that  the  mortgagor 
shall  pay  the  debt,  but  also  where  it  merely  stipulates  that  he 
shall  indemnify  the  surety .^  Thus,  a  mortgage  by  the  principal 
maker  of  a  promissory  note  to  his  surety,  conditioned  that  the 
principal  will  pay  the  note  and  save  the  surety  harmless,  creates 
a  trust  and  an  equitable  lien  for  the  holder  of  the  note ;  and  even 
after  the  surety's  liability  to  the  holder  of  the  note  is  barred  by 
the  statute  of  limitations,  he  holds  the  property  subject  to  such 
trust  and  lien.*  If  he  has  foreclosed  the  mortgage,  and  obtained 
an  absolute  title  to  the  property,  the  same  trust  still  attaches  to 
it.^  This  equitable  lien  binds  the  property,  after  a  transfer  of  it 
by  the  mortgagee  to  one  who  has  notice  of  the  trust.  The  mort- 
gage is  treated  as  a  mere  security  for  the  debt ;  and  when  the 
debt  is  assigned  by  the  mortgagee,  it  carries  with  it  in  equity,  as 
an  incident,  a  right  to  have  the  estate  appropriated  for  the  pay- 
ment of  the  debt  in  the  hands  of  the  assignee.  To  carry  out  and 
enforce  this  equity,  the  mortgagee  is  regarded  as  the  trustee  of 
those  to  whom  he  has  assigned  the  debt  secured  by  the  mortgage, 
and  can  be  compelled  to  appropriate  it  for  their  benefit.*^ 

1  Thrall  v.  Spencer,  16  Conn.  139;  Ho-  Heisk.  (Tenn.)  525;  Eiddle  v.  Bowman, 
meru.  Savings  Bank,  7  Conn.  478;  Jones  27  N.  H.  236;  Phillips  v.  Thompson,  2 
V.  Quinnipiack  Bank,  29  Conn.  25  ;  Post  Johns.  (N.  Y.)  Ch.  418;  Thornton  i'.  Nat. 
f.  Tradesmen's  Bank,  28  Conn.  420.  Exchange  Bank,  71  Mo.  221. 

2  Lewis  V.  De  Forest,  20  Conn.  427.  *  Eastman  v.  Foster,  8  Met.  (Mass.)  19. 
^  New   Bedford   Inst,    for    Savings  v.         ^  Eastman  v.  Foster,  supra. 

Fairhaven  Bank,  9  Allen,  175;  Aldrichv.         ^  RJce  v.  Dewey,  13  Gray  (Mass),  47. 
Martin,  4  R.  I.  520 ;  Saylors  v.  Saylors,  3 

292 


MORTGAGES  FOR   SUPPORT.  [§  388. 

IV.   Mortgages  for  Support, 

388.  Whether  strictly  mortgages.  —  It  has  sometimes  been 
questioned  whether  a  deed  conditioned  for  the  support  and  main- 
tenance of  a  person,  or  for  the  performance  of  any  other  duty,  the 
damages  for  a  breach  of  which  are  unliquidated,  can  be  regai'ded 
as  strictly  a  mortgage.  Early  definitions  of  mortgages  are  found 
by  which  no  conditional  conveyances  are  mortgages  except  such 
as  are  made  for  the  security  of  a  loan  of  money ;  others  include 
all  conveyances  made  as  security  for  any  debt ;  while  the  later 
doctrine  generally  is,  that  a  conveyance  conditioned  for  the  per- 
formance of  any  contract  is  a  mortgage.^  But  in  quite  recent 
cases  it  is  said  that  many  contracts,  the  performance  of  which 
may  be  secured  by  conveyances  of  land,  have  such  peculiarities 
that  the  rules  of  law  relating  to  mortgages  can  have  but  a  very 
partial  if  any  application  to  them.^ 

In  New  Hampshire,  although  it  is  provided  by  statute^  that 
"  every  conveyance  of  lands  made  for  the  purpose  of  securing  the 
payment  of  money,  or  the  performance  of  any  other  thing  in  the 
condition  thereof  stated,  is  a  mortgage,"  it  is  held  that  a  deed 
conditioned  for  support,  and  implying  the  personal  services  of  the 
mortgagor,  is  not  a  mortgage.  Neither  the  grantor  nor  the 
grantee,  under  such  a  deed,  can  assign  his  interest.  The  contract 
is  for  services  to  be  rendered  by  the  one  in  person  to  the  other  in 
person.  The  former,  having  assumed  a  personal  trust,  cannot  sub- 
stitute another  person  in  his  place  to  fulfil  it.*  Upon  his  death,  a 
sale  of  the  estate  by  his  administrator  under  license  of  court,  sub- 
ject to  this  duty,  passes  no  title,  and  the  purchaser  cannot  main- 
tain a  bill  to  redeem.^  One  who  takes  a  mortgage  for  the  sup- 
port of  himself  and  his  wife  is  a  trustee  for  his  wife,  and  on  his 
death  and  a  breach  of  the  condition  of  the  mortgage  the  court 
will  appoint  a  trustee  to  appropriate  the  land  for  the  purposes  of 
the  trust.^  And  on  the  other  hand,  it  is  held  that  the  person  who 
is  to  receive  the  personal  service  cannot  assign  the  obligation  and 
security  to  another,  so  as  to  enable  such  other  person  to  enforce 

'  Per  Bell,  C.  J.,  in  Bctlilcliem  i;.  An-  *  Flanders  v.  Lamplicar,  9  N.  II.  201. 

ni.H,  40  N.  II.  .34.  See,    however,    Austin   v.   Au.stin,   9   Vt. 

'^  Bethlehem  v.  Aunis,  snjna,  per  Bell,  420;   Bryant  i'.  Er.skine,  .')5  Me.  l.'j.3. 

C.  .J.  "^  Eastman  v.  Batelielilor,  .-iO  N.  II.  141. 

■'  G.  S.  180",  25.3,  eh.    122,  §  1  ;  G.  L.  «  Perkins  v.  Perkins,  (10  N.  II.  373. 
1878,  eh.  1.3C,  §  1. 

293 


§  388.]  THE  DEBT   SECURED. 

it,  unless,  perhaps,  where  there  has  been  an  actual  breacli  and  an 
entry  for  condition  broken  before  the  assign  men t.^ 

In  Pennsylvania,  upon  somewhat  different  grounds,  it  is  said 
that  when  a  father  conveys  land  to  his  son,  and  takes  a  reconvey- 
ance, conditioned  for  the  faithful  performance  of  covenants  to 
support,  although  such  reconveyance  may  be  termed  a  mortgage, 
it  is  something  more  than  a  mortgage  ;  for  in  an  ordinary  mort- 
gage, when  the  object  of  security  is  accomplished,  the  conveyance 
becomes  void  ;  but  if  there  be  a  breach  of  the  condition  to  sup- 
port, and  the  father  in  consequence  takes  possession,  the  son  can- 
not claim  upon  his  father's  death  that  the  title  should  vest  in  him, 
notwithstanding  he  has  failed  to  perform  his  covenants.  That 
would  be  no  security  that  the  son  would  perform  his  covenants, 
but  an  inducement  for  him  to  break  them.  It  would  enable  him 
to  throw  off  all  the  trouble  and  responsibility  of  his  contract,  and 
simply  by  waiting  a  few  years  without  doing  anything,  get  the 
property  for  nothing.  Nothing  can  give  effectual  security  for  the 
performance  of  such  covenants  but  the  right  to  revest  the  entire 
estate  upon  a  breach.  The  son  having  broken  his  covenants  to 
support  his  father  during  life,  has  no  possible  equity  on  his  death 
to  demand  a  reconveyance.  A  recovery  in  ejectment  by  the 
father  after  breach  as  effectually  revests  the  title  in  him  as  would 
a  reentry  for  condition  broken.^ 

But  the  courts  generally  treat  as  mortgages  conveyances  con- 
ditioned for  the  support  and  maintenance  of  the  mortgagees. 
They  are  generally  in  such  terms  that  the  court  can  by  an  award 
of  damages  compensate  the  mortgagees  for  a  non-performance  of 

1  Bryant  v.  Erskine,  55  Me.  153  ;  Beth-  establish  the  system  of  relief  from  forfeit- 
lehem  v.  Annis,  40  N.  H.  34.  In  this  case  ures  in  the  case  of  mortfrages,  will  not  en- 
Chief  Justice  Bell  said  :  "  Wherever  the  title  a  party  to  analogous  relief  in  cases 
condition,  when  broken,  gives  rise  to  no  where  the  design  of  the  parties  is  to  make 
claim  for  damages  whatever,  or  to  a  claim  a  conveyance  by  way  of  security." 
for  unliquidated  damages,  the  deed  is  not  -  Soper  v.  Guernsey,  71  Pa.  St.  219. 
to  be  regarded  as  a  mortgage  in  equity,  The  defeasance  in  this  case  was  :  "  Pro- 
but  as  a  conditional  deed  at  common  law.  vided  always,  nevertheless,  that  if  the  said 
It  has  the  incidents  of  a  mortgage  only  to  party  of  the  first  part  shall  and  does  well, 
a  limited  extent,  and  the  party,  if  relieved  truly,  and  faithfully  perform  all  and  sin- 
by  a  court  of  equity  from  the  forfeiture  re-  gular  the  aforesaid  covenants,  promises, 
suiting  from  the  non-performance  of  the  and  agreements  unto  the  said  party  of  the 
condition,  will  not  be  relieved  as  in  cases  second  part,  according  to  the  true  intent 
of  a  mortgage.  It  is  not,  however,  in-  and  meaning  thereof,  without  fraud  or  de- 
tended  to  say  that  the  same  principle  of  lay,  then  this  indenture  and  tlie  estate 
justice,  which  has  led  courts  of  equity  to  hereby  granted  shall  become  void." 

294 


MORTGAGES   FOR    SUPPORT.  [§§  389,  390. 

the  personal  services  ;  ^  but  it  rests  in  the  sound  discretion  of  the 
court  whether  a  forfeiture  shall  be  relieved  in  this  way,^  Such  a 
mortgage  is  not  void  for  uncertainty  in  not  defining  the  support 
to  be  furnished  ;  for  tliis  will  be  construed  to  be  such  support  as 
is  proper  and  suitable  for  the  person  to  be  supported  according  to 
his  station  in  life ;  and  the  amount  required  for  such  support  can 
be  ascertained  with  reasonable  certainty.^ 

389.  Mortgagor's  right  of  possession  implied.  —  Generally, 
when  land  has  been  conveyed  to  the  mortgagor  by  the  mort- 
gagee, who  has  taken  a  mortgage  of  the  same,  conditioned  for  his 
support,  there  is  a  necessary  implication,  nothing  appearing  to 
the  contrar}',  that  the  mortgagee  is  not  to  enter  until  there  is  a 
breach  of  the  condition.^  The  possession  of  the  property  is  gen- 
erally essential  to  the  mortgagor  to  enable  him  to  perform  the 
condition.  The  mortgagee  cannot  then  maintain  an  action  for 
possession  until  there  has  been  a  breach  of  condition. 

If  a  mortgage  for  the  support  of  a  person  for  life  be  followed 
by  a  lease  of  the  same  premises  for  life  given  by  the  mortgagor 
to  the  mortgagee,  the  lease  is  regarded  as  merely  giving  the 
mortgagee  the  possession  and  use  of  the  premises.  The  lease 
does  not  extinguish  the  mortgage,  but  is  merely  ancillary  to  it, 
and  its  enjoyment  may  pro  tanto  operate  as  a  satisfaction  of  the 
covenants  of  the  bond  or  agreement  for  support.^ 

390.  Alternative  condition.  —  When  a  mortgage  is  condi- 
tioned to  pay  a  certain  sum  or  to  support  the  mortgagee,  the 
mortgagor  has  his  election  which  alternative  he  will  take,  and  if 
he  elect  to  furnish  support,  he  is  entitled  to  possession  of  the 
premises  in  order  to  be  enabled  to  comply  with  the  condition 
he  has  chosen  to  perform.  But  having  once  made  the  election  he 
cannot  revoke  it.  His  election  is  also  conclusive  upon  the  mort- 
gagee, who  cannot  have  the  election  in  the  beginning,  and  much 
less  can  he  have  part  performance  of  one  of  the  alternatives,  and 
then  claim  the  entire  performance  of  the   other.^     The  election 

1  2   Greenl.  Cruise,   80,    n. ;    Hoyt    v.  2  Henry  v.  Tuppor,  29  Vt.  .358. 

Bradley,  27  Me.  242;  Bor.st  v.  Crommie,  ^  Simpson  i'.  Edmiston,  .<!»/jra. 

19  Hun  (N.  Y.),  209;  Simpson  v.  Edmi.s-  *  §§  668,  702;  Flanders  v.  Liimphcar,  9 

ton,  23  W.  Va.  67.') ;  Austin  v.  Austin,  9  N.  II.  201  ;   Klioades  v.  Parker,  10  N.  H. 

"Vt.  420.     Chancellor  riieipH,  in  this  case,  83;  Dearborn  v.  Dearborn,  9  N.  II.  117; 

said  :    "  There  i.s  certainly  no  difficulty  in  Brown  v.  Leach,  35  Me.  39,  41  ;   Bryant 

making;   coni|)en.saiioii    for   past    maiiitc-  v.  Erskine,  55  Me.  153.     See  §  80. 

nance,  any  more  tlian  in  any  case  of  a  con-  ^  Powers  v.  Patten,  71  Me.  583. 

tract  to  perform  services."     Iliatt  v.  Par-  "  Bryant  v.  Erskine,  sujiru.     "  It  is  laid 

ker,  29  Kans.  765.  down  as  a  general  rule  that,  in  case  an 

295 


§  391.]  THE  DEBT   SECURED. 

having  been  made,  the  mortgage  becomes  security  for  the  per- 
formance of  the  condition  chosen  as  effectually  as  if  that  alone 
had  been  set  forth.^  But  a  mortgage  to  secure  the  payment  of 
$500  in  five  years,  "  to  be  paid  in  furnishing  the  mortgagee,"  dur- 
ing that  period,  "  a  good  and  sufficient  home  and  support,"  does 
not  give  the  mortgagor  his  election  to  pay  in  money .^ 

Under  a  mortgage  for  support  with  an  alternative  condition  to 
pay  the  mortgagee  a  sum  of  money  if  he  should  choose  to  leave 
the  mortgagor  and  be  supported  elsewhere,  a  person  who  sup- 
ported the  mortgagee  elsewhere  during  an  illness  while  upon  a 
visit,  is  not  entitled  to  recover  the  money  from  the  mortgagor, 
and  the  mortgaged  property  is  not  chargeable  for  the  support  of 
the  mortgagee  elsewhere,  unless  he  was  justified  in  leaving  the 
mortgagor.^ 

391.  Where  the  support  is  to  be  furnished.  —  When  no 
place  is  stipulated  where  the  mortgagee  is  to  receive  support,  he 
has  a  riglit  to  be  supported  wherever  he  may  choose  to  live,  pro- 
vided he  does  not  create  any  needless  expense  to  the  mortgagor.* 
When  it  is  provided  that  the  support  is  to  be  furnished  on  the 
granted  premises,  but  that  the  mortgagor,  with  his  family,  may 
also  reside  there,  the  latter  has  no  right  to  insist  that  the  mort- 
gagee shall  become  a  part  of  his  family  or  receive  support  at  his 
table,  and  in  the  apartments  occupied  by  him.  A  refusal  to  fur- 
nish such  support  in  a  separate  room  is  a  breach  of  the  condition.^ 
If  the  place  where  support  is  to  be  furnished  is  left  ambiguous  in 
the  mortgage,  parol  evidence  is  admissible  to  explain  the  ambigu- 
ity, and  show  the  intention  of  the  parties.^ 

The  condition  of  such  a  mortgage  is  broken  by  the  mortgagor's 
declining  to  pay  for   the   board  of  the   mortgagee  at  a  suitable 

election  is  given  of  two  several  things,  he  Thayer    v.    Richards,    19    Pick.    (Mass.) 

who  is  the  first  agent,  and  ought  to  do  the  398;  Flanders  v.  Lamphear,  9  N.  H.  201 ; 

first  act,  shall  have  the  decision.     As  if  a  Eowell  v.  .Jewett,  69  Me.  293 ;  Borst  v. 

man  grants  a  rent  of  20s.  or  a  robe  to  one  Crommie,  19  Hun  (N.  Y.),  209  ;  Young  v. 

and  his  heirs,  the  grantor  shall  have  the  Young  (Vt.),  10  Atl.  Rep.  528. 

election,  for  he  is  the  first  agent,  by  pay-  ^  Hubbard  ?;.  Hubbard,  12  Allen  (Mass.), 

ment  of  one  or  the  delivery  of  the  other."  586. 

3  Bac  Abr.  Election,  B,  p.  309.  6  Young  v.  Young,  su}yra. 

1  See  Furbish   v.   Sears,   2   Cliff.  454 ;  For  a  provision  which  leaves  it  optional 

Lind.sey  i'.  Bradley,  53  Vt.  682.  with    the   mortgagee   to  reside   with   the 

■^  Hawkins  v.  Clermont,  15  Mich.  511 ;  mortgagor  or   to  be  supported   in   some 

and  see  Evans  v.  Norris,  6  Mich.  369.  other  place,   see  Dickinson  v.  Dickinson 

3  Lindsey  v.  Bradley,  supra.  (Vt.),  10  Atl.  Rep.  821. 

♦  Wilder  v.  Whittemore,  15  Mass.  262; 
296 


MORTGAGES  FOR  SUPPORT.  [§  392. 

place,  althougli  Le  make  no  special  demand  upon  the  mortgagor 
for  such  support.^ 

A  mortgage  conditioned  to  provide  a  home  in  tbe  house  on  the 
premises  obliges  the  mortgagor,  notwithstanding  his  removal  from 
the  premises,  and  the  house  becoming,  by  natural  decay  and  with- 
out his  fault,  much  dilapidated  and  not  worth  repairing,  to  pro- 
vide a  home  there,  or  to  furnish  an  equivalent  elsewhere,  but 
does  not  oblige  him  to  supply  food,  clothing,  or  fuel.  The  fact 
that  the  mortgagor  actually  furnished  such  supplies  for  some  time 
after  making  the  mortgage  does  not  affect  this  construction.^ 

It  is  not  sufficient  proof  of  a  breach  of  contract  to  support  a 
person  during  his  life,  to  show  that  he  left  the  house  of  the  obligor 
and  resided  elsewhere  for  several  years,  but  without  at  any  time 
requesting  him  to  fulfil  his  agreement,  or  in  any  way  manifesting 
to  him  an  intention  or  desire  to  hold  him  to  the  performance  of 
the  obligation.^ 

Where  a  mortgage  by  a  son  to  his  mother  was  conditioned  "  to 
provide  a  horse  for  said  Margery  to  ride  to  meeting  and  elsewhere, 
when  necessary ;  find  her  firewood  for  one  fire,  to  be  drawn  and 
cut  at  the  door,  fit  for  use ;  give  her  a  good  cow,  and  keep  said 
cow  for  her  during  the  natural  life  of  her  the  said  Margery,"  it 
was  held  that  the  destruction  of  the  house  in  which  the  mother 
lived  with  her  son  did  not  exempt  him  from  the  performance  of 
the  condition,  and  that  he  was  bound  to  furnish  the  wood  at  such 
place  as  she  should  make  her  home,  within  a  reasonable  and  con- 
venient distance  ;  that  if  the  mortgagee  was  obliged  to  sell  the 
cow  in  consequence  of  its  not  being  properly  kept,  it  was  not 
necessary,  in  order  to  charge  him  with  the  cost  of  keeping  a  cow 
for  the  time  subsequent  to  the  sale,  that  the  mortgagee  should 
purchase  a  cow  and  tender  her  to  the  mortgagor  to  be  kept.^ 

392.  Who  may  perform  the  condition.  —  As  already  stated, 
a  mortgage  for  support  is  in  its  nature  a  contract  for  personal 
services,  and,  especially  when  by  its  terms  the  condition  is  to  be 
performed  by  the  mortgagor,  his  heirs,  executors,  or  administra- 
tors, the  duty  cannot  be  transferred  to  a  third  person.  Upon  the 
death  of  the  mortgagor,  the  condition  must  be  kept  by  his  heirs, 
executors,  or  administrators,  and  the  mortgaged  property  subject 

'  Pettee  v.  Case,  2  Allen  (Mass.),  54G.  128  ;  Thayer  v.  Richards,  19  Pick.  (Mass.) 

-  Gibson   v.   Taylor,   6    Gray   (Ma.ss.),  398;  Rhoadcs  i;.  Parker,  10  N.  II.  83. 

.-MO.  ■«  Fiske  v.  Fiskc,  20  Pick.  (Mass.)  499. 
•"•  Jenkins  v.  Stetson,  9  Allen  (Mass.), 

297 


§  393.]  THE   DEBT   SECURED. 

to  this  duty  cannot  be  disposed  of  by  the  administrator  for  the 
payment  of  tlie  mortgagor's  debts.^ 

393.  Foreclosure.  —  A  mortgage  for  the  support  of  the 
grantee  and  his  wife  during  their  lives  may  be  foreclosed  by  the 
administrator  of  the  grantee,  for  a  breach  of  condition  occurring 
both  before  and  after  the  grantee's  death,  although  his  widow 
does  not  join  in  the  suit.^ 

But  where  a  mortgage  was  conditioned  to  support  the  mort- 
gagee during  her  lifetime,  and  there  was  no  evidence  of  a  breach 
of  the  condition,  or  of  any  demand  for  support  other  than  what 
was  furnished,  it  was  held  that  the  administrator  of  the  mort- 
gagee could  not  foreclose  the  mortgage  for  the  benefit  of  persons 
who  had  boarded  the  mortgagee  at  the  mortgagor's  request.  The 
mortgage  was  regai'ded  as  for  the  benefit  of  the  mortgagee,  and 
not  for  the  benefit  of  those  who  might  furnish  her  with  support. 
Whatever  claim  they  severally  had  for  boarding  and  taking  care 
of  her  at  the  mortgagor's  request  was  against  him  personally,  and 
not  against  her  or  her  estate.^ 

Where  a  mortgage  from  a  son  to  his  parents,  for  their  support, 
provides  also  for  the  use  of  a  horse  and  buggy  when  they,  or 
either  of  them,  may  desire  it,  there  is  a  breach  of  the  condition 
upon  a  failure  to  furnish  it  on  a  reasonable  demand  by  either  of 
them  alone,  and  either  of  them  may  have  a  separate  action  for 
damages.  The  provision  is  not  joint  but  several.  The  damages 
allowed  should  cover  the  actual  damage  sustained.  No  decree 
can  be  made  for  future  violations  of  this  provision.  It  is  impos- 
sible to  determine  in  advance  what  damages  may  result  from  a 
failure  to  perform  the  condition.* 

An  instrument  under  seal  but  not  acknowledged,  in  which 
the  maker  agrees  to  support  his  father  and  mother  during  their 
natural  lives,  and  as  security  for  the  fulfilment  of  the  agreement 
conveys  and  gi'ants  to  them,  "  each  and  severally,  a  life  lien  or 
dower,  or  lien  of  maintenance  for  life,"  in  real  estate,  is  a  mort- 
gage ;  and  upon  a  breach  of  the  agreement,  an  action  for  posses- 
sion of  the  premises  may  be  sustained  by  the  father  alone.^ 

If  the  mortgagor  give  a  bond  in  a  fixed  sum  conditioned  for 

1  Eastman  v.  Batchelder,  36  N.  H.  141 ;  *  Tucker  v.  Tucker,  24  Mich.  426  ;  5. 
Bethlehem  v.  Annis,  40  N.  H.  34;  Bryant     C.  35  Mich.  365. 

V.  Erskine,  55  Me.  153.  °  Gilson   v.   Gilson,    2    Allen    (Mass.), 

2  Marsh  v.  Austin,  1  Allen  (Mass.),  115  ;  and  see  Lanfair  t;.  Lanfair,  18  Pick. 
235.  (Mass.)   299.     The  judgment   may  be  in 

8  Daniels  v.  Eisenlord,  10  Mich.  454.  the  nature  of  a  strict  foreclosure.    §  1556. 

298 


MORTGAGES   FOR   SUPPORT.  [§§  394,  395. 

the  maintenance  and  support  of  the  mortgagee,  such  sum  will  be 
regarded  as  a  penalty,  and  the  mortgage  cannot  be  treated  as  one 
to  secure  the  payment  of  that  sum  absolutel}',  unless  there  be  a 
stipulation  that  this  sum  shall  be  regarded  as  liquidated  damages 
for  any  default.^ 

Instead  of  a  judgment  of  foreclosure  and  sale,  in  some  states  a 
judgment  of  strict  foreclosure,  or  for  the  rescinding  of  the  convey- 
ance, will  be  entered.^ 

394,  Agreement  for  arbitration.  —  Under  a  mortgage  to 
secure  the  performance  of  a  bond  or  contract  conditioned  to  sup- 
port the  mortgagee,  a  stipulation,  "  that  should  either  party  be 
dissatisfied  with  the  fulfilling  of  the  above  bond,  it  shall  be  sub- 
mitted" to  three  persons  named,  "and  their  decision  shall  be 
final,"  does  not  prevent  an  action  for  breach  of  condition  by  the 
mortgagee.  This  comes  within  the  general  principle  that  an 
agreement  for  arbitration  shall  not  deprive  one  of  his  legal  rem- 
edies.^ 

395.  Such  a  mortgage  may  be  redeemed  after  breach.*  A 
court  of  equity  may  grant  relief  from  the  forfeiture  of  a  condition 
for  the  maintenance  of  the  mortgagee  when  the  forfeiture  has 
been  accidental  or  unintentional,  and  not  attended  with  irrepara- 
ble injury.  But  the  granting  of  relief  in  such  a  case  rests  in  the 
sound  discretion  of  the  court.^ 

1  Bresnahan;;.  Bresnahan,  46  Wis.  385  ;  there  was  any  good  ground  to  apprehend 
Wright  v.  Wright,  49  Mich.  624.  a  recurrence  of  the  failure  to  perform.  .  .  . 

2  Bresnahan  y.  Bresnahan,  su/ira ;  Bogie  The  case  might  occur  where  the  refusal 
V.  Bogie,  41  Wis.  209.  to  afford  daily  support  would  be  wanton 

3  Hill  f.  More,  40  Me.  515,  or  wicked;    indeed,  where  it  might  pro- 
*  Bryant  v.  Erskine,  55  Me.  153  ;  Beth-     ceed   from    murderous    intentions   even  ; 

lehem  v.  Annis,  40  N.  H.  34,  43 ;  Rowell  and  it  is  even  supposable  that  the  treat- 

V.  Jewett,  69  Me.  293.  ment  of  those  who  were  the  objects  of  the 

^  Henry  v.  Tupper,  29   Vt.  358,  375.  services  should  be  such  as  to  subject  the 

Redfield,  C.  J.,  said  :  "  We  must  all  feel  grantor  to  indictment  for  manslaughter, 

that   cases   of    the   character   before    the  or  murder  even,  and  possibly  to  ignomin- 

court  siiould  be  received  with  something  ious  punishment  and  to  death.     To  afford 

more  of  distrust,  and  relief  afforded  with  relief  in  such  a  case,  for  the  benefit  of  the 

more  reserve  and  circumspection,  than  in  heirs,  would  be  to  make  the  court  almost 

ordinary  cases  of  collateral  duties.     And  partakers  in  the  offence.    And  the  case, 

although  we  are  not  prepared  to  say  that  upon  the  other  hand,  is'  entirely  suppos- 

it  must  appear  that  in  all  cases  the  fail-  able,  and   not  of  infrequent    occurrence, 

ure  arises  from  surprise,  or  accident,  or  where,  through  mere  inadvertence,  a  tecb- 

mistake,  wo   certainly  should   not  grant  nical   breach   may  have  occurred   in  the 

relief  when  the  omission   was  wilful  and  non-performance    of    some    unimportant 

wanton,  or  attended  with  suffering  or  se-  particular,     in    kind    or    degree,    where, 

rious    inconvenience   to   the    gruntee,    or  through  perhaps  mere  difTercuce  in  con- 

299 


§  395.] 


THE  DEBT   SECURED. 


structioD,  or  error  in  judgment,  one  may 
have  suffered  a  forfeiture  of  an  estate  at 
law  of  thousands  of  dollars  in  value, 
where  the  collateral  service  was  not  of  a 
dollar's  value,  and  attended  with  no  se- 
rious inconvenience  to  the  grantee.  Not 
to  afford  relief  in  such  case  would  be  a 

300 


discredit  to  the  enlightened  jurisprudence 
of  the  English  nation  and  those  American 
States  which  have  attempted  to  follow 
the  same  model." 

See,  also,  §  388;  Dunklee  v.  Adams, 
20  Vt.  415,  421  ;  Soper  v.  Guernsey,  71 
Pa.  St.  219. 


CHAPTER  X. 

INSURANCE. 


I.  Insurable  interests  of  mortgagor  and 

mortgagee,  396-399. 
n.  Insurance  by  the  mortgagor  for  the 


in.  Insurance   by   the   mortgagee^  418- 

421.  ^ 

IV.  A  mortgage  is  not  an  alienation,  422- 


benefit  of  the  mortgagee,  400-417.    I  427. 

I.  Lisurahle  Interests  of  Mortgagor  and  Mortgagee. 

396.  An  insurance  against  fire  is  a  contract  of  indemnity 
with  the  assured  against  any  loss  he  may  sustain  by  the  burning 
of  the  buildings.  He  must  have  some  interest  in  the  property 
insured,  as  owner,  mortgagee,  or  otherwise,  to  make  the  contract 
effectual.  If  he  never  had  any  interest,  or  if  at  the  time  of  the 
loss  he  had  ceased  to  have  any  interest,  he  cannot  claim  anything 
under  the  contract ;  for  he  has  suffered  no  loss.  He  may  upon 
transferring  his  interest  in  the  estate  at  the  same  time  transfer 
the  policy  of  insurance,  and  such  transfer,  being  assented  to  by 
the  underwriter,  constitutes  a  new  and  original  promise  to  the 
assignee  to  indemnify  him.  "  But  such  undertaking,"  said  Shaw, 
C.  J.,  "  will  be  binding,  not  because  the  policy  is  in  any  way  inci- 
dent to  the  estate  or  runs  with  the  land,  but  in  consequence  of  the 
new  contract."  ^ 

397.  Insurable  interests.  —  The  mortgagor  may  insure  the 
full  value  of  the  property,  and  recover  the  full  amount  insured,  if 
at  the  time  of  the  loss  he  had  the  right  of  redemption  ;  ^  and  it 
matters  not  that  the  mortgagee  has  taken  possession  of  the  prem- 
ises.^ Neither  does  it  matter  that  his  right  in  equity  has  been 
seized  and  sold  on  execution  ;  his  insurable  interest  continues  so 
long  as  he  has  the  right  to  redeem  from  such  sale,  and  he  may 
upon  a  loss  recover  the  whole  amount  insured.** 

1  Wilson  V.  Hill,  3  Met.  (Mass.)  06,  69  ;  ■'  Stephens  v.  III.  Mut.  Fire  Ins.  Co.  43 

Macombcr  v.  Cambridge  Mut.  F.  Ins.  Co.  111.  327  ;  Illinois  F.  lus.  Co.  i;.  Stanton,  57 

8  Cush.    (Mass.)   133  ;  Murdock  v.  Che-  111.  354. 

nango  Co.  Mut.  Ins.  Co.  2  N.  Y.  210.  *■  Strong  v.  Manufacturers'  Ins.  Co.  10 

-  Insurance  Co.  i;.  Stiuson,  103  U.  S.  Pick.  (Mass.)  40. 
25  ;  Carpcutcr  v.  Ins.  Co.  16  Pet.  495,  501. 

301 


§  397.]  INSURANCE. 

The  mortgagee  and  mortgagor  may  both  insure  their  separate 
interests  at  the  same  time.^  Such  insurance  is  not  liable  to  the 
objection  of  a  double  insurance,  because  to  constitute  this  the  two 
policies  must  be  not  onl}'  upon  the  same  property,  but  also  for 
the  benefit  of  the  same  person,  and  for  the  same  entire  risk.^ 

A  trustee  in  a  deed  of  trust  in  the  nature  of  a  mortgage  in  like 
inanner  has  an  insurable  interest  distinct  from  that  of  the  grantor.^ 

A  conveyance  of  the  mortgaged  property  by  the  mortgagor  in 
no  way  afi'ects  the  mortgagee's  right  to  insure  his  interest."^ 

The  owner  of  an  equity  of  redemption  obtained  a  policy  of  in- 
surance which  contained  a  provision  that  he  should  not  be  enti- 
tled to  recover  any  greater  proportion  of  the  loss  than  the  amount 
insured  might  bear  to  the  whole  sum  insured  on  the  same  prop- 
erty, without  reference  to  the  solvency  or  liability  of  other  in- 
surers. The  owner  had  at  the  time  of  the  loss  another  policy  on 
his  interest  in  another  company  ;  and  the  mortgagee  had  a  policy 
on  his  interest  in  a  third  company.  The  jury  were  properly  di- 
rected to  apportion  the  loss  between  the  companies  having  insur- 
ance upon  the  mortgagor's  interest,  without  taking  into  account 
the  value  of  the  interest  of  the  mortgagee  insured  by  him  ;  that 
is  to  say,  in  apportioning  the  loss,  the  value  of  the  equit}^  of 
redemption  was  taken  as  a  basis,  and  not  the  value  of  the  entire 
property.^ 

The  insurable  interest  of  the  holder  of  the  mortgage  is  meas- 
ured b}'^  the  value  of  his  lien,  if  this  does  not  exceed  the  value  of 
the  property.^  He  may  recover  according  to  his  interest  at  the 
time  of  the  loss.  It  does  not  matter  that  the  mortgage  is  not 
valid  at  law,  so  long  as  it  is  valid  in  equity,  as  in  the  case  of  a 
mortgage  by  a  husband  to  his  wife,  made  for  a  just  and  valuable 
consideration.'' 

1  Jones  on  Chattel  Mortgages,  §  100;  &  Tuck  v.  Hartford  F.  Ins.  Co.  56  N. 
Manson  v.  Phoenix  Ins.  Co.  64  Wis.  26.  H.  326. 

2  Westchester  F.  Ins.  Co.  v.  Foster,  90  ^  Sussex  Co.  Mut.  Ins.  Co.  v.  Woodruff, 
111.  121  ;  ^tna  Ins.  Co.  v.  Tyler,  16  Wend.  2  Dutch.  (N.  J.)  .541  ;  Kernochan  v.  N.  Y. 
(N.  Y.)  385,  396  ;  Dick  i-.  Franklin  F.  Ins.  Bowerj-  F.  Ins.  Co.  5  Duer  (N.  Y.),  1  ;  S. 
Co.  10  Mo.  App.  376;  affirmed  81  Mo.  C.  17N.  Y.  428;  Tillou  v.  Kingston  Mut. 
103.  Ins.  Co.  7  Barb.  (N.  Y.)  570  ;  Excelsior 

3  Carpenter  v.  Ins.  Co.  16  Pet.  495;  Fire  Ins.  Co-  r.  Royal  Ins.  Co.  of  Liver- 
Foster  V.  Van  Reed,  70  N.  Y.  19  ;  Suffolk  pool,  7  Lans.  (N.  Y.)  138 ;  S.  C.  55  N.  Y. 
Ins.  Co.  V.  Boyden,  9  Allen  (Mass.),  123;  343;  Slocovich  v.  Oriental  Mut.  Ins.  Co. 
Honore  v.  Ins.  Co.  51  111.  409;  Dick  v.  13  Daly,  264. 

Franklin  F.  Ins.  Co.  supra.  "^  Mix  v.  Andes  Ins.  Co.  of  Cincinnati, 

*  Dick  V.  Franklin  F.  Ins.  Co.  supra.  9  Hun  (N.  Y.),  397. 

302 


INSURABLE  INTERESTS   OF  MORTGAGOR   AND   MORTGAGEE.         [§  398. 

The  mortgagee  may  insure  as  general  owner  without  disclosing 
his  interest  unless  this  is  inquired  about,  or  he  may  insure  his 
interest  as  mortgagee.^  When  an  inquiry  is  made  I'especting  his 
interest,  or  when  he  undertakes  to  make  a  disclosure  of  his  inter- 
est, his  representations  must  be  substantially  correct  or  the  policy 
will  be  void.  But  the  mere  fact  of  not  disclosing  his  interest  will 
not  have  that  effect. 

A  mortgagee,  who  upon  assigning  the  mortgage  has  indorsed 
the  note,  has  an  insurable  interest  in  the  mortgaged  property. 
And  that  interest  is  sufficiently  described  by  calling  him  "  mort- 
gagee," though  the  policy  provide  that  the  interest  of  the  assured, 
whether  as  owner,  trustee,  mortgagee,  lessee,  or  otherwise,  shall 
be  truly  stated.^ 

Upon  payment  of  the  mortgage  debt  the  mortgagee's  insurable 
interest  ceases ;  and  upon  part  payment  his  insurable  interest  is 
the  amount  of  the  debt  remaining  unpaid.^ 

398.  The  mortgagor's  interest  remains  insurable  so  long  as 
he  has  a  right  to  redeem  the  land.  It  continues  after  a  sale  of 
his  equity  of  redemption  on  execution  until  his  right  to  redeem 
from  such  sale  is  barred  ;  and  he  may  recover  the  insurance  not- 
withstanding the  sale.*  What  the  value  of  his  redeemable  inter- 
est may  be  is  immaterial ;  the  whole  sum  insured  may  be  recov- 
ered, if  this  does  not  exceed  the  value  of  the  property.^  In  like 
manner  the  mortgagor's  insurable  interest  continues  after  a  fore- 
closure sale  when  a  right  to  redeem  exists  after  such  a  sale,  so 
long  as  this  right  exists ;  and  when  there  is  no  right  of  redemp- 
tion after  such  sale,  it  would  seem  that  he  retains  an  insurable 
interest  until  tlie  deed  is  delivered  in  j^ursuance  of  the  sale.  The 
purchaser  has  no  right  to  the  possession  of  the  property  until  he 
receives  the  deed,  and  in  the  mean  time  the  mortgagor  has  at 
least  the  right  to  occupy  or  to  collect  the  rents  ;  and  until  then 
the  sale  is  not  complete,  nor  is  the  right  to  redeem  conclusively 
barred. '''     Even  after  a  mortgagor  has  conveyed  his  equity  of  re- 

■  Buck  V.  riicenix  lus.  Co.  7G  Me.  .086  ;  2  Williams  v.  Roger  Williams  Ins.  Co. 

Sussex    Co.  Mut.  Ins.  Co.  v.  Woodruff,  107  Mats.  377. 

26  N.  J.  L.  .541  ;  Titus  v.  Glens  Falls  Ins.  3  Sussex   Co.   Mut.    Insurance    Co,   v. 

Co.  81  N.  Y.  410;  Norwich  Fire  Ins.  Co.  Woodruff,  supra. 

r.  Boomer,  52   111.  442,    per  Mr.  Justice  *  Strong  v.  Manufacturer.s'  Ins.  Co.  10 

Walker:  "Neither  reason,  authority,  nor  Pick.  (Mass)  40. 

the  contr.ict  of  assurance,  so  far  as  we  can  ^  Strong   v.   Manufacturers'    lu.s.    Co. 

see,  required  the  mortgaj^ce,  unless  inter-  supra. 

rogatcd,  to  state  the  nature  of  his  interest  «  Gordon  i'.  Ma-^s.  F.  &  Marino  In.s.  Co. 

in  the  property."  2  Tick.   (Mass.)  2i;);  Buffalo  Steam-En- 

303 


399.] 


INSURANCE. 


demption  subject  to  the  mortgage,  or  his  grantee  has  assumed 
the  payment  of  it,  he  retains  an  insurable  interest,  because  he 
is  liable  upon  the  mortgage  note  to  the  holder  of  the  mortgage, 
and  is  therefore  interested  in  the  preservation  of  the  property 
charged  with  the  payment  of  it.^  And  even  after  an  absolute 
conveyance,  intended,  however,  as  a  security  merely,  and  there- 
fore in  equity  a  mortgage,  the  mortgagor  retains  an  insurable 
interest.^ 

399.  When  application  should  state  incumbrance.  —  The 
existence  of  a  mortgage  upon  a  building,  for  the  insurance  of 
which  application  is  made,  is  a  material  fact,  if  inquired  about, 
and  any  misrepresentation  in  regard  to  the  existence  of  the  in- 
cumbrance or  the  amount  of  it  will  render  void  the  policy.^  Al- 
though the  original  amount  of  the  mortgage  be  correctly  stated, 
a  failure  to  disclose  the  existence  of  accumulated  interest  to  a 
large  amount  has  been  held  to  invalidate  the  policy,*  But  if  the 
principal  of  the  mortgage  be  correctly  stated,  the  omission  to  in- 
clude interest  upon  it  then  accruing,  but  not  then  due,  does  not 
make  the  representation  of  the  amount  of  the  incumbrance  un- 
true nor  render  the  policy  void.^     The  failure  of  an  applicant  for 


gine  Works  r.  Sun  Mut.  Ins.  Co.  17  N. 
Y.  401,404;  Insurance  Co.  v.  Sampson, 
38  Ohio  St.  672.  In  McLaren  v.  Hart- 
ford F.  Ins.  Co.  5  N.  Y.  151,  it  was  held 
that  the  mortgagor  could  not  recover  for 
a  loss  happening  after  a  sale  under  a  de- 
cree of  foreclosure,  and  before  the  deliv- 
ery of  the  deed,  having  then  no  insurable 
interest;  but  this  ruling  is  doubted  in 
Cheney  v.  Woodruff,  45  N.  Y.  98;  and 
see  Brown  v.  Frost,  Hoff.  (N.  Y.)  41. 

1  Waring  v.  Loder,  53  N.  Y.  581 ;  Her- 
kimer V.  Kice,  27  N.  Y.  1 63 ;  Strong  v. 
Manufacturers'  Ins.  Co.  10  Pick.  (Mass.) 
40 ;  Buck  v.  Phoenix  Ins.  Co.  76  Me.  586. 

-  Hodges  V.  Tennessee  Marine  &  F. 
Ins.  Co.  8  N.  Y,  416;  Walsh  v.  Phila.  F. 
Asso.  127  Mass.  383. 

3  Davenport  v.  N.  E.  Mut.  F.  Ins.  Co. 
6  Cush.  (Mass.)  340;  Van  Buren  v.  St. 
Joseph  County  Village  F.  Ins.  Co.  28 
Mich.  398.  Stating  the  mortgage  to  be 
about  $3,000,  when  it  was  in  fact  $4,000, 
has  that  effect.  Hayward  v.  N.  E.  Mut. 
F.  Ins.  Co.  10  Cush,  (Mass.)  444;  and  to 
like  effect.  Brown  v.  People's  Mut.  Ins. 

304 


Co.  11  lb.  280;  void  also  when  subject  to 
a  preexisting  mortgage  not  recorded  ; 
Packard  v.  Agawam  Mut.  F.  Ins.  Co.  2 
Gray  (Mass.),  334;  misrepresentation  as 
to  the  existence  of  mortgage  ;  JEtna  Ins. 
Co.  V.  Eesh,  40  Mich.  241 ;  S.  C.  8  Ins. 
L.  J.  271 ;  Draper  v.  Charter  Oak  F.  Ins. 
Co.  2  Allen  (Mass.),  569;  Bowditch  Mut. 
F.  Ins.  Co.  V.  Winslow,  8  Gray  (Mass.), 
38  ]  S.C.3  lb.  415  ;  Falls  v.  Conway  Mut. 
F.  Ins.  Co.  7  Allen  (Mass.),  46;  Towne 
V.  Fitchburg  Mut.  F.  Ins.  Co.  7  lb.  51  ; 
Murphy  v.  People's  Eq.  Mut.  F.  Ins.  Co. 
7  lb.  239 ;  Smith  v.  Columbia  Ins.  Co.  17 
Pa.  St.  253  ;  Titus  v.  Glens  Falls  Ins.  Co. 
81  N.  Y.  410 ;  Woodward  v.  Republic  F. 
Ins.  Co.  32  Hun  (N.  Y.),  365  ;  Byers  i-. 
Farmers'  Ins.  Co.  35  Ohio  St.  606.  Whe- 
ther a  deed  of  trust  is  compatible  with  an 
entire,  unconditional,  and  sole  ownership 
of  the  property  by  the  assured,  see  Man- 
hattan F.  Ins.  Co.  V.  Weill,  28  Gratt. 
(Va.)  389. 

*  Jacobs  I'.  Eagle  Mut.  F.  Ins.  Co.  7 
Allen  (Mass.),  132, 

5  Titus  V.  Glens  Falls  Ins.  Co.  supra. 


BY  MORTGAGOR  FOR  BENEFIT  OF  MORTGAGEE.     [§  400. 

insurance  to  disclose  the  existence  of  a  mortgage  which  has  been 
paid,  or  one  which  is  invahd  by  reason  of  its  having  been  ob- 
tained by  fraud,  does  not  render  the  policy  void.i 

Knowledge  on  the  part  of  the  insurer  of  the  existence  of  a 
mortgage  may  be  inferred  from  the  circumstances  of  the  case, 
though  not  actually  disclosed  by  the  insured  ;2  thus  where  the 
insurers  of  property,  upon  which  there  was  at  the  time  an  undis- 
closed mortgage,  afterwards  insured  the  interest  of  the  mortgagee 
and  later  still  renewed  the  first  policy,  the  circumstances  war- 
ranted a  finding  that  the  insurers  knew  of  the  mortgage  when 
they  renewed  the  policy  to  the  mortgagor.^  Knowledge  on  the 
part  of  an  agent  of  the  insurers  of  an  incumbrance  will  be  im- 
puted to  the  insurers  themselves.^  Knowledge  of  the  existence 
of  an  incumbrance  on  the  part  of  the  agent  authorized  to  solicit 
the  insurance  will  bind  the  company,  although  the  application 
filled  up  by  him  stated  that  there  was  no  incumbrance.^ 

Although  the  policy  be  taken  upon  the  interest  of  a  mortgagee, 
a  concealment  of  the  existence  of  prior  mortgages  held  by  him, 
when  their  disclosure  was  called  for,  avoids  the  policy.*^ 

When  incumbrances  are  not  made  material  by  an  inquiry  in 
relation  to  them,  the  applicant  is  not  bound  to  disclose  them.  It 
is  only  necessary  that  he  should  have  an  insurable  interest." 

II.  Insurance  hy  the  Mortgagor  for  the  Benefit  of  the  Mortgagee. 
400.  When  the  mortgage  provides  that  the  mortgagor 
shall  keep  the  premises  insured  for  the  benefit  of  the  mort- 
gagee, and  in  fulfilment  of  this  covenant  he  takes  out  a  policy  of 
insurance  in  his  own  name,  which  is  not  assigned  to  the  mort- 
gagee or  made  payable  to  him  in  any  way,  the  mortgagee  is  re- 
garded as  having  an  equitable  lien  upon  the  proceeds  of  the 
policy;^  and   if  his  mortgage  is  duly  recorded,  the  covenant  for 

1  Lycoming  Fire  Ins.  Co.  v.  Jackson,  ^  Smith  i'.  Columbia  Ins.  Co.  17  Pii. 
83  111.  302.  St.  253. 

2  Wooilward  v.  Kepublic  F.  Ins.  Co.  "  Norwich  Fire  Ins.  Co.  v.  Boomer,  52 
32  Iliin  (N.  Y.),  305.  111.  442  ;  Lycoming  F.  Ins.  Co.  v.  Jackson, 

3  State  Ins.  Co.  of  Mo.  v.  Todd,  83  Pa.  83  111.  302. 

St.  272.  ^  Vernon  v.  Smith,  5  Rarn.  &  Aid.  1; 

*  Holme',   V.   Drew,    10    IIuu    (X.  Y.),  Wheeler  v.  Ins.  Co.  101  U.  S.  439.     Inre 

491.  Sands  Ale  Brewing  Co.  3  Biss.  175;  Car- 

^  Boetcher    v.   Ilawkcye    Ins.    Co.    47  ter   i;.    Kockett,    8    Paige   (N.    Y.),   437; 

Iowa,  253;  S.  C.  1  Am.  Law  Kec.  383;  Cromwell   v.  Brooklyn  V.  Ins.  Co.  44  N. 

Woodward  v.  Republic  Ins.  Co.  supra.  Y.  42,  47,  per  Karl,  C. ;  Tiiomas  v.  Von- 

voi..  I.                   20  305 


§  400.]  INSURANCE. 

insurance  is  regarded  by  some  authorities  as  running  with  the 
land,  and  as  giving  notice  of  the  right  to  others,  so  that  no  sub- 
sequent assignment  of  the  policy  would  affect  his  rights.^  It  is 
immaterial  in  this  respect  whether  the  policy  existed  at  the  time 
of  the  mortgage,  or  was  afterwards  taken  out  by  the  mortgagor.^ 
The  mortgagee  in  such  case  stands  in  the  position  of  an  assignee 
of  a  chose  in  action ;  he  must  enforce  his  rights  in  the  name  of 
the  mortgagor,  but  his  interest  is  sufficient  to  enable  him  to  hold 
the  proceeds  against  an  attaching  creditor  or  any  subsequent  as- 
signee. But  these  cases  which  support  the  claim  of  the  mort- 
gagee to  insurance  obtained  by  the  mortgagor  in  his  own  name 
are  regarded  as  resting  upon  special  facts  which  justify  the  infer- 
ence that  the  insurance  in  question  was  obtained  by  the  mort- 
gagor with  the  intent  to  perform  his  agreement  to  insure  for  the 
benefit  of  the  mortgagee,  or  that  the  agreement  had  reference  to 
the  insurance  already  obtained.  Accordingly  where  there  was  no 
ground  for  such  inference,  and  the  insurance  company  paid  the 
amount  of  the  loss  to  the  mortgagor,  the  Supreme  Court  of  Mas- 
sachusetts held  that  the  mortgagee  had  no  equitable  lien  upon  the 
policy,  and  could  not  recover  in  the  name  of  the  mortgagor.^ 

When  the  mortgagor,  in  a  mortgage  containing  such  a  cove- 
nant, has  procured  a  policy  in  his  own  name,  and  after  a  loss  has 
delivered  the  policy  to  a  third  person  in  trust,  to  collect  the  insur- 
ance money,  and  pay  from  it  the  mortgage  debt,  the  mortgagee 
thereupon  has  an  equitable  lien  upon  the  policy  which  he  may 
enforce,  although  the  mortgagor  afterwards  obtains  possession  of 
the  policy  and  fraudulently  seeks  to  avail  himself  of  it  for  his 
sole  benefit.*  A  mortgagee  is  entitled  to  the  benefit  of  a  policy 
upon  the  mortgaged  property  under  a  covenant  for  insurance 
•  where  the  mortgagor  represented  that  the  property  was  covered 
by  this  particular  policy  which  he  agreed  to  transfer  as  collateral 
security,  but  in  fact  transferred  a  policy  upon  a  building  which 

kapff,  6  Gill  &  J.  (Md.)  372 ;  Norwich  F.  amount   to   the  required  insurance;   and 

Ins.  Co.  V.   Boomer,  52  111.  442;  Provi-  the  court  found  as  a  fact  that  the  inten- 

dence  County  Bank  i-.  Benson,  24  Pick,  tion  of  the  parties  was  that  this  particular 

(Mass.)  204;  Dunlop  v.  Avery,  24   Hun  policy   should   be   assigned   to  the  mort- 

(N.  Y.),  509  ;  Miller  v.  Aldrich,  31  Mich,  gagee.     See,   also,   Ames  v.  Richardson, 

408;  Ames  r.  Richardson,  29  Minn.  330.  supra. 

1  /?i  re  Sands  Ale  Brewing  Co.  3  Biss.  3  Stearns  v.   Quincy  Mut.  F.  Ins.  Co. 

175.  124  Mass.  61. 

•^  Nichols  V.  Baxter,  5  R.  I.  491.     The  *  Hazard  v.  Draper,  7   Allen  (Mass.), 

policy  in  this  case  was  in  existence  when  267 ;  and  see  Providence  County  Bank  v. 

the  mortgage  was  made,  and  conformed  in  Benson,  supra. 

306 


BY  MORTGAGOR  FOR   BENEFIT   OF   MORTGAGEE.  [§  401. 

had  been  removed  from  the  mortgaged  premises,  and  retained 
the  policy  he  agreed  to  assign.  It  was  fraud  in  him  to  assign  a 
worthless  policy,  and  retain  the  policy  expressly  stipulated  for  the 
mortgagee's  security.^ 

When  a  lessee  has  effected  insurance  under  a  provision  in  his 
lease  that  a  policy  shall  be  taken  by  him,  and  the  money  payable 
under  it  shall  be  applied  in  restoring  the  premises,  the  benefit  of 
the  insurance  passes  by  a  mortgage  of  his  term  without  special 
mention  of  it.^ 

In  general,  however,  it  may  be  said  that  a  covenant  to  insure 
for  the  benefit  of  the  mortgagee  is  not  a  covenant  running  with 
the  land,  but  is  entirely  personal  in  its  character  ;  and  therefore 
the  holder  of  a  mortgage  cannot  claim  the  benefit  of  an  insur- 
ance procured  by  a  purchaser  of  the  equity  of  redemption  from 
the  mortgagor .3  But  if  the  purchaser  or  his  agent  has  an  in- 
dorsement made  upon  the  policy,  making  the  loss  payable  to  the 
mortgagee,  the  latter  is  entitled  to  the  insurance,  and  his  right  to 
receive  it  cannot  be  revoked  by  a  cancellation  of  the  indorsement 
made  without  his  knowledge  or  assent."^ 

Where  the  agreement  to  keep  insurance  for  the  benefit  of  the 
mortgagee  was  merely  verbal,  but  the  mortgagor  had  acted  upon 
it  by  obtaining  such  insurance,  and  his  grantee  having  knowl- 
edge of  the  agreement  subsequently  surrendered  this  policy,  and 
took  another,  which  was  not  payable  to  the  mortgagee,  it  was 
held  that  he  was  nevertheless  entitled  in  equity  to  have  the  in- 
surance money  applied  in  payment  of  the  mortgage  debt.^ 

401.  But  if  there  is  no  covenant  or  agreement  in  the  mort- 
gage that  the  premises  shall  be  insured  for  the  benefit  of  the 
mortgagee,  the  mere  fact  that  his  mortgage  covers  the  property 
insured,  and  the  insured  is  personally  liable  for  the  debt,  give's 
the  mortgagee  no  corresponding  claim  upon  the  policy  or  the  pro- 
ceeds of  it.^     His  claim  is  then  no  better  than  that  of  any  creditor 

1  Doughty  V.  Van  Horn,  29  N.J.  Eq.  Wilson  v.  Hill,  3  Met.  (xMass.)  GG  ;  Co- 
90.  lumbia  Ins.  Co.  of  Alexandria  v.  Law- 

2  Garden  v.  Ingram,  23  L.  J.  Ch.  478.  rence,  10  Pet.   507  ;    Carpenter  v.   Prov. 

3  Dunlop  V.  Avery,  89  N.  Y.  592;  Ileid  Washington  Ins.  Co.  IG  Pet.  495  ;  Van- 
V.  McCrum,  91  N.  Y.  412.  degraaff  i;.  Wedlock,  3  Port.  (Ala.)  389  ; 

*  Keid  V.  McCrum,  supra.  Ilaiicox  v.  Fishing  Ins.  Co.  3  Sum.  132; 

6  Miller  v.  Aldricli,  31  Mich.  408.  McDonald  v.  Black,  20  Ohio,  185  ;  Plimp- 

6  Lynch  r.  Dalzcll,  4  Bro.  Pari.  Cases,  ton  v.  Ins.  Co.  43    Vt.  497 ;    Nichols  i;. 

431;  Ncale  v.  Beid,  3  Dowl.  &  By.   150,  Baxter,  5  B.  I.  491  ;    Byan  v.  Adamsou, 

158;  Powles  v.  Innes,  11    M.  &  W.  10;  57   Iowa,   30;    Ames   v.   Bichardson,   29 

Carter  v.  Bockett,  8  Paigo  (N.  Y.),  437  ;  Minn.  330. 

307 


§§  402,  403.]  INSURANCE. 

of  the  mortgagor.  The  policy  is  strictly  a  personal  contract.  It 
does  not  attach  to  the  mortgage  or  to  the  realty.  It  has  even 
been  held  that  a  mere  covenant  by  the  mortgagor  to  effect  insur- 
ance, without  any  stipulation  that  it  is  for  the  benefit  of  the  mort- 
gagee, or  that  the  loss  shall  be  paid  to  him,  does  not  imply  that 
the  mortgagor  sliall  apply  the  insurance  money  either  in  discharge 
of  the  mortgage  debt  or  in  restoration  of  the  property .^  A  cov- 
enant to  effect  insurance  is  not  without  meaning,  or  without  ad- 
vantage to  the  mortgagee,  although  it  be  not  either  expressly  or 
impliedly  made  for  his  benefit. 

402.  The  mortgagee  may  have  an  equitable  lien  upon  a 
policy  taken  by  the  mortgagor,  although  the  mortgage  pro- 
vides that  the  mortgagee  himself  may  insure.  While  a  mort- 
gagee, merely  as  such,  has  no  interest  in  or  claim  to  a  policy  of 
insurance  effected  by  the  mortgagor  upon  the  property  mortgaged 
for  his  benefit,  and  each  has  an  insurable  interest,  and  may  effect 
separate  insurance,  yet  one  insurance  for  the  benefit  of  both  is 
generally  provided  for  by  a  covenant  or  condition  that  the  mort- 
gagor shall  keep  the  premises  insured  for  the  benefit  of  the  mort- 
gagee, and  the  policy  should  then  be  taken  out  by  the  mortgagor, 
payable  to  the  mortgagee  in  case  of  loss,  or  the  policy  should  be 
assigned  to  him.  But  if  the  mortgagor  afterwards  takes  out  a 
policy  in  his  own  name  and  fails  to  assign  it,  or  to  make  it  pay- 
able to  the  mortgagee,  such  a  contract  in  the  mortgage  creates  an 
equitable  lien  in  favor  of  the  mortgagee,  upon  the  money  due,  for 
a  loss  under  such  a  policy,  to  the  extent  of  his  interest,  although 
the  mortgage  contained  a  provision  that  the  mortgagee,  in  default 
of  the  mortgagor's  insuring,  might  take  out  a  policy  at  the  ex- 
pense of  the  mortgagor,  and  under  the  security  of  the  mortgage, 
for  the  premiums.  The  insurance  company,  and  an  assignee  of 
the  policy  on  notice  of  the  rights  of  the  mortgagee  prior  to  the 
assignment,  are  subject  to  the  equity.^ 

403.  How  far  this  equitable  lien  can  affect  another  person 
who  has  subsequently  acquired  a  specific  assignment  of  the  policy 
is  a  question  not  very  definitely  settled  by  the  authorities.^     In 

1  Lees  V.  Whiteley,  L.  R.  2  Eq.  143.  right,  subject   to  the  mortgagee's  equity. 

2  Wheeler  v.  Ins.  Co.  101  U.  S.  439;  That  the  administrators  represent  the 
Nichols  V.  Baxter,  5  R.  I.  491 ;  and  see  creditors  cannot  change  the  character  of 
Miller  v.  Aldrich,  31  Mich.  408.  this  equity  of  the  mortgagee,  or  weaken 

3  Thomas  v.  Vonkapff,  6  Gill  &  J.  (Md.)  its  efficacy.  The  particular  creditor  and 
372.  Archer,  J.,  said  :  "  But  here  the  the  general  creditor  stand  in  different 
administrators  have  a  mere  naked  legal  attitudes.     The  former  never  trusted   to 

308 


BY   MORTGAGOR   FOR   BENEFIT   OF   MORTGAGEE.  [§  404. 

the  case  cited,  there  was  no  occasion  for  the  court  to  go  further 
than  to  hold  that  this  equitable  lien  was  binding  upon  the  mort- 
gagor, and  after  his  decease  upon  his  legal  representatives.  Mr. 
Justice  Archer,  however,  in  delivering  the  opinion  of  the  court, 
expressed  the  view  that  if  the  insurance  policy  or  fund  had  been 
passed  over  by  the  mortgagor,  for  a  valuable  consideration  with- 
out notice,  to  a  third  person,  the  right  of  such  third  person  would 
prevail,  because  he  would  have  an  equity  also  ;  and  having  the 
possession,  he  would  be  protected,  on  the  principle  that  the  title 
of  one  who  has  both  a  fair  possession  and  an  equitable  title  shall 
be  preferred  to  that  of  a  mere  equitable  interest. 

In  another  aspect  of  the  case,  the  learned  judge  expressed 
views  which  go  far  towards  sustaining  the  position  that  the  lien 
created  in  favor  of  the  mortgagee  by  the  covenant  for  insurance 
is  good  against  one  who  might  afterwards  take  an  assignment  of 
the  policy.  "  That  this  is  a  covenant  running  with  the  land  can, 
we  think,  scarcely  be  doubted.  The  covenants  to  repair  and 
rebuild  are  admittedly  so.  And  what  is  this  but  in  effect  a 
modified  covenant  to  repair  and  build?  The  insurance  is  to  be 
kept  up,  so  that  in  case  of  loss  by  fire  the  sum  insured  shall  be 
immediately  applied  to  rebuilding  the  property  on  the  premises. 
Being  of  this  character,  it  would  run  with  the  land,  just  as  would 
an  ordinary  and  absolute  covenant  to  repair  or  rebuild  ;  and  run- 
ning with  the  land,  the  record  of  the  mortgage  would  be  notice 
to  all  the  general  creditors,  and  they  would,  therefore,  have  no 
just  pretensions  to  participate  in  the  fund,  to  the  prejudice  of  the 
particular  creditor." 

404.  That  the  lien  created  by  such  a  covenant  is  valid  as" 
against  the  mortgagor's  assignee  in  bankruptcy  was  decided 
in  a  recent  case  in  the  District  Court  of  the   United  States  for 
the  Northern  District  of  Illinois,^  and  there  was  an  intimation  by 

the  personal  credit  of  tho  mortgagor,  but  wliich  tliey  derive  advantage  from  it,  to 

trusted  and  looked  to  this  particular  fund,  the  same  extent  do   tiiey  take  from  that 

to   satisfy  his  debt  or  give  him  security  creditor  who   looked   exclusively   to   it." 

for  it.  The  general  creditors  trusted  to  And  see  Giddings  v.  Seevers,  24  Md.  363. 
a  personal  credit  alone.     What  has  pro-         i  In  re  Sands  Ale  Brewing  Co.  3  Bisa 

duced  this  fund  ?     The  advance  of  money  175.      Mr.  Justice   Blodgett   said:    "My 

upon  its  faitii.  .  .  .  But  again  :  the  cov-  conclusion  then   is,  that  tho  covenant  by 

cnant  is  expressly  for  the  benefit  of  tho  the  bankrupt  to  insure  opcnited  to  assign 

particular  creditor,  not  for  the  benefit  of  in  equity  to  the  petitioner  the  benefit  of 

the  gen<ral  creditors  ;  and  if  they  partici-  any  insurance  efiected  by  the  bimkrupt  on 

pate  in  it,  they  get  that  which  they  never  the    mortgageil    property.       It    is    no   an- 

could  have  looked  to,  and  the  extent  lo  swer  to  say    that  tho    mortgagee    might 

309 


§  405.]  INSURANCE. 

the  court  that  a  specific  assignment  to  a  particular  creditor  would 
not  have  avoided  the  effect  of  the  covenant. 

405.  In  Maine  it  is  provided  by  statute  ^  that  a  mortgagee 
of  any  real  estate  shall  have  a  lien  upon  any  policy  of  insurance 
against  loss  by  fire  procured  thereon  by  the  mortgagor,  to  take 
effect  from  the  time  he  files  with  the  secretary  of  the  company  a 
written  notice  briefly  describing  the  mortgage,  the  estate  con- 
veyed, and  the  sum  remaining  unpaid  thereon.  If  the  mortgagor 
consents  in  writing  filed  with  the  secretary  that  the  whole  or  a 
part  of  the  sum  secured  by  the  policy'  shall  be  applied  to  the  pay- 
ment of  the  mortgage,  the  mortgagee's  receipt  shall  be  a  suffi- 
cient discharge.  If  the  mortgagor  does  not  so  consent,  the  mort- 
gagee may,  at  any  time  within  sixty  days  after  a  loss,  enforce 
his  lien  by  a  suit  against  the  mortgagor,  and  the  company  as  his 
trustee,  in  which  judgment  may  be  rendered  for  what  is  found 
due  upon  the  policy,  notwithstanding  the  time  of  payment  of  the 
whole  sum  secured  by  the  mortgage  has  not  arrived.^  The 
amount  recovered  is  first  applied  to  the  payment  of  the  costs  of 
suit,  and  then  to  the  payment  of  the  mortgage  debt;  and  the 
balance,  if  an}^,  is  retained  by  the  company  and  paid  to  the  mort- 
gagor. When  two  or  more  mortgagees  claim  the  benefit  of  this 
lien,  their  rights  are  determined  according  to  the  priority  of  their 
claims  and  mortgages  by  the  principles  of  law.  When  a  mort- 
gagee claims  the  benefit  of  this  lien,  any  policy  of  insurance 
previously  or  subsequently   procured  by  him  on  his  interest  as 

have  insured  in  default  of  insurance  by  gagor  did  not  do  it.  ...  The  lien  is 
the  mortgagor,  because  the  mortgagor  neither  doubtful  nor  general,  but  is  clear 
had  insured,  and  his  insurance  enured  at  and  specific.  It  is  but  carrying  out  the 
once  to  the  benefit  of  the  mortgagee.  It  intent  of  the  parties,  and  giving  the  mort- 
is urged  by  way  of  argument  in  belialf  of  gagee  the  security  he  had  bargained  for, 
one  creditor  —  the  Union  National  Bank  and  which  he  had  given  the  whole  world 
—  that  if  all  or  part  of  these  policies  had  notice  he  was  entitled  to." 
been  assigned  to  that  creditor,  they  could  ^  Rev.  Stat.  1871,  ch.  49,  §§  32-36.  The 
have  been  held  then  as  against  the  peti-  statute  annuls  all  provisions  of  a  policy  at 
tioner,  and  that  the  assignee,  holding  for  variance  with  it.  Emery  r.  Piscataqua  F. 
the  benefit  of  all  creditors,  occupies  the  &  M.  Ins.  Co.  52  Me.  322. 
same  position ;  but  this  argument  is  fal-  ^  j^  mortgagee  has  no  lien  upon  a  pol- 
lacious,  because  it  overlooks  or  ignores  icy  procured  by  the  mortgagor  which  the 
the  fact  that  all  creditors  had  notice  of  insurers  have  in  good  faith  settled  before 
the  petitioner's  equitable  right  to  this  in-  the  expiration  of  sixty  days  after  loss,  and 
surance  money,  and  could  acquire  no  before  any  notice  of  the  loss  has  been  filed 
valid  interest  therein  as  against  him.  with  the  secretary,  although  such  notice  be 
Equity  made  this  assignment  the  moment  afterwards  filed  within  the  sixty  days, 
the   insurance  was  effected,   if  the  mort-  Burns  v.  Collins,  64  Me.  215. 

310 


BY  MORTGAGOR  FOR   BENEFIT   OF  MORTGAGEE.  [§  406. 

mortgagee  is  void,  unless  it  is  consented  to  by  the  company  insur- 
ing tlie  mortgagor's  interest. 

406.  Loss  payable  to  the  mortgagee.  —  When  a  policy  is 
taken  in  the  name  of  the  mortgagor,  but  the  insurance  is  made 
payable  to  the  mortgagee  in  case  of  loss,  the  contract  is  with  the 
mortgagor,  and  is  for  the  insurance  of  his  interest,  and  the  mort- 
gagee can  recover  only  in  case  the  mortgagor  could  have  doue  so, 
unless  the  polic}^  contains  special  provisions  in  favor  of  the  mort- 
gagee.^ The  making  of  the  policy  payable  to  the  mortgagee  is 
regarded  as  an  appointment  to  receive  any  money  which  might 
become  due  from  the  insurers  by  reason  of  any  loss  which  the 
mortgagor  might  sustain.  It  is  still  a  contract  to  indemnify  the 
mortgagor  against  a  loss,  and  not  a  contract  to  indemnify  the 
mortgagee.  Thus  when  a  mortgagor  has  procured  a  policy  "  as 
his  interest  might  appear,"  the  loss,  if  any,  payable  to  the  mort- 
gagee as  collateral  security  for  the  mortgage  debt,  the  mortgagee 
has  no  authority  to  consent  to  the  cancellation  of  the  policy  ;  and 
if  he  does  so,  and  takes  out  a  new  policy  in  his  own  name,  he  will 
have  only  the  same  rights  under  it  that  he  had  under  the  old  pol- 
icy. Therefore,  if  a  loss  occurs,  and  the  mortgagor  restores  the 
building  to  the  same  condition  it  was  in  before,  the  insurance  is 
payable  to  the  mortgagor  and  not  to  the  mortgagee,  the  latter 
having  sustained  no  loss  or  damage.^  In  a  case  before  the  Court 
of  Appeals  of  New  York,^  Mr.  Justice  Harris  described  the  rights 
of  the  parties  in  such  a  case  as  follows :  "  The  undertaking  to  pay 
the  plaintiff  was  an  undertaking  collateral  to  and  dependent  upon 
the  principal  undertaking  to  insure  the  mortgagor.  The  effect 
of  it  was,  that  the  defendants  agreed  that  whenever  any  money 
should  become  due  to  the  mortgagor  upon  the  contract  of  insur- 
ance, they  would,  instead  of  paying  it  to  the  mortgagor  himself, 
pay  it  to  the  plaintiff.     The  mortgagor  must  sustain  a  loss  for 

1  Franklin  Savings  Institution  v.  Cen-  7  Hun  (N.  Y.),  659.     The  fiict  that  the 

tral  Mut.  F.  Ins.  Co.  119  Mass.  240;  Tur-  policy  is  payable  to  the  mortgajjee  is  not 

nor  V.  Qulncy  Mut.  F.  Ins.  Co.  109  Mass.  inconsistent  with  an  allegation,  in  a  crim- 

568;  Fogg  i;.  Miiidlesex  Mut.  F.  Ins.  Co.  inal    prosecution   of    the   mortgagor    for 

10  Cusli.  (Mass.)  3.37  ;  Hale  v.  Mechanics'  burning  a  buiMing  with  intent  to  (U'fraud 

Mut.   Fire  Ins.  Co.  6  Gray  (Mass.),  169;  the  insurers,  that  the  building  was  insured 

Loring  v.  Manufacturers'  Ins.  Co.  8  lb.  to  the  accused.     State  v.  Byrne,  45  Conn. 

28;  Krunswick  Suv.  Inst.  v.  Commercial  273;  S.  C.  8  Ins.  L.  J.  4,  28. 

Union    Ins.  Co.    68    Me.  313;    Smith    v.  2  /„  ^e  Moore,  6  DmIv  (N.  Y.),  541. 

Union  Ins.  Co.  120. Mass.  90;  Fitchburg  *  Grosvenor  t".  Atlantic  Fire  Ins.  Co.  of 

Savings    Bank    v.    Amazon    Ins.  Co.    125  Brooklyn,  17  N.  Y.  391. 
Mass.  431  ;   Merwin  v.  Star  F.  Ins.  Co- 

311 


§  406.]  INSURANCE. 

which  the  insurers  were  liable,  before  the  party  appointed  to  re- 
ceive the  money  would  have  a  right  to  claim  it.  It  is  the  dam- 
age sustained  by  the  party  insured,  and  not  by  the  party  ap- 
pointed to  receive  payment,  that  is  recoverable  from  the  insurers." 
It  was  accordingly  held  in  this  case  that  the  mortgagor  having 
parted  with  his  interest  in  the  property  before  the  loss,  the  mort- 
gagee, to  whom  the  loss  was  payable,  could  not  recover.  Such  a 
result  is  generally  prevented  by  a  provision  in  favor  of  the  mort- 
gagee, that  no  alienation  by  the  mortgagor  shall  affect  the  mort- 
gagee's right  to  recover ;  ^  and  frequently  protection  is  extended 
to  the  mortgagee  so  far  as  to  prevent  the  invalidating  of  the  policy 
by  any  act  of  the  mortgagor  or  owner  of  the  property  insured.^ 

A  stipulation  that  no  sale  or  transfer  of  the  property  shall  viti- 
ate the  right  of  the  mortgagee  to  recover  in  case  of  loss,  or  that 
no  act  or  default  of  any  person  other  than  such  mortgagee  or  his 
agents  shall  affect  his  right  to  recover,  prevents  a  forfeiture  of  the 
policy  as  to  his  interest,  after  a  sale  of  the  property,  in  conse- 
quence of  the  breach  of  a  condition  of  the  policy,  such  as  a  condi- 
tion making  the  policy  void  if  further  insurance  be  obtained  with- 
out the  consent  of  the  insurers.^  A  necessary  consequence  of  a 
sale  is  that  the  purchaser  has  a  right  to  insure  his  interest.  The 
object  of  the  stipulation  is  to  secure  the  insurance  of  the  mort- 
gagee's interest,  and  to  avoid  the  defeat  of  this  security  by  any 
sale  or  transfer  of  the  property ;  and  by  a  fair  interpretation  of 
the  contract  it  means  that  the  mortgagee's  right  to  recover  shall 
not  be  vitiated  by  any  of  the  natural  consequences  or  incidents  of 
sale.* 

If  a  policy,  though  containing  a  mortgage  clause  protecting  the 
mortgagee  from  the  consequences  of  the  acts  and  omissions  of  the 
mortgagor,  provides  that  the  mortgagee  shall  notify  the  insurer 
of  any  increased  hazard  which  shall  come  to  his  knowledge,  the 
policy  is  rendered  void  by  the  failure  of  the  mortgagee  to  comply 
with  this  provision.^ 

Aside  from  any  saving  provision  in  favor  of  the  mortgagee,  any 
act  of  the  mortgagor,  either  in  procuring  the  policy  or  in  dealing 

1  Macomber  v.  Cambridge  Mut.  F.  Ins.  *  City  Five  Cents  Sav.  Bank  v.  Penn. 
Co.  8  Cush.  (Mass.)  133.  F.  Ins.  Co.  122  Mass.  165. 

2  SprinRfielti  F.  &  M.  Ins.  Co.  v.  Allen,  ^  Cole  v.  German  la  F.  Ins.  Co.  99  N. 
43  N.  Y.  389.  Y.  36 ;  Graham  v.  Fireman's  Ins.  Co.  87 

3  Eliot   P^ive    Cents    Savings   Bank  v.  N.  Y.  69. 
Commercial   Union   Ass.    Co.   142   Mass. 

142. 

312 


BY  MORTGAGOR   FOR   BENEFIT   OF   MORTGAGEE.  [§  407. 

with  the  property  afterwards,  which  would  avoid  the  policy  as  to 
him,  will  avoid  it  equally  as  to  tlie  mortgagee  ;  as  by  a  misrepre- 
sentation as  to  the  use  made  of  the  property  ;  ^  or  a  violation  of 
one  of  the  previsions  of  the  policy  in  procuring  over-insurance.^ 
But  no  admissions  or  declarations  by  the  owner  after  a  loss  are 
admissible  to  defeat  a  recovery  by  the  mortgagee  upon  the 
policy.^ 

407.  Equivalent  to  assignment.  —  In  general,  the  provision 
of  a  policy  that  the  loss,  if  any,  shall  be  paid  to  the  mortg;igee, 
operates  to  give  the  mortgagee  precisely  the  same  rights  and  inter- 
est in  the  policy  which  he  would  have  if,  without  such  words, 
the  mortgagor  had  assigned  the  policy  to  him  as  collateral  secu- 
rity to  the  mortgage  debt.'* 

The  insured  can  of  course  no  more  adjust  a  loss  payable  to  the 
mortgagee  than  he  could  release  it.^  The  insurer  cannot  termi- 
nate the  contract  before  the  date  fixed  by  the  policy,  without 
notice  to  the  mortgagee.^ 

In  Massachusetts  it  is  provided  that  in  case  of  loss  upon  prop- 
erty hereafter  insured  within  the  terms  of  the  fire  insurance  pol- 
icies thereon,  all  such  insurers  thereof,  upon  the  proper  presenta- 
tion of  proofs  by  the  claimants  in  accordance  with  the  provisions 
of  the  policy,  together  with  an  authentic  statement  of  the  title, 
showing  the  rights  and  interests  of  all  parties  therein,  shall  pay 
all  mortgages  expressly  protected  by  any  policies  taken  out  in  the 
name  of  the  mortgagor,  in  the  order  of  their  priority,  to  the  ex- 
tent of  their  respective  policies   or  interests  in   their  respective 

1  Merwin  v.  Star  Fire  Ins.  Co.  7  Iliin  poses  further  obligations  on  the  assignee, 
(N.  Y. ),  659.  making  a  new  contract  with  him,  the  acts 

2  Buffalo  Steam-Engine  Works  v.  Sun  of  the  mortgagor  cannot  affect  his  rights. 
Mut.  Ins.  Co.  17  N.  Y.  401.  Civil  Code,  §§  2541,  2542 ;  Codes  &  Stats, 

In  California  it  is  provided  that  where  1877,  §§7541,  7542. 

a  mortgMgor  of  property  effects  insurance  ^  Browning  v.  Home  Ins.  Co.  71  N.  Y. 

in  his  own  name,  providing  that  the  loss  508. 

shall  be  payable  to  the  mortgagee,  or  as-  *  Grosvenor  v.  Atlantic  F.  Ins.  Co.  of 

signs  a  policy  of  insurance  to  the  mort-  Brooklyn,  5  Duer  (N.  Y.),517;  S.  C.  17 

gagee,  the  insurance  is  deemed  to  be  upon  N.  Y.  391,  395;  Ennis  v.  Harmony  F.  Ins. 

the  interest  of  the  mortgagor,  who  does  Co.  3  Bosw.  (N.  Y.)  516;  Luckey  v.  Gan- 

not  cease  to  be  a  party  to  the  original  con-  non,  37  How.  (N.  Y.)  Pr.  134,  138. 

tract,  and  any  act  of  his  which  would  oth-  Quoted  with   approval.  Conn.  Mut.  L. 

erwi.se  avoid  the  insurance  will  have  the  Ins.  Co.  v.  Scarauion  (C.  C.  111.  1880),  4 

same  effect,  although  tlie  property  is  in  Fed.  Hep.  2G3. 

the  hands  of  the  mortgagee.  '^  Harrington  v.  Fitchburg  Mut.  F.  Ins. 

If  an  insurer  as.sents  to  the  transfer  of  Co.  124  Mass.  126  ;  S.  C.l  Ins.  L.  J.  618. 

an  insurance  fnjm  a  mortgagor  to  a  mort-  •>  Lattan  v.  Koyal  Ins.  Co.  45  N.  J.  L. 

tragee,  and   at  liie  time   of  his  assent  im-  453. 

313 


§  408.]  INSURANCE. 

mortgage  claims,  before  the  owner  of  tlie  equity  of  redemption  in 
said  property  shall  receive  anything ;  but  this  provision  does  not 
enlarge  the  amount  which  any  insurance  company  would  other- 
wise pay  on  account  of  any  loss  ;  and  any  payment  so  made  by 
any  such  company  under  its  policy  in  accordance  with  the  provi- 
sions of  this  act,  whether  to  the  person  named  in  the  policy  or 
not,  shall  be  deemed  and  taken  to  be  in  payment  and  satisfaction 
of  the  liability  of  such  comj)any  under  its  policy  to  the  full  extent 
of  such  payment.^ 

408.  Who  may  bring  suit.  —  "When  the  policy  is  taken  out 
by  the  mortgagor  in  his  name,  payable  in  case  of  loss  to  the  mort- 
gagee, the  mortgagor  should,  with  the  assent  of  the  mortgagee, 
sue  on  the  policy  in  his  own  name.  The  mortgagor  in  such  case  is 
the  party  for  whose  benefit  the  insurance  really  operates,  whether 
payment  be  made  to  himself  or  to  the  mortgagee.^  The  contract 
of  insurance  in  such  case  is  with  the  mortgagor,  notwithstanding 
the  loss  is  payable  to  the  mortgagee.  This  direction  in  the  policy 
is  not  an  assignment  of  it,  and  although  it  is  assented  to  Iw  the 
insurer,  the  contract  with  the  mortgagor  is  not  thereby  merged  or 
extinguished."^  In  an  action  on  such  a  policy  by  the  mortgagor, 
the  insurer  may  plead  payment  to  the  mortgagee  as  performance. 
The  rights  of  the  mortgagee,  and  of  the  insurers  as  well,  may  be 
protected  in  all  cases  by  a  payment  of  the  money  into  court.* 

There  is  some  confusion  and  contradiction  in  the  cases  in  regard 
to  the  right  of  action  upon  a  policy  procured  by  a  mortgagor  pay- 
able in  case  of  loss  to  the  mortgagee.  The  principle  underlying 
the  subject  is,  that  the  real  party  to  the  contract,  in  whom  the 
entire  interest  in  it  is  vested,  is  the  proper  party  to  enforce  it. 
If  a  policy  be  taken  by  a  mortgagee  in  this  way,  he  alone  dealing 
with  the  company  and  paying  the  premiums,  he  is  the  real  party 

1  Acts  1878,  ch.  132,  §  2.  Fix,  53  111.  151 ;    Martin  v.  Franklin  F. 

2  Turner  v.  Quincy  Mut.  F.  Ins.  Co.  Ins.  Co.  38  N.  J.  L.  140;  S.  C.  Franklin 
109  Mass.  568;  Farrow  y.  Commonwealth  Ins.  Co.  v.  Martin,  8  Ins.  L.J.  81,  134; 
Ins.  Co.  18  Pick.  (Mass.)  53;  Patterson  Grosvenor  v.  Atlantic  F.  Ins.  Co.  of 
V.  Triumph  Ins.  Co.  64  Me.  500;  Jack-  Brooklyn,  17  N.  Y.  391  ;  Hartford  F.  Ins. 
son  V.  Farmers'  Mut.  F.  Ins.  Co.  5  Gray  Co.  v.  Davenport,  37  Mich.  609  ;  Van 
(Mass.),  52;  Continental  Ins.  Co.  r.  Hul-  Buren  v.  St.  Joseph  County  Village  F. 
man,  92  111.  145;  Meriden  Sav.  Bank  v.  Ins.  Co.  28  Mich.  398,  404;  Brunswick 
Home  Ins.  Co.  50  Conn.  396.  Sav.  Inst.  v.  Commercial  Union  Ins.  Co. 

3  Friemansdorf  v.  Watertown  Ins.  Co.  8  Ins.  L.  J.  120;  -S'.  C.  68  Me.  313. 

9  Biss.  167;  Bates  v.  Equitable  Ins.  Co.         *  Martin  v.    Franklin  F.   Ins.   Co.   su- 

10  Wall.  33;  Illinois  Mut.  F.  Ins.  Co.  v.     pra. 

314 


BY   MORTGAGOR   FOR  BENEFIT   OF  MORTGAGEE.  [§  408. 

to  tlie  contract  and  tlie  proper  party  to  sue,i  if  the  policy  covers 
only  the  mortgaged  property  and  does  not  in  amount  exceed  the 
mortgagee's  interest.^  In  like  manner,  if  the  entire  interest  in 
the  policy  has  been  vested  in  the  mortgagee,  or  assigned  to  him, 
or  if  the  whole  amount  of  the  policy  is  made  payable  to  the  mort- 
gagee, without  qualification  express  or  implied,  or  it  be  less  in 
amount  than  the  debt,  he  may  enforce  it  by  suit.^  Ordinarily, 
however,  there  remains  by  the  very  terms  of  a  policy  insuring  the 
mortgagor,  but  payable  to  the  mortgagee  in  case  of  loss,  or  by 
necessary  implication  from  such  a  policy,  an  equitable  interest  in 
the  mortgagor.  A  debt  to  the  mortgagee  is  implied,  and  the 
making  of  the  policy  payable  to  him  implies  that  his  interest  is^ 
limited  to  the  amount  of  this  debt.  Therefore,  in  the  ordinary 
case  of  a  policy  made  in  this  way,  there  is  a  divided  interest ; 
partly  in  the  mortgagor  and  partly  in  the  mortgagee.  The  direc- 
tion that  payment  in  case  of  loss  be  made  to  the  mortgagee  is  a 
contingent  order  or  stipulation.*  Making  a  policy  payable  to  a 
mortgagee  in  case  of  loss  is  a  mere  appointment  of  the  insurance 
to  the  extent  of  the  mortgagee's  interest ;  it  does  not  constitute 
an  assignment  of  the  policy,  so  as  to  authorize  the  mortgagee  to 
sue  in  his  own  name.^  Under  the  codes  of  practice  of  some 
states,  as  in  New  York  and  other  states  which  have  adopted  the 
same  practice,  the  mortgagee  may  maintain  sucli  suit  in  his  own 
name,  by  virtue  of  a  provision  that  suits  shall  be  maintained  in 
the  name  of  the  real  party  in  iiid;erest.  Sometimes  the  mortgagee 
is  by  statute,  or  by  stipulation  in  the  policy  or  charter  of  the  com- 
pany, given  the  right  to  enforce  such  a  policy.  But  aside  from 
authority  so  conferred,  the  mortgagor  as  a  general  rule,  so  long  as 
he  retains  an  insurable  interest,  may  bring  the  suit.  There  can 
be  no  division  of  causes  of  action  on  a  single  insurance  policy. 
Whoever  sues  must  be  able  to  enforce  the  whole  liability.^   There- 

1  Chamberlain  v.  N.  II.  F.  Ins.  Co.  55  be  joined  as  a  party.     Ennis  v.  Harmony 

N.  H.  249;  Westchester  F.   Ins.  Co.   v.  F.  Ins.  Co.  3  Bosw.  516;  Frink  f.  Ilamp- 

Foster,  90  111.  121.  den  Ins.  Co.  45  Barb.  384  ;  S.  C.  31  Ilovr. 

-  Hopkins  Manuf.  Co.  v.  Aurora  F.  &  Pr.  30;  Rou.ssel  v.  St.  Nicholas  Ins.  Co. 

M.   Ins.  Co.    48  Mich.  148;  Hartford  F.  41  N.  Y.  Superior    Ct.  279;  Berthold  i;. 

Ins.  Co.  V.  Davenport,  37  Mich.  609.  Clay  F.  Ins.  Co.  2  Mo.  App.  311. 

3  Iladley  v.  N.  H.  Fire  Ins.  Co.  55  N.  II.  ■*  Brunswick  Savings  Inst.  v.  Commcr- 

i:0 ;  S.  C.  4  Ins.  L.  J.  611.  cial  Union  Ins.  Co.  68  Mo.  313. 

Under  the  Code  practice  in  New  York,  ^  Fire  Ins.  Co.  v.  Felrath,  77  Ala.  194 ; 

BO  lon^f  as  the  mort{,'nge  debt  remains  un-  S.  C.  54  Am.  Bep.  58. 

paid,  the  action  should  be  brout^lit  by  the  «  Hartford  F.    Ins.   Co.   v.   Davenport, 

mortgagee  in  his  own  name,  or  he  should  supra. 

315 


§  408.]  INSURANCE. 

fore,  when  a  partial  interest  in  the  policy  remains  in  the  mort- 
gagor, the  mortgagee  cannot  sue  as  the  party  to  whom  the  loss  is 
payable.  And  for  the  same  reason,  if  the  policy  cover  property 
in  part  not  subject  to  the  mortgage,  the  mortgagee  cannot  sue 
upon  it,  either  in  his  own  name  or  that  of  the  mortgagor.^  For 
if  the  suit  be  in  his  own  name,  with  reference  to  his  own  interest, 
the  insurers  would  be  liable  to  another  suit  by  the  mortgagee 
upon  the  same  policy ;  and  if  the  mortgagee  be  allowed,  against 
the  consent  of  the  mortgagor,  to  prosecute  a  suit  in  his  name,  the 
insurers  would  be  required  to  pay  one  loss  by  instalments  to  dif- 
ferent persons.  Under  the  codes  in  force  in  some  of  the  states, 
persons  having  several  interests  in  such  a  contract  may  join  in 
enforcing  it.^  If  the  mortgagee's  interest  exceeds  the  amount  of 
the  insurance,  the  whole  interest  being  in  the  mortgagee  he  may 
sue  upon  the  policy  alone.^ 

If,  however,  the  mortgage  clause  in  a  policy  be  in  legal  effect 
an  agreement  to  pay  the  insurance  or  any  part  of  it  directly  to 
the  mortgagee,  recognizing  him  as  a  distinct  party  in  interest, 
and  not  a  mere  appointment  to  pay  the  loss  to  him,  he  may  main- 
tain the  action  in  his  own  name.^ 

When  a  mortgagor  effects  an  insurance,  payable  in  case  of  loss 
to  the  mortgagee,  the  former  holds  the  legal  title,  and  may  main- 
tain an  action  on  the  policy  for  the  use  of  the  mortgagee.^  The 
subsequent  payment  of  the  mortgage  debt  does  not  prevent  a  re- 
covery against  the  insurance  company  ;  but  the  mortgagor  may 
still  recover  in  the  name  of  the  mortgagee,  if  necessary,  or  in  his 
own  nanie.^  A  mortgagor,  after  making  a  policy  payable  to  his 
mortgagee,  can  no  more  bind  the  mortgagee  by  an  adjustment  of 
the  amount  of  the  loss  than  he  can  bind  him  by  a  release  of  it.''' 

On  the  other  hand,  if  a  mortgagee  as  such  take  out  a  policy 
upon  his  interest  for  the  benefit  of  the  mortgagor  with  the  agree- 
ment that  any  sum  that  might  be  received  for  a  loss  should  be 

1  Steams  v.  Quincy  Mut.   T.  Ins.  Co.  Co.   v.  Foster,  90   111.   121  ;   Hastings  v. 
124  Mass.  61  ;  S.  C.  7  Ins.  L.  J.  506.  Westchester  F.  Ins.   Co.  73  N.  Y.  141 ; 

2  As  in  Wisconsin:  Strohn  v.  Hartford  Meriden  Sav.  Bank  v.  Home  Ins.  Co.  50 
F,  Ins.  Co.  33  Wis.  648 ;  S.  C.  37  lb.  625  ;  Conn.  396. 

3  Ins.  L.  J.  288.  5  Illinois  Fire  Ins.  Co.  v.  Stanton,  57 

8  Hammel  v.   Queen  Ins.  Co.  50  Wis.  El.  354. 

240.     Otherwise  where  Code  practice  does  ^  Norwich  Fire  Itis.  Co.  v.  Boomer,  52 

not   prevail.      Fire  Ins.    Co.    v.   Felrath.  111.  442 ;  Concord  Union  Mut.  F.  Ins.  Co. 

77  Ala.  194.  V.  Woodbury,  45  Me.  447. 

*  See  §  413 ;   Hartford  F.  Ins.  Co.  v.  "<  Harrington  v.  Fitchburg  Mut.  F.  Ins. 

Olcott,  97  III.  439  ;   Westchester  F.  Ins.  Co.  124  Mass.  126. 

316 


BY  MORTGAGOR   FOR   BENEFIT   OF  MORTGAGEE.  [§  409. 

credited  upon  the  mortgage  debt,  the  mortgagor  is  the  proper 
party  to  maintain  a  suit.^ 

'i'he  mortgagor  may  in  his  own  name  enforce  specific  perform- 
ance of  a  provision  in  the  policy  giving  the  insurers  the  election 
to  rebuild,  after  they  have  made  such  election  and  neglected  to 
perform  the  contract.  The  action  is  upon  the  contract  to  rebuild 
and  not  strictly  upon  the  policy,  and  the  cause  of  action  is  in  the 
insured  and  not  in  the  mortgagee.^ 

At  common  law  the  assignee  of  a  policy  of  insurance  cannot 
maintain  an  action  upon  it  in  his  own  name,  and  unless  author- 
ized so  to  do  by  general  law,  or  by  the  act  incorporating  the  in- 
surance company,  the  suit  must  be  in  the  name  of  the  insured  for 
the  use  of  the  assignee.^ 

409.  The  mortgagee  is  bound  to  receive  the  whole  insur- 
ance, and  apply  it  to  the  debt.  Where  a  policy  of  insurance  is 
taken  out  by  the  mortgagor,  payable  to  the  mortgagee  in  case  of 
loss,  the  insurer  is  bound  to  pay  the  whole  loss  to  the  mortgagee, 
who  is  holden  to  apply  the  amount  received,  so  far  as  is  necessary 
to  discharge  the  mortgage;  and  in  case  the  mortgage  debt  has 
been  previously  paid,  the  mortgagee  would  receive  the  sum  paid 
for  the  use  of  the  mortgagor.  In  such  case,  the  continued  ex- 
istence of  the  mortgage  debt  is  not  essential  to  a  recovery  for  the 
benefit  of  the  mortgagor,  because  the  policy  is  his,  and  is  upon 
his  interest,  which  is  in  no  way  diminished  by  the  discharge  of 
the  mortgage.^  If  the  policy  contain  a  provision  that  "  No  sale 
of  the  property  shall  affect  the  right  of  the  mortgagee  to  recover 
in  case  of  loss  under  this  policy,"  and  a  sale  be  made  before  a 
loss  occurs,  the  mortgagee  is  still  bound  to  recover  the  amount 
from  the  insurers,,  and  to  apply  the  avails  first  to  the  discharge  of 
the  mortgage  debt,  and  the  surplus  to  the  benefit  of  the  mort- 
gagor ;  and  the  insurers,  if  they  have  taken  a  transfer  of  the 
mortgage  upon  paying  the  loss,  stand  in  no  better  position  than 
the  mortgagee,  as  they  have  full  knowledge  of  the  existence  of 
tlie  policy  and  of  its  provisions  ;  and  the  purchaser  of  the  equity 
of  redemption  is  entitled  to  the  benefit  of  the  money  paid  on  the 

1  vY-tna  Ins.  Co.  v.  Baker,  71  Ind.  102.  *  Concord  Union  ]Mut.  Fire  lus.  Co.  v. 

■^  Ilcilrnann  v.  Westchester  F.  Ins.  Co.  Woodbury,  4.5   Me.  447  ;    King  v.   State 

75  N.  Y.  7  ;  S.  C.7  I{ei)orter,.305  ;  8  Ins.  Mutual  Fire  Ins.  Co.  7  Cush.  (Mass.)   1, 

L.  J.  M,  88.  j)cr  Sliaw,  C.  J.  ;  Suffolk  F.  Ins.  Co.  v. 

8  NewKn^^land  F.  &  M.  Ins.  Co.  r.  Wet-  IJoyden,  9  Allen  (Ma.-s),   123  ;  Clark  v. 

more,  .32  111.  221  ;  Illinois  F.  Ins.  Co.  i>.  Wil>on,  103  Mass.  219,  221  ;  Warin-  t;. 

Stanton,  57  111.  354.  Loder,  53  N.  Y.  581. 

317 


§  409.]  INSURANCE. 

loss,  and  may  redeem  upon  paying  the  balance  due  upon  the 
mortgage  after  deducting  the  amount  payable  for  the  loss.^ 

If,  however,  the  policy  further  provides  that  when  a  loss  after 
a  forfeiture  is  paid  to  *he  mortgagee,  the  insurer  shall  be  subro- 
gated to  the  mortgagee's  rights  under  the  mortgage  to  the  extent 
of  such  payment,  and  may  pay  the  full  amount  of  the  debt  to  the 
mortgagee,  and  shall  thereupon  receive  an  assignment  of  the  mort- 
gage, and  a  loss  occurs  after  a  forfeiture  of  the  policy,  and  the 
mortgagee,  upon  receiving  the  amovint  due  on  the  mortgage,  as- 
signs the  mortgage  to  the  insurerj  the  owner  of  the  equit}"^  cannot 
redeem  without  paying  to  the  insurer  the  full  amount  of  such 
moi'tgage  debt.^ 

If  the  policy  stipulates  that  the  mortgagee  shall,  in  case  of  loss, 
assign  his  mortgage  to  the  insurer  to  the  amount  of  the  loss  paid, 
the  mortgagee  cannot  recover  for  a  loss  until  he  has  complied  with 
such  stipulation.^ 

If  it  be  provided  in  the  mortgage  that  the  mortgagor  shall 
insure  in  a  certain  sum,  for  the  benefit  of  the  mortgagee,  or  that 
the  mortgagee  may  cause  the  property  to  be  insured  at  the  ex- 
pense of  the  mortgagor,  and  that  the  premium  shall  be  covered 
by  the  mortgage  security,  then  in  effect  the  policy  is  fm-nished  by 
the  mortgagor,  and  any  money  recovered  under  it  enures  to  him 
in  going  towards  paying  his  debt  to  the  mortgagee.*  The  mort- 
gagee receives  the  proceeds  to  apply  in  the  first  place  to  the  pay- 
ment of  the  mortgage  debt,  and  then  he  is  trustee  for  the  mort- 
gagor for  any  balance  left  in  his  hands.^  If  in  such  case  the 
mortgagee  pays  the  premium,  he  may  charge  the  amount  in  his 
account  against  the  mortgagor.  But  in  the  absence  of  any  such 
contract  the  mortgagee  could  not  charge  to  the  mortgagor  a  pre- 
mium paid  by  him  for  insurance.  Any  insurance  obtained  by  him 
on  his  own  interest  is  for  his  own  benefit.  The  fiduciary  relation 
existing  between  the  mortgagee  and  mortgagor,  in  some  limited 
matters,  does  not  extend  to  such  an  insurance  of  the  mortgagee's 
interest.  Before  entry  for  condition  broken,  that  relation  is  a 
matter  of  contract.^ 

1  Graves  v.  Hampden  Fire  Ins.  Co.  10  *  Wilcox  v.  Allen,  36  Mich.  160. 
Allen  (Mass.),  281.  6  Fowley  v.  Palmer,  5   Gray   (Mass.), 

2  Allen  V.  Watertown  Ins.  Co.  132  Mass.  549  ;  Mix  v.  Hotclikiss,  14  Conn.  32. 
480.     See  §  412.  «  Dobson  v.  Land,  8  Hare  216;  6".  C. 

3  Foster  v.  Van  Reed,  70  N.  Y.  19,  4  De  G.  &  S.  575;  Bellamy  y.  Brickenden, 
reversing  5  Hun,  321  ;  Dick  v.  Franklin  2  Jo.  &  Hem.  137 ;  King  v.  State  Mutual 
F.  Ins.  Co.  10  Mo.  App.  376.  Fire  Ins.  Co.  7  Cush.  (Mass.)  1. 

318 


BY   MORTGAGOR   FOR  BENEFIT   OF  MORTGAGEE.        [§§  410,  411. 

If  tlie  holder  of  the  mortgage  receive  the  insurance  money 
after  the  mortgage  debt  is  due,  and  afterwards,  without  indorsing 
the  amount  received  upon  the  mortgage  note,  assigns  the  note 
and  mortgage,  the  mortgagor  cannot  maintain  a  bill  to  have  this 
amount  indorsed  upon  the  note.     His  remedy  is  to  redeem.^ 

410.  When  debt  not  due.  —  When  the  mortgaged  property 
is  insured  for  the  benefit  of  the  mortgagee  such  insurance  is 
collateral  to  the  debt,  and  money  recovered  from  the  insurance  is 
still  collateral,  and  cannot  be  applied  by  the  mortgagee  to  pay- 
ment of  the  mortgage  debt  without  the  consent  of  the  mortgagor 
if  the  debt  be  not  due,  and  the  mortgagee  has  no  right  to  demand 
payment,  or  upon  default  to  convert  the  securities.  If  under  such 
circumstances  the  money  received  from  the  insurance  be  paid  by 
the  mortgagee  to  the  mortgagor,  for  restoring  the  premises  so  as 
to  make  them  as  valuable  as  before  the  fire,  a  second  mortgagee 
has  no  equity  to  have  the  amount  so  received  applied  for  his  ben- 
efit in  reduction  of  the  debt  secured  by  the  first  mortgage.^ 

But  there  may  be  circumstances  which  will  make  it  incumbent 
upon  a  mortgagee  who  allows  the  mortgagor  to  apply  the  pro- 
ceeds of  an  insurance  to  the  restoration  of  the  property  to  see  that 
the  mortgagor  actually  uses  the  money  for  this  purpose.  Other 
parties  in  interest  may  have  an  equity  requiring  the  application 
of  the  insurance  by  the  mortgagee  to  be  either  in  payment  of 
the  debt  due  him,  or  in  making  the  security  to  this  extent  more 
valuable.-'^ 

411.  Insurers  under  such  a  policy  have  no  claim  to  be  sub- 
rogated. The  insurers  upon  paying  a  loss  upon  a  policy  taken 
out  by  the  mortgagor  payable  to  the  mortgagee  in  case  of  loss, 
or  assigned  to  him,  have  no  claim  to  be  subrogated  to  the  rights 
of  the  mortgagee.*  If  after  such  a  loss  the  mortgagee  brings  suit 
in  the  name  of  the  assured  upon  the  policies  and  obtains  judg- 
ment, but,  instead  of  enforcing  the  judgment,  enforces  payment 
of  tlie  mortgage  by  foreclosure,  the  assured  is  entitled  to  the  ben- 

1  Stevens  V.  Havden,  129  Mass.  328.  cantile  Mut.  Ins.  Co.  v.  Calebs,  20  N.  Y. 

*  Gordon  v.  Ware  Savings  Bank,  115  173;  Cone  v.  Insurance  Co.  GO  N.  Y.  619, 
Mass.  588.  024;  Tcndleton  v.  Elliott  (Midi),  38  N. 

3  Conn.  Mut.  L.  Ins.  Co.  v.  Scammon  W.  Kep.  97.     And  sec,  also,  Washington 

(C.  C.  111.  1880),  4  Fed.  Rep.  203.  Fire  Ins.  Co.  v.  Kelly,  32  Md.  421,  as  to 

*  Kernoclian  v.  N.  Y.  Bowery  Fire  Ins.  right  of  subrogation  upon  loss  pending 
Co.  17  N,  Y.  428  ;  i>.  C.  5  Duer,  1 ;  Mcr-  contract  of  sale. 

319 


§§  412,  413.]  INSURANCE. 

efit  of  the  judgment  against  the  insurers,  who  have  no  claim  to 
be  relieved  from  the  judgment.^ 

412.  Agreement  to  assign  to  insurers.  —  The  effect  of  an 
insurance  procured  in  this  way  is  not  qualified  by  a  clause  in  the 
policy,  that  in  case  of  loss  the  assured  shall  assign  to  the  insurers 
an  interest  in  the  mortgage  equal  to  the  amount  of  the  loss  paid ; 
or  by  an  assignment  made  in  pursuance  of  such  a  provision,  or  of 
any  subsequent  agreement  between  the  parties.  Under  such  an 
assignment  the  amount  of  the  loss  must  be  applied  in  reduction 
of  the  mortgage  debt,  and  the  insurers  can  hold  the  mortgage 
only  for  the  balance  of  the  debt  remaining  after  such  payment.^ 

Policies  of  insurance  now  generally  provide  that  in  case  of  the 
payment  of  any  loss  to  a  mortgagee,  whose  interest  is  insured,  the 
insurers  shall  be  subrogated  to  that  extent  to  his  rights  under  the 
mortgage.^ 

413.  "When  a  policy  or  a  separate  agreement  protects  the 
mortgagee  against  the  acts  of  the  owner  of  the  property  in 
derogation  of  the  policy,  and  provides  for  the  subrogation  of  the 
insurers  to  the  rights  of  the  mortgagee,  in  case  of  payment  to  the 
mortgagee  for  a  loss  under  the  policy  which  the  insurers  would 
not  have  been  liable  to  pay  to  the  owner,  the  contract,  from  being 
primarily  one  insuring  the  mortgagor,  and  making  the  mortgagee 
an  equitable  assignee,  is  by  these  special  provisions,  upon  the  hap- 
pening of  certain  events,  regarded,  under  the  New  York  decisions, 
as  resolved  in  effect  into  an  insurance  of  the  interest  of  the  mort- 
gagee as  such,  and  into  a  personal  contract  with  the  mortgagee, 
in  which  the  mortgagor  has  no  interest.*     The  insurance  money, 

1  Robert  v.  Traders'  Ins.  Co.  17  Wend,  so  that  the  policy  by  its  terms  became  void. 
(N.  Y.)  631,  reversing  -S.  C.  9  lb.  404.  Subsequently  the  insurance  com]iany,  at 

2  Foster  v.  Van  Keed,  5  Hun  (N.  Y.),  the  request  of  the  mortgagee,  without  re- 
321  ;  S.  C.  70  N.  Y.  19  ;  Waring  v.  Loder,  ceiving  any  new  consideration,  made  an 
53N.  Y.  581  ;  Davis  r.  Quincy  Mat.  F.  Ins.  indorsement  on  the  policy,  which  recited 
Co.  10  Allen  (Mass.),  113;  Thornton  v.  that  the  mortgagee  had  enieied  for  breach 
Enterprise  Ins.  Co.  71  Pa.  St.  234.  of  condition,  and  provided  that  the  policy 

3  See  §  409;  Springfield  F.  &  M.  Ins.  should  attach  and  cover  his  interest  as 
Co.  V.  Allen,  43  N.  Y.  389.  such;  that  the  insurance  as  to  the  inierest 

*  Ulster  Co.  Sav.  Inst.  r.  Leake,  73  N.  of  the  mortgagee  should  not  be  invalidated 

Y.  161,  reversing  S.  C.  11  Hun,  515;  Has-  by  any  act  or  neglect  of  the  mortgagor  ; 

tings  V.  Westchester  F.  Ins.  Co.  73  N.  Y.  and  that  whenever  the  insurer  should  pay 

141.  the  mortgagee  any  sum  for  loss  under  the 

There  is  a  Massachusetts  decision  which  jiolicy,  and  should  claim  that  as  to  the 

is  haidly  consistent  with  the  last  named  mortgagor  or  owner  no  liability  existed, 

case.     A  mortgagee,  to  whom  a  policy  of  the  insurer  should   be  subrogated  to  the 

insurance  had  been  made  payable  in  case  legal  rights  of  the  mortgagee  under  all  se- 

of  loss,  entered  for  a  breach  of  condition,  curities  held  as  collateral  to  the  mortgage 

320 


BY  MORTGAGOR   FOR   BENEFIT   OF  MORTGAGEE.  [§  413. 

when  paid  under  such  a  policy  to  the  mortgagee,  is  not  a  payment 
to  that  extent  of  the  mortgage  debt,  but  is  in  effect  a  payment  by 
the  insurers  towards  the  purchase  of  the  mortgage. 

Another  view,  differing  a  little  from  the  above,  is  taken  by  the 
courts  of  Connecticut.  Instead  of  holding  such  an  arrangement 
with  the  mortgagee  to  be  a  distinct  and  independent  contract  of 
insurance,  they  regard  it  rather  as  an  agreement  relating  to  an 
existing  policy,  by  which  certain  conditions  are  dispensed  with, 
and  certain  privileges  are  secured  to  the  insurers  which  they 
would  not  otherwise  have,  and  the  plaintiffs  are  made  a  party  to 
the  contract  of  insurance.^ 

When  the  policy  is  made  payable  to  a  mortgagee,  he  is  gener- 
ally protected  against  the  acts  of  the  owner  of  the  property  by  a 
provision  of  the  policy  that  it  shall  not  be  forfeited  by  any  alien- 
ation or  other  act  on  his  part.  If  a  policy  so  providing  also  con- 
tains a  further  provision  that  in  case  of  a  payment  of  the  loss  to 
the  mortgagee  the  insurer  shall  be  entitled  to  an  assignment  of 
the  mortgage,  upon  the  happening  of  a  loss  and  the  assignment 
of  the  policy  to  the  insurers,  it  will  be  a  valid  security  in  their 
hands  if  the  mortgagor  or  owner  of  the  property,  to  whom  the 
policy  was  issued,  has  alienated  the  property  prior  to  the  loss,  so 
that  the  policy  has  become  void  as  to  him,  though  saved  from 
forfeiture  as  against  the  mortgagee.  The  principal  party  insured 
then  has  no  right  to  claim  the  sum  paid  upon  the  loss  as  a  pay- 
ment on  the  mortgage  debt.^ 

A  provision  in  a  policy  obtained  by  the  mortgagor  and  payable 
to  a  mortgagee,  that  "  no  sale  or  transfer  of  the  property  insured 
shall  vitiate  the  right  of  the  mortgagee  to  recover  in  case  of  loss," 
as  a  necessary  consequence,  protects  the  mortgagee  from  the  acts 
of  any  subsequent  purchaser  or  mortgagee,  although  those  acts 
be  in  violation  of  provisions  of  the  policy  ;  as,  for  instance,  a 
provision  making  the  policy  void  if   the  assured  should    obtain 

debt.    A  loss  having  occurred  after  the  delivered  the  opinion  in  the  Massachusetts 

indorsement  was  made,  it  was  held  that  case  objects  to  this  view.    It  must  be  con- 

the  mortgagee  could  not  maintain  an  ac-  fessed,  however,  that  the  New  York  de- 

tion  for  it.     Davis  v.  German-American  cision  seems  to  present  the  broader  and 

Ina.  Co.   135  Mass.  251.     In  Hastings  v.  better  view  of  the  question. 

Winchester  Ins.  Co.  it  was  suggested  that  ^  Meriden  Sav.  Bank  i'.  Home  Ins.  Co. 

the  stipulation  for  subrogation  to  the  legal  50  Conn.  .39G. 

rights  of  the  mortgagee,  upon  payment  to  2  Springfield  F.  &  M.  Ins.  Co.  v.  Allen, 

him,  to   the  extent  of  such  payment  is  a  43  N.  Y.  389. 

consideration  ;  but  the  learned  judge  who 

VOL.  I.              21  321 


§§  413  a,  414.]  INSURANCE. 

fui'ther  insurance  without  giving  written  notice  to  tlie  insurance 
company  and  obtaining  its  consent.  A  necessary  consequence  of 
a  sale  of  the  property  is,  that  the  purchaser  has  a  right  to  insure 
his  interest;  and  the  object  of  the  stipulation  being  to  avoid  the 
defeat  of  the  policy  by  any  sale  or  transfer  of  the  property,  the 
fair  interpretation  of  the  stipulation  is,  that  the  mortgagee's  right 
to  recover  shall  not  be  vitiated  by  any  of  the  natural  conse- 
quences or  incidents  of  a  sale.^ 

Of  course  if  a  mortgagee,  by  an  indorsement  upon  the  policy, 
stands  merely  in  the  position  of  one  to  whom  the  policy  is  made 
payable,  without  any  stipulation  for  his  protection  against  the  acts 
of  the  assured,  his  right  to  recover  may  be  vitiated  by  the  vio- 
lation of  any  of  the  provisions  of  the  policy  b}'^  any  owner  or  oc- 
cupant of  the  premises.^  The  mortgagee  does  not  in  such  case 
become  an  assignee  of  the  policy,  and  can  recover  only  what  the 
assured  could  recover.  If  a  policy  be  assigned  to  a  mortgngee, 
and  he  gives  a  deposit  note  and  becomes  liable  to  assessments,  a 
new  contract  of  insurance  is  created,  which  is  in  effect  an  insur- 
ance of  the  mortgagee's  interest,  and  in  that  case  he  is  not  af- 
fected by  the  subsequent  acts  of  the  party  originally  insured.^ 

413  a.  Condition  against  procuring  other  insurance.  —  A 
policy  taken  by  a  mortgagor  for  the  benefit  of  the  mortgagee  pro- 
vided that  it  should  become  void  if  the  assured  should,  without  the 
written  consent  of  the  insurers,  obtain  other  insurance  upon  the 
property.  The  mortgagee,  without  the  knowledge  of  the  mort- 
gagor and  before  default,  procured  other  insurance  payable  to  him- 
self as  mortgagee.  The  insurers  contended  that  the  mortgagor's 
policy  was  rendered  void  by  a  breach  of  this  condition ;  but  it  was 
held  that  there  was  no  breach  of  the  condition,  although  the  policy 
contained  a  clause  that  the  mortgagor  should  keep  the  mortgaged 
buildings  insured  for  the  benefit  of  the  mortgagee,  who  was  author- 
ized, in  case  of  default,  to  pi'ocure  insurance  ;  for  inasmuch  as  the 
mortgagor  was  not  in  default,  the  mortgagee,  in  procuring  insur- 
ance, acted  for  himself,  and  not  as  the  mortgagor's  agent.* 

414.  When  mortgagee  may  charge  for  insurance.  —  Insur- 

1  City   Five    Cents    Savings    Bank   v.     facturers'   Ins.   Co.   8   Gray  (Mass.),  28 ; 
Pennsylvania  F.  Ins.  Co.  122  Mass.  165.        Van  Buren  v.  St.  Joseph  County  Village 

2  Franklin  Savings  Institution  v.  Cen-     Ins.  Co.  28  Mich.  398. 

tral  Mut.  F.  Ins.  Co.  119  Mass.  240;  Hale  3  Fosters.  Equitable  Mut.  F.  Ins.  Co. 

V.  Mechanics'  Mut.  F.  Ins.  Co.  G  Gray,  2  Gray  (Mass.),  216. 

169;  Fogg  V.  Middlesex  Mut.  F.  Ins.  Co.  *  Titus  v.  Glens  Falls  Ins.  Co.  81  N.  Y. 

10  Cush.   (Mass.)  337  ;  Loring  v.  Manu-  410. 

322 


BY  MORTGAGOR  FOR  BENEFIT  OF  MORTGAGEE.     [§  414. 

ance  effected  by  a  mortgagee  upon  the  mortgaged  estate,  with- 
out any  provision  authorizing   him  or  obligating  the  mortgagor 
to  do  so,  cannot  be  charged  to  the  mortgagor.^     But  if  the  mort- 
gage contains  a  condition  that  the    mortgagor  shall  "keep  the 
buildings  standing  on  the  land  aforesaid  insured  against  fire  in  a 
sum  not  less  than  twenty-five  hundred  dollars,  for  the  benefit  of 
the  said  mortgagee,"  and  the  mortgagor  fails  to  insure,  the  mort- 
gagee may  effect  insurance,  and  is  entitled  to  credit  for  the  pre- 
miums paid  by  him.^     For  a  still  stronger  reason  is  this  the  case 
when  the  mortgage  provides  that  upon  the  failure  of  the  mort- 
gagor to  keep  this  condition,  the    mortgagee   may  insure.^     The 
mortgagor,   having  failed    to   comply   with    his   contract,   cannot 
take  advantage  of  his   own   wrong   and  decline  to  pay  the   pre- 
mium.    The    condition    that    the    mortgagor   should    insure    dis- 
tinguishes the  case  from  that  class  of  cases  where  the  mortgagee 
insures  his  own  interest  in  the  mortgaged  premises  ;  such  insur- 
ance he  must  effect  at  his  own  expense.     Then  he  is  not  liolden 
to  account  for  the  proceeds.     But  when  the  mortgage  gives  the 
mortgagee  the  right  to  insure  at  the  expense  of  the  mortgagor, 
and  he  does  so,  and  charges  the   premium  to  the  mortgagor,  the 
amount  received  from   the  insurance  must  be  accounted  for  to- 
wards  the  payment  of  the  mortgage   debt.*      Although  it   may 
be  difficult  to  prove  that  the   mortgagee  in  any  particular  case 
effected  the  insurance  under  the  provision  of  the  mortgage  and 
at  the  expense  of  the  mortgagor,  so  that  he  is  accountable  for  the 
proceeds,  the  difficulty  is  one  brought  upon  the  mortgagor  by  his 
own  failure  to  perform  his  contract ;  •'  and  if  he  has  no  such  proof 
he  must  take  the  mortgagee's  word  for  it. 

But  he  cannot  charge  for  premiums  paid  for  insurance  to  a 
larger  amount  than  is  stipulated  for  in  the  mortgage.*^ 

The  mortgagee  will  not  be  allowed  for  insurance  effected  by 
himself,  in  the  absence  of  any  stipulation  in  the  mortgage  that 
the  mortgagor  shall  keep  the  property  insured  for  the  mortgagee's 

1  Dobson  V.  Land,  8  Hare,  216;  S.   C.  concern."     I^iirthell  v.  Syverson,  r)4  low* 

4   De  G.  &  S.  575;  3  Bennett's   F.  Ins.  160. 

Cases,  147,  n. ;  Saunders  v.  Frost,  5  Pick.  8  Qverby  v.  Faycttevillc  Huilding  &  Loan 

(Mass.)    2.'J9;    Faurc   v.    Winans,   Ilopk.  A?so.  81  N.  C.  56. 

(N.  Y.)  283;  Nordyke  v.  Gery  (Ind.),  13  *  Pendleton  v.  Elliott  (Midi.),  S.'i  N.  W. 

N.  E.  Uep.  683.  Rep.  97. 

'■*  Fowiey   i;.    Palmer,  5    Gray   (Mass.),  ^  Per  Ciiicf  Justice  Siiaw,  in  Fowley  r. 

549.     Tlie  insurance  in  this  ciLse  was  ])ay-  Palmer,  supra. 

able  to  the  niortgagee  "  for  whom  it  may  "  Conover  i'.  Grovcr  31  N.J   E(i.  .WQ. 

323 


§§  415-417.]  INSURANCE. 

benefit,  or  that  premiums  of  insurance  paid   by  the  mortgagee 
shall  be  a  charge  upon  the  property .^ 

415.  Rule  is  the  same  under  a  condition  to  keep  insurance, 
not  in  the  form  of  a  direct  covenant,  as  where  the  condition  was,^ 
that  if  the  grantor  should  repay  the  loan,  "  and,  until  such  pay- 
ment, keep  the  buildings  standing  on  the  land  aforesaid  insured 
against  fire,  in  a  sum  not  less  than  $250,  for  the  benefit  of  the 
mortgagee,  and  payable  to  him  in  case  of  loss,  at  some  insurance 
office  approved  b}'^  him  ;  or,  in  default  thereof,  shall,  on  demand, 
pay  to  said  mortgagee  all  such  sums  of  money  as  the  said  mort- 
gagee shall  reasonably  pay  for  such  insurance,  with  interest,"  then 
the  deed  should  be  void. 

In  Connecticut  it  is  provided  by  statute  that  premiums  paid  by 
the  mortgagee  of  any  property,  for  insuring  his  interest  therein 
against  loss  by  fire,  shall  be  deemed  to  be  a  part  of  the  mortgage 
debt,  and  shall  be  refunded  to  him  before  he  can  be  required  to 
release  his  title.^ 

416.  A  mortgagee  charging  for  insurance  is  liable  as  an 
insurer.  If  he  charges  the  mortgagor  with  the  premiums  for  an 
insurance  for  a  certain  time  as  part  of  the  loan,  and  undertakes 
to  procure  the  insurance,  he  is  bound  to  keep  the  policies  alive 
during  that  period,  and  he  is  himself  liable  as  an  insurer  if,  in 
consequence  of  his  neglect  to  pay  the  premiums,  the  policies  ex- 
pire.* The  extent  of  the  liability  is  the  same  as  an  insurance 
company's  would  have  been  had  the  policies  been  continued  by 
the  payment  of  the  premiums. 

417.  A  return  premium  upon  a  policy  procured  by  the  mort- 
gagor and  assigned  to  the  holder  of  a  mortgage,  which  is  sub- 
sequently paid  by  a  purchaser  of  the  equity  of  redemption,  in 
accordance  with  his  agreement  with  the  mortgagor  to  assume  and 
pay  it,  belongs  to  the  mortgagor,  and  he  may  recover  the  amount 
of  it  from  any  one  else  who  collects  it.^ 

1  Clark  V.  Smith,  Saxt.  (N.  J.  Eq.)  121,  mortgagee  for  insurance,  which,  by  the 
137;  Saunders  v.  Frost,  5  Pick.  (Mass.)  terms  of  the  deed,  should  be  obtained  by 
259 ;  Taure  v.  Winans,  Hopk.  (N.  Y.)  the  mortgagor,  23  &  24  Vict.  ch.  145, 
283  ;  Pierce  v.  Faunce,  53  Me.  351.  §§  11,  12. 

2  Nichols  V.  Baxter,  5  R.  I.  491.  The  *  Soule  v.  Union  Bank,  45  Barb.  (N. 
form  of  mortgage  in  this  case  is  the  ordi-  Y.)  Ill ;  5.  C.  30  How.  Pr.  105. 

nary  form  used  in  Massachusetts.     See,         ^  Merrifield  v.  Baker,  9  Allen  (Mass.), 

also,  Barthell  y.  Syverson,  54  Iowa,  160.  29;   Felton   v.   Brooks,   4   Cush.  (Mass.) 

3  Gen.  Stat.  1875,  p.  358.  See  English  203;  Rafsnyder's  Appeal,  88  Pa.  St.  436 ; 
statute  providing  for  adding  to  the  prin-  «S.  C7.  19  Alb.  L.  J.  262. 

cipal  sum  secured  premiums  paid  by  the 

324 


BY    THE   MORTGAGEE.  [§  418. 

But  where  a  mortgagee  took  out  a  policy  in  which  the  mort- 
gagor was  named  as  the  assured,  but  it  was  made  payable  in  case 
of  loss  to  the  mortgagee,  and  it  was  stipulated  that  the  assured 
might  terminate  the  policy  at  any  time,  in  which  case  the  insur- 
ance company  could  retain  a  proportionate  part  of  the  premium, 
and  shortly  afterwards  the  mortgagee  sold  the  land  under  a  power 
of  sale,  and  the  policy  was  cancelled  and  a  new  one  issued  to  the 
purchaser,  without  any  rebate  being  paid  to  the  mortgagee,  it  was 
held  that  the  mortgagor  could  not  recover  the  rebate  of  premium 
from  the  mortgagee.  The  mortgagor  should  either  have  surren- 
dered the  policy  immediately  before  the  sale  with  the  mortgagee's 
consent,  or  should  have  sold  the  policy  to  the  purchaser,  and  ob- 
tained the  consent  of  the  insurance  company  thereto.^ 

Upon  a  foreclosure  sale  a  mortgagee  to  whom  a  policy  has 
been  transferred  as  collateral  security  for  the  mortgage  debt  is 
entitled  to  the  deposit  premium,  when  by  the  terms  of  the  policy 
the  insurable  interest  of  both  the  mortgagee  and  mortgagor  is 
divested,  and  the  proceeds  of  the  sale  are  insufficient  to  pay  the 
mortgage  debt.^ 

III.  Insurance  by  the  Mortgagee. 

418.  Insurance  obtained  by  the  mortgagee  when  the  mort- 
gage contains  the  usual  covenant  for  insurance  on  the  part  of 
the  mortgagor,  and  an  agreement  that,  in  case  of  his  failure  to  do 
so,  the  mortgagee  or  his  representatives  may  make  such  insurance, 
and  the  mortgage  shall  secure  the  repayment  of  the  premiums, 
is  not  necessarily  presumed  to  be  under  this  authority,  especially 
if  it  be  taken  "  on  his  interest  as  mortgagee."  ^  A  mortgagee 
may  insure  his  interest  as  mortgagee,  and  he  may  make  such  terms 
with  the  insurer  as  they  may  agree  upon.  When,  therefore,  the 
mortgagee  procures  a  policy  with  a  provision  that  in  case  of  loss 
the  assured  shall  assign  to  the  insurer  an  interest  in  the  mortgage 
equal  to  the  amount  of  loss  paid,  this  provision  is  paramount  to 
the  contract  between  the  mortgagor  and  mortgagee,  and  the  in- 
surer is  entitled,  upon  payment  of  a  loss  under  the  policy,  to  an 
assignment  of  the  mortgage ;  and  in  an  action  to  foreclose  the 
mortgage  the  mortgagor  cannot  claim  an  application  of  the  amount 

»  Parker  v.  Stiiith  Charities,  127  Mass.  •'  Foster  v.  Van  Heed,  70  N.  Y.  19,  re- 
499.  versiug  6\  C.  5  IIuii  (N.  Y.),  321. 

-  Rafsnyder'.M  Appeal,  88  Pa.  St.  436 ; 
.S'.  C.  7  lieporter,  537. 

325 


§  418.]  INSURANCE. 

of  tlie  insurance  as  payment  upon  the  mortgage.^  Such  a  case  is 
distinguished  from  cases  where  there  was  no  agreement  in  the 
policy  obtained  by  the  mortgagee  as  to  subrogation.  If  there  be 
nothing  in  the  policy  inconsistent  with  the  contract  between  the 
mortgagor  and  mortgagee,  this  contract  may  be  regarded  as  an 
explanation  of  the  policy  obtained  by  the  mortgagee  ;  and  the 
policy  will  be  regarded  as  having  been  obtained  under  the  provi- 
sions of  the  mortgage  and  for  the  benefit  of  the  mortgagor.  Thus 
in  a  case  before  the  Court  of  Appeals  in  New  York,^  upon  a  policy 
effected  under  such  a  provision  in  the  mortgage,  Mr.  Justice  An- 
drews said :  "  The  authority  given  in  the  mortgage  was  an  author- 
ity to  the  mortgagee  to  procure  an  insurance  for  the  benefit  of 
both  parties.  This  is  the  fair  interpretation.  It  was  immaterial 
to  the  mortgagor  whether  the  insurance  was  in  his  name  or  in  the 
name  of  the  mortgagee,  if  the  avails  of  it  in  case  of  loss  should 
apply  in  reduction  of  the  debt.  The  mortgagee  had  no  interest 
to  procure  an  insurance  limited  to  his  own  protection  merely, 
where  the  expense  was  to  be  paid  by  the  other  party  and  was  se- 
cured on  the  land."  There  is  an  implied  obligation  arising  from 
the  pi-ocuring  of  the  insurance  upon  the  request  of  the  mortgagor, 
or  at  his  expense,  that  the  insurance  money  when  paid  shall  be 
applied  to  the  mortgage  debt.^  Whenever  the  insurance  has  been 
effected  at  the  request  or  by  the  authority  of  the  mortgagor,  or 
at  his  expense,  or  under  circumstances  that  would  make  him 
chargeable  with  the  premium,  he  is  entitled  to  have  the  money 
paid  on  the  policy  applied  to  the  extinguishment  of  his  debt.* 
The  insurance  having  been  paid  for  hj  the  mortgagor,  though 
taken  in  the  name  of  the  mortgagee  as  if  absolute  owner,  the 
fact  that  the  mortgagor  has  paid  the  debt  secured  by  the  mort- 
gage does  not  prevent  a  recovery  for  a  loss  against  the  insurers. 
The  mortgagor  in  such  case  is  the  beneficial  party,  and  has  the 
right  to  recover  in  the  name  of  the  mortgagee.^ 

Where  a  mortgagee  holding  a  mortgage  containing  the  usual 
insurance  clause  obtained,  at  the  expense  of  the  mortgagor,  a 
policy  insuring  him  as  mortgagee,  and  afterwards,  upon  taking  an 
additional  mortgage  upon  the  same  jDroperty,  also  containing  the 

1  Foster  v.  Van  Reed,  70  N.  Y.  19.  *  Honore  v.  Lamar  F.  Ins.  Co.  51  111. 

2  Wariug  v.  Loder,  53  N.  Y.  581.  409  ;  Stinchfield  v.  Milliken,  71  Me.  567  ; 

3  Holbrook  v.  Am.  Ins.  Co.  1  Curtis,  Pendleton  v.  Elliott,  35  N.  W.  Hep.  97; 
193;  Buffalo  Steam-Engine  Works  f.  Sun  Kelson  v.  Ins.  Co.  (N.J.)  11  Atl.  Rep.  681. 
Mut.  Ins.  Co.  17  N.  Y.  401,  406 ;  Clinton  &  Norwich  F.  Ins.  Co.  v.  Boomer,  52  111. 
V.  Hope  Ins.  Co.  45  N.  Y.  454.  442.      > 

326 


BY  THE  MORTGAGEE. 


[§  419. 


insurance  clause,  applied  for  a  new  policy  to  cover  both  amounts, 
and  a  policy  was  issued  which  contained  an  additional  clause  pro- 
viding that  the  insurance  company  should  only  be  liable  for  any 
deficiency  that  might  remain  after  the  mortgagee  had  exhausted 
his  primary  security,  and  this  clause  was  not  noticed  till  after  a 
loss  occurred,  it  was  held  that  the  insertion  of  this  clause  was  a 
fraud  upon  the  mortgagee,  and  that  the  policy  should  be  reformed 
by  striking  out  this  clause.^ 

419.  An  insurance  of  a  mortgagee's  interest  is  not  an  insur- 
ance of  the  mortgage  debt,  as  has  been  said  in  some  cases,  nor 
is  it  an  indemnity  against  the  loss  of  that  debt  by  a  loss  or  dam- 
age to  the  property  mortgaged,  so  that  if  the  mortgaged  property 
after  the  loss  is  still  enough  in  value  to  pay  the  debt,  there  has 
been  in  effect  no  loss.^  This  subject  was  fully  explained  by  Mr. 
Justice  Folger,  in  a  I'ecent  case  before  the  Court  of  Appeals  in 
New  York,'5  and  he  clearly  shows  that  the  insurance  of  a  mortgage 


1  Hay  V.  Star  F.  Ins.  Co.  13  Hun  (N. 
Y.),  496. 

-  Smith  V.  Columbia  Ins.  Co.  17  Pa. 
St.  2.03,  per  Gibson,  J.  ;  ^tna  F.  Ins.  Co. 
V.  Tyler,  16  Wend.  385,  397,  per  Ch.incel- 
lor  Walworth  ;  Carpenter  v.  Providence 
Washington  Ins.  Co.  16  Peters,  495,  501, 
per  Story,  J.;  Kernochan  v.  N.  Y.  Bow- 
ery Fire  Ins.  Co.  17  N.  Y.  428,  per  Strong, 
.T. ;  Matliewson  v.  Western  Assurance  Co. 
4  L.  Can.  Jur.  57. 

'^  Excelsior  Fire  Ins.  Co.  v.  Royal  Ins. 
Co.  55  N.  Y.  343,  357,  per  Folger,  J. 
"Fire  underwriters  in  these  days,  in  this 
state,  are  the  creatures  of  statute,  and  have 
no  rights,  save  such  as  the  state  gives  to 
them.  They  may  agree  that  they  will  pay 
such  loss  or  damage  as  happens  by  fire  to 
property.  They  are  limited  to  this.  It 
was  not  readily  that  it  was  first  held  that 
they  could  agree  with  a  mortgagee  or 
lienor  of  property  to  reimburse  to  him 
tlie  loss  caused  to  him  by  fire.  He  is  not 
the  owner  of  it :  how  then  can  he  insure 
it  ?  was  the  query.  And  the  effort  was 
not  to  enlarue  the  power  of  the  insurer  so 
that  it  might  insuro  "  debt,  but  to  bring 
the  lienor  within  the  scojic  of  that  power, 
80  that  the  property  might  be  insured  for 
his  benefit.  And  it  whs  done  by  liolding 
that,  as  his  security  did  dejicnd  upon  the 


safety  of  the  property,  he  had  an  interest 
in.sits  preservation,  and  so  had  such  inter- 
est as  that  he  might  take  out  a  policy 
upon  it  against  loss  by  fire,  without  meet- 
ing the  objection  that  it  was  a  wagering 
policy.  The  policy  did  not,  therefore,  be- 
come one  upon  the  debt,  and  for  indemni- 
fication against  its  loss  ;  but  still  remained 
one  upon  the  property,  and  against  loss  or 
damage  to  it.  It  is  doubtless  true,  as  is 
said  by  Gibson,  J.,  in  17  Penn.  supra,  that 
in  effect  it  is  the  debt  which  is  insured. 
It  is  only  as  an  effect,  however ;  an  effect 
resulting  from  the  primary  act  of  insur- 
ance of  the  property  which  is  the  security 
for  the  debt.  It  is  the  interest  in  the 
property  which,  gives  the  right  to  obtaia 
insurance,  and  the  ownership  of  the  debt, 
a  lien  upon  the  property,  creates  that  in- 
terest. The  agreement  is  usually,  as  it  is 
in  fact  in  this  case,  for  insuring,  from  loss 
or  damage  by  fire,  the  ])roperty.  The  in- 
terest of  the  mortgagor  is  in  the  whole 
property,  just  as  it  exists,  undamaged  by 
fire  at  the  date  of  the  policy.  If  that 
proj)crty  is  consumed  in  part,  though 
what  there  be  left  of  it  is  ccjual  in  value 
to  the  amount  of  the  mortgage  debt,  the 
mortgage  interest  is  affected.  It  is  not  .so 
great,  or  so  safe,  or  so  viiluable,  a.s  it  w:\s 
before.     It  was  for  indemnity  against  this 

327 


§  420.] 


INSURANCE. 


interest  is  not  an  insurance  of  the  debt,  but  of  the  interest  of  the 
mortgagee  in  the  property  upon  the  safety  of  which  depends  his 
security,  and  that  upon  the  happening  of  a  loss  the  insurer  is 
bound  to  make  good  the  loss  without  regard  to  the  value  of  the 
property  remaining. 

420.  Insurer  subrogated  to  rights  of  mortgagee.  —  It  being 
settled  that  an  insurance  made  by  a  mortgagee  of  his  own  in- 
terest, at  his  own  expense,  and  upon  his  own  motion,  is  an  insur- 
ance of  his  interest  in  the  property,  and  not  of  the  debt  secured, 
and  that  the  insurers  are  liable  to  pay  him  the  whole  amount  of 
the  damage  to  the  property,  it  remains  to  be  considered  whether 
either  the  mortgagor  can  claim  that  the  payment  shall  be  applied 
in  discharge  of  his  debt,  or  the  insurers  can  claim  the  mortgage 
security  by  assignment  or  subrogation. 

In  the  first  place  it  is  the  undisputed  doctrine  of  all  the  cases, 
that  the  mortgagor  himself  can  claim  no  benefit  from  such  in- 
surance.i  The  question  in  dispute  is,  whether,  upon  payment  of 
the  loss  under  such  a  policy,  the  insurer  shall  be  subrogated  to 


very  detriment,  this  very  decrease  in  value, 
that  the  mortgagee  sought  insurance  and 
paid  his  premium. 

"  To  say  that  it  is  the  deht  which  is  in- 
sured against  loss,  is  to  give  to  most,  if 
not  all,  fire  insurance  companies  a  power 
to  do  a  kind  of  business  which  the  law 
and  their  charter  do  not  confer.  They 
are  privileged  to  insure  property  against 
loss  or  damage  by  fire.  They  are  not 
privileged  to  guarantee  the  collection  of 
debts.  If  they  are,  they  may  insure 
against  the  insolvency  of  the  debtor.  No 
one  will  contend  this  ;  and  it  will  be  said, 
it  is  not  by  a  guaranty  of  the  debt,  but  an 
indemnity  is  given  against  the  loss  of  the 
debt  by  an  insurance  agaiast  the  perils  to 
the  property  by  fire.  This  is  but  coming 
to  our  position :  that  it  is  the  property 
which  is  insured  against  the  loss  by  fire, 
and  the  protection  of  the  debt  is  the  se- 
quence thereof.  As  the  property  it  is 
which  is  insured  against  loss,  it  is  the  loss 
which  occurs  to  it  which  the  insurer  con- 
tracts to  pay,  and  for  such  loss  he  is  to 
pay,  within  the  limit  of  his  liability,  irre- 
spective of  the  value  of  the  property  de- 
stroyed.    So  as  to  the  remark,  that  it  is 

328 


the  capacity  of  the  property  to  pay  the 
debt  which  is  insured.  This  is  true  in  a 
certain  sense ;  but  it  is  as  a  result  and  not 
as  a  primary  undertaking.  The  under- 
taking is  that  the  property  shall  not  suffer 
by  loss  by  fire ;  that  is,  in  effect,  that  its 
capacity  to  pay  the  mortgage  debt  shall 
not  be  diminished.  When  an  appreciable 
loss  has  occurred  to  the  property  from  fire, 
its  capacity  to  pay  the  mortgage  debt  has 
been  affected  ;  it  is  not  so  well  able  to  pay 
the  debt  which  is  upon  it.  The  mortgage 
interest,  the  insurable  interest,  is  lessened 
iu  value,  and  the  mortgagee,  the  insuree, 
is  affected,  and  may  call  upon  the  insurer 
to  make  him  as  good  again  as  he  was 
when  he  effected  his  insurance." 

1  Dobson  V.  Laud,  8  Hare,  216  ;  5.  C.  4 
De  G.  &  Sm.  57.5  ;  Bellamy  v.  Brickenden, 
2  Johns.  &  Hem.  137 ;  Russell  v.  South- 
ard, 12  How.  139,  157;  White  v.  Brown, 
2  Cush.  (Mass.)  412;  Fowley  v.  Palmer, 
5  Gray  (Mass.),  549;  Suffolk  lus.  Co.  v. 
Boydeu,  9  Allen  (Mass.),  123;  Clark  v. 
Wilson,  103  Mass.  219,  221 ;  Ely  ;;.  Ely, 
80  111.  532  ;  Foster  v.  Van  Reed,  70  N.  Y. 
19;  Stinchfield  v.  Milliken,  71  Me.  567. 


BY   THE  MORTGAGEE.  [§  421. 

the  security  held  by  the  mortgagee,  or  whether  he  may,  after  hav- 
ing collected  the  insurance  money,  proceed  to  collect  the  mortgage 
debt  from  the  mortgagor,  and  the  property  mortgaged. 

The  general  rule  and  the  weight  of  authority  is,  that  the  in- 
surer is  thereupon  subrogated  to  the  rights  of  the  mortgagee 
under  the  mortgage.  This  is  put  upon  the  analogy  of  the  situ- 
ation of  the  insurer  to  that  of  a  surety. ^  The  mortgagor  and 
mortgagee  have  each  an  insurable  interest.  If  the  mortgagee  ob- 
tains insurance  on  his  own  accovmt,  and  the  premium  is  not  paid 
by  or  charged  to  the  mortgagor,  the  latter  cannot  claim  the  ben- 
efit of  a  payment  of  the  policy ;  ^  but  the  insurer  is  entitled  to  be 
subrogated  to  the  claim  of  the  mortgagee,  and  may  recover  upon 
the  note.^  If,  however,  the  insurer  receives  the  premium  know- 
ing that'  the  mortgagor  has  paid  or  agreed  to  pay  it,  he  is  not  en- 
titled to  be  subrogated  to  the  rights  of  the  mortgagee,  as  a  mere 
matter  of  equity,  in  the  absence  of  a  stipulation  therefor  in  the 
policy.* 

Upon  this  principle  it  has  been  held  that,  upon  payment  of  the 
mortgage  debt,  the  equitable  liability  of  the  mortgagee  to  the 
mortgagor  for  the  money  received  from  the  insurers  is  a  sufficient 
consideration  to  support  a  promise  by  the  mortgagee  to  allow 
the  amount  secured  by  him  upon  the  mortgage  debt,  and  that  an 
action  may  be  maintained  on  such  promise.^ 

421.  King  V.  State  Mutual  Fire  Insurance  Co.  —  If  insur- 
ance be  effected  upon  the  interest  of  the  assured  as  mortgagee, 
at  his  own  expense,  the  insurers,  upon  payment  of  a  loss  and  ten- 
der of  the  balance  due  on  the  mortgage,  have  in  some  courts  been 
held  not  entitled  to  have  the  mortgage  assigned  to  them,  or  to  be 
subrogated  to  the  rights  of  the  assured  under  the  mortgage,  either 

1  Illinois  :  Honore  v.  Lamar  F.  Ins.  Co.  397  ;  Foster  v.  Van  Keed,  70  N.  Y.  19  ; 

.51    111.   409;    Norwich    Fire    Ins.   Co.   v.  Cone  r.  Niagara  F.  Ins.  Co.  60  N.  Y.  619, 

Boomer,  52  111.  442.    Missouri:  Dick  v.  624;  De  Wolf  w.  Capital  City  Ins.  Co.  16 

Franklin  F.  las.  Co.  10  Mo.  App.  376;  Hun,  116.     Maine:  Concord  Union  Mut. 

affirmed,  81  Mo.  103.    New  Jersey :  Bound  F.  Ins.    Co.    v.    Woodbury,   45    Me.   447. 

Brook  Mut.  F.  Ins.  Ass.  v.  Nelson,  41  N.  New  Jersey :  Sussex  Co.  Mut.  Ins.  Co.  v. 

.1.  Eq.  485;  Su.ssex  Co.  Mut.  Ins.  Co.  i>.  Woodruff,   26  N.  J.  L.  541.     Maryland: 

Woodruff,  2  Dutch.  (N.  J.)  541,  555.  Callahan  v.  Linthicum,  43  Md.  97. 

'  White  V.  Brown,  2  Cush.  (Ma.ss.)  412;  4  ])ick  v.  Franklin  F.  Ins.  Co.   10  Mo. 

Insurance  Co.  v.  Woodbury,  45  Me.  447  ;  App.  376,  per  Thompson,  J. ;  atrirmed  81 

Stinchfiild  v.  Milliken,  71  Me.  567.  Mo.  103;  Kernochan  v.  Ins.  Co.  17  N.  Y. 

■'  New  York:  Excelsior  Fire  Ins.  Co.  v.  428,  441  ;  Cone  v.  Niagara  F.  Ins.  Co.  60 

Royal  Ins.  Co.  55  N.  Y.  343  ;  Kernochan  N.  Y.  619,  624. 

V.  N.  Y.  Bowery  F.  Ins.  Co.  17  N.  Y.  428 ;  ^  Callahan  v.  Linthicum,  supra,  Alvey 

y'Etna  Ins.  Co.  v.  Tyler,  16  Wend.  385,  and  Grason,  JJ.,  dissenting. 

829 


§  421.] 


INSURANCE. 


at  law  or  in  equity.  The  mortgagee's  insurance  is  not  an  insur- 
ance of  the  debt,  although  the  amount  of  that  is  the  measure  of 
his  insurable  interest  in  the  property.^  The  insurer  has  no  inter- 
est in  the  mortgage  debt ;  and  there  is  no  privity  between  him 
and  the  mortgagor.  Neither  can  the  mortgagor  claim  any  part 
of  the  money  so  recovered  as  a  payment  of  the  mortgage  debt,  in 
whole  or  in  part ;  but  he  must  still  pay  the  whole  mortgage  debt 
to  the  mortgagee.^     If,  however,  the  mortgage  debt  was  paid,  and 


1  King  V.  State  Mutual  Fire  Ins.  Co.  7 
Cush.  (Mass.)  1.  In  this  case  Chief  Jus- 
tice Shaw  said :  — 

"  The  case  supposed  is  this :  A  man 
makes  a  loan  of  money,  and  takes  a  bond 
and  mortgage  for  security.  Say  the  loan 
is  for  ten  years.  He  gets  insurance  on 
his  own  interest,  as  mortgagee.  At  the 
expiration  of  seven  years  the  buildings 
are  burnt  down ;  he  claims  and  recovers 
a  loss  to  the  amount  insnred,  being  equal 
to  the  greater  part  of  the  debt.  He  after- 
wards secures  the  amount  of  his  debt  from 
the  mortgagor,  and  discharges  his  mort- 
gage. Has  he  received  a  double  satisfac- 
tion for  one  and  the  same  debt  1 

"  He  surely  may  recover  of  the  mort- 


received  are  intended  to  be,  and  in  theory 
of  law  are,  precisely  equivalent.  .  .  .  Sup- 
pose —  for,  in  order  to  test  a  principle, 
we  may  put  a  strong  case  —  suppose  the 
debt  has  been  running  twenty  years,  and 
the  premium  is  at  five  per  cent. ;  the  cred- 
itor may  pay  a  sum,  equal  to  flie  whole 
debt,  in  premiums,  and  yet  never  receive 
a  dollar  of  it  from  either  of  the  other  par- 
ties. Not  from  the  underwriters,  for  the 
contingency  has  not  happened,  and  there 
has  been  no  loss  by  fire ;  nor  from  the 
debtor,  because,  not  having  authorized  the 
insurance  at  his  expense,  he  is  not  liable 
for  the  premium  paid. 

"  What,   then,  is  there  inequitable,  on 
the  part  of  the  mortgagee,  towards  either 


gagor,  because  he  is  his  debtor,  and  on  party,  in  holding  both  sums  1     They  are 

good  consideration  has  contracted  to  pay.  both  due  upon  valid  contracts  with  him, 

The  money  received  from  the  underwriters  made  upon  adequate  considerations  paid 

was  not  a  payment  of  his  debt ;  there  was  by  himself.     There  is  nothing  inequitable 


no  privity  between  the  mortgagor  and  the 
underwriters  ;  he  had  not  contracted  with 
them  to  pay  it  for  him,  on  any  contin- 
gency; he  had  paid  them  nothing  for  so 
doing.  They  did  not  pay  because  the 
mortgagor  owed  it ;  but  because  they  had 
bound  themselves,  in  the  event  which  has 
happened,  to  pay  a  certain  sum  to  the 
mortgagee. 

"  But  the  mortgagee,  when  he  claims 
of  the  underwriters,  does  not  claim  the 
same  debt.  He  claims  a  sum  of  money 
due  to  him  upon  a  distinct  and  indepen- 
dent contract,  upon  a  consideration,  paid 
by  himself,  that  upon  a  certain  event,  to 
wit,  the  burning  of  a  particular  house, 
they  will  pay  him  a  sum  of  money  ex- 
pressed. Taking  the  risk  or  remoteness 
of  the  contingency  into  consideration,  in 
other  words,  the  computed  chances  of 
loss,  the  premium  paid  and  the  sum  to  be 

330 


to  the  debtor,  for  he  pays  no  more  than 
he  originally  received  in  money  loaned ; 
nor  to  the  underwriter,  for  he  has  only 
paid  upon  a  risk  voluntarily  taken,  for 
which  he  was  paid  by  the  mortgagee  a 
full  and  satisfactory  equivalent." 

See,  also,  Suffolk  Fire  Ins.  Co.  v.  Boy- 
den,  9  Allen  (Mass.),  123  ;  Foster  v.  Equi- 
table Mut.  F.  Ins.  Co.  2  Gray  (Mass.), 
216;  Concord  Union  Mut.  Fire  Ins.  Co. 
V.  Woodbury,  45  Me.  447  ;  Cushing  v- 
Thompson,  34  Me.  496;  Clark  v.  Wilson, 
103  Mass.  219,  221. 

2  King  V.  State  Mutual  Fire  Ins.  Co.  7 
Cush.  (Mass.)  1 ;  Whiter. Brown,  2  Cush. 
(Mass.)  412;  Cushing  v.  Thompson,  su- 
pra ;  Concord  Union  Mut.  F.  Ins.  Co.  v. 
Woodbury,  supra;  Bean  v.  Atlantic  &  St. 
Lawrence  R.  R.  Co.  .58  Me.  82;  Mclntire 
V.  Plaisted,  68  Me.  363. 


A  MORTGAGE   IS  NOT   AN  ALIENATION. 


[§  422. 


the  mortgage  discharged  before  the  loss  occurred,  the  mortgagee's 
insurable  interest  having  terminated,  he  has  no  claim  to  recover. 


IV.  A  Mortgage  is  not  an  Alienation. 

A^'2i.  With  reference  to  the  usual  provision  in  the  policy 
of  insurance,  that  it  shall  become  void  upon  an  alienation  of  the 
property  insured,  or  upon  any  transfer  or  change  of  title,  the 
general  rule  is  that  a  mortgage,  whether  executed  before  or  after 
the  policy  is  issued,  is  not  an  alienation  or  change  of  title  until 
foreclosure  is  complete,  or  the  mortgagor's  title  is  otherwise  di- 
vested in  consequence  of  the  mortgage.^ 

Even  a  sale  under  a  power  contained  in  the  mortgage  does  not 
amount  to  an  alienation,  when  the  mortgagee  himself  becomes  the 
purchaser  through  a  third  party,  and  the'  sale  is  repudiated  by  the 
mortgagor,  and  is  subsequently  set  aside  by  a  decree  of  court.^ 

The  policy  may,  however,  provide  that  it  shall  be  void  in  case 
there  be  at  the  time  the  policy  is  issued,  or  afterwards,  an  incum- 
brance upon  the  property,  and  then  of  course  a  mortgage  or  other 
incumbrance  will  render  the  policy  void.^ 

So  long  as  the  period  of  redemption  has  not  expired,  a  fore- 
closure sale  is  not  an  alienation.'^ 


1  Massachusetts :  Judge  v.  Conn.  Ins. 
Co.  132  Mass.  521  ;  Powers  v.  Guardian 
Ins.  Co.  136  Mass.  108  ;  49  Am.  Rep.  20 ; 
Jackson  v.  Mass.  Mut.  Fire  Ins.  Co,  23 
Pick.  418;  Rice  v.  Tower,  I  Gray,  426. 
Maine :  Pollard  v.  Somerset  Mut.  Fire 
Ins.  Co.  42  Me.  221 ;  Smith  v.  Monmouth 
Mut.  Fire  Ins.  Co.  50  Me.  96.  New  Hamp- 
shire: Shepherd  v.  Union  Mut.  Fire  Ins. 
Co.  38  N.  II.  2.32 ;  Button  v.  N.  E.  Mut. 
Fire  Ins.  Co.  9  Fost.  153  ;  Rollins  v.  Co- 
lumbian Mut.  Fire  Ins.  Co.  5  lb.  200; 
Folsom  y.  Belknap  County  Mut.  Fire  Ins. 
Co.  10  lb.  231.  New  York:  Conover  v. 
Mut.  Ins.  Co.  3  Denio,  254  ;  <S.  C.  1  Comst. 
290;  Van  Duesen  v.  Charter  Oak  Ins.  Co. 
1  Rob.  55.  Pennsylvania  :  Howard  F. 
Ins.  Co.  V.  Bruner,  23  Pa.  St.  50  ;  Kronk 
V.  Birmingham  Ins.  Co.  91  Pa.  St.  300. 
Indiana  :  Indiana  Mut.  Fire  Ins.  Co.  v. 
Coqiiillard,  2  Ind.  645.  Contra,  see  M'Cul- 
loch  V.  Indiana  Mut.  Fire  Ins.  Co.  8  Bhickf. 
(Ind.)  50.  Ohio:  IJyers  v.  Ins.  Co.  35  Oiiio 
St.  60G.     Minnesota  :   Loy  v.  Home  Ins. 


Co.  24  Minn.  315.  Illinois :  Aurora  F. 
Ins.  Co.  V.  Eddy,  55  111.  213;  Hartford 
Ins.  Co.  V.  Walsh,  54  111.  164  ;  Commercial 
Ins.  Co.  V.  Spankneble,  52  111.  53 ;  Han- 
over F.  Ins.  Co.  V.  Connor,  20  HI.  App. 
297.  Wisconsin:  Friezen  y.  Allemania  F. 
Ins.  Co.  30  Fed.  Rep.  352. 

-  Scammon  v.  Commercial  Union  Ins. 
Co.  20  111.  App.  500 ;  Insurance  Co.  v. 
Sampson,  38  Ohio  St.  672. 

3  Ellis  V.  State  Ins.  Co.  68  Iowa,  578; 
S.  C.  61  Iowa,  577  ;  Schumitsch  v.  Amer- 
ican Ins.  Co.  48  Wis.  26;  Mallory  v. 
Farmers'  Ins.  Co.  65  Iowa,  450  ;  Hicks  v. 
Farmers'  Ins.  Co.  32  N.  W.  Rep.  201.  Not 
by  mortgage  on  adjoining  parcel.  Eddy 
V.  Hawkeye  Co.  (Iowa)  30  N.  W.  Rep. 
808.  As  to  effect  of  a  change  of  incum- 
brances, see  Russell  v.  Cedar  Kapids  Ins. 
Co.  32  N.  W.  Rep.  95  ;  Ilankins  v.  Rock- 
ford  Ins.  Co.  35  N.  W.  Rep.  34. 

4  Hopkins  Manuf'g  Co.  v.  Aurora  F.  & 
M.  Ins.  Co.  48  Mich.  148. 

331 


§§  423,  424.]  INSURANCE. 

In  general  a  mortgage  is  not  an  alienation  until  foreclosure  is 
complete ;  and  a  foreclosure  is  not  complete  until  a  tx'ansfer  of 
title  under  a  foreclosure  sale.  Thus  where,  previous  to  the  loss, 
a  decree  of  sale  on  foreclosure  had  been  entered,  and  the  prop- 
erty had  been  put  up  for  sale  and  bid  off  by  the  mortgagee,  but 
no  deed  had  been  delivered,  and  because  of  the  fire  the  mortgagee 
refused  to  accept  a  deed,  it  was  held  that  the  policy  had  not  be- 
come void  by  sale  or  alienation,  and  that  the  original  owner  had 
an  insurable  interest  at  the  time  of  the  fire.^ 

423.  If,  however,  the  mortgage  is  by  a  deed  absolute  in 
form,  this  operates  as  a  transfer  or  change  of  title,  and  puts  an 
end  to  an  insurance  conditioned  to  be  void  in  that  eTent,^  al- 
though there  be  a  defeasance  executed  at  the  same  time,  if  this  be 
not  recorded  in  accordance  with  a  statute  providing  that  an  abso- 
lute conveyance  shall  not  be  defeated  or  affected  by  an  unre- 
corded defeasance,  as  against  any  person  other  than  the  maker  of 
the  defeasance  or  his  heirs  or  devisees,  or  persons  having  actual 
notice  thereof.^ 

Some  courts,  however,  hold  that  a  conveyance  which  equity 
will  treat  as  a  mortgage  does  not  terminate  the  interest  of  the 
assured,  or  make  void  the  policy  under  the  alienation  clause."^  If 
there  be  a  written  defeasance  which  is  seasonably  recorded,  the 
two  instruments  constitute  a  mortgage  as  effectually  as  if  the 
defeasance  were  contained  in  the  deed,  and  there  can  be  no  pre- 
tence that  there  is  an  absolute  conveyance.^  Even  if  the  defea- 
sance be  not  recorded,  the  deed  is  not  an  alienation  which  will 
avoid  the  policy.^ 

424.  Entry   to   foreclose.  —  Where  a  policy  provided  that 

1  Marts  V.  Cumberland  Ins.  Co.  44  N.  be  in  A.  but  in  B.,  his  grantee.    We  think 
J.  L.  478.  such   a  conveyance   would   clearly   come 

2  Western  Mass.  Ins.  Co.  v.  Riker,  10  within  the  condition  of  the  policy  and  put 
Mich.  279.     "  There  may  be  a  transfer  or  an  end  to  the  insurance." 

change  of  title  without  a  sale.     Should  A.  3  Foote  v.  Hartford  Ins.  Co.  119  Mass. 

convey  a  piece  of  property  to  B.  to  hold  259 ;    Tomlinson   v.   Monmouth   Mut.  F. 

in  secret  trust  for  him,  there  would  be  a  Ins.  Co.  47  Me.  232. 

transfer  or  change  of  title  from  A.  to  B.,  *  Holbrook  v.  American  Ins.  Co.  1  Cur- 

but  there  would  be  no  sale  of  the  property  tis  C.  C.  193  ;  Hodges  v.  Tennessee  Ma- 

or  an  actual  parting  with  it  to  B.  for  a  rine  &  Fire  Ins.  Co.  8  N.  Y.  416 ;  and  see 

valuable  consideration,  although  the  con-  Tittemore  v.  Vt.   Mut.  Fire  Ins.  Co.  20 

veyance  on  its  face  would  import  a  sale  Vt.  546. 

from  A.  to  B.    And  if  the  trust,  instead  ^  Smith  v.  Monmouth  Mut.  F.  Ins.  Co. 

of  being  secret,  appeared  on  the  face  of  50  Me.  96. 

the  conveyance,   there  would   still   be   a  ^  Bryan  v.  Traders'  Ins.  Co.  (Mass.)  14 

change  of  title.   The  title  would  no  longer  N.  E.  Rep.  454. 

332 


A   MORTGAGE  IS  NOT  AN  ALIENATION.  [§  424  a. 

"  the  entry  of  a  foreclosure  of  a  mortgage  "  should  be  deemed  an 
alienation  of  the  property,  and  the  company  should  not  be  holden 
for  any  loss  occurring  afterwards,  it  was  held  that  this  did  not 
mean  an  actual  and  complete  foreclosure,  but  had  reference  to  an 
entry  by  the  mortgagee  upon  a  breach  of  condition  for  the  pur- 
pose of  foreclosure.  Under  the  system  of  foreclosure  in  use  in 
Massachusetts,  such  entry  duly  recorded,  and  followed  by  posses- 
sion for  three  years,  accomplishes  a  foreclosure.^ 

424  a.  A  condition  making  a  policy  void  in  case  foreclos- 
ure proceedings  are  commenced  against  the  insured  property 
is  not  inconsistent  with  a  clause  making  the  policy  payable  to  the 
mortgagee  in  case  of  loss.^  In  regard  to  such  a  policy  it  was  con- 
tended in  behalf  of  the  mortgagee  that  the  insurers  having  issued 
such  a  policy,  with  notice  of  the  interest  of  the  mortgagee  in  the 
property,  and  with  an  agreement  to  pay  him  the  loss,  if  any, 
they  could  not  afterwards  call  in  question  the  natural  result  and 
incident  of  such  mortgage  title,  namely,  the  foreclosure  thereof, 
but  must  be  held  to  have  agreed  to  it  in  advance.  But  it  was 
held  otherwise.'^ 


1  Mclntire  v.  Norwich  Fire  Ins.  Co.  102 
Mass.  230. 

The  court  say  :  "  The  first  step  towards 
foreclosure  is  the  manifestation  of  the  in- 
tent to  foreclose,  which  is  to  be  indicated 
in  such  manner  as  the  law  points  out,  ac- 
companied with  a  formal  registration  in 
the  pul)lic  records.  It  is  very  manifest, 
as  we  think,  that  the  words  '  the  entry  of 
a  foreclosure,'  as  used  in  the  policy,  are 
not  to  be  interpreted  as  meaning  exactly 
the  same  thing  as  a  consummated  and  fin- 
ished foreclosure.  The  policy  provides  not 
merely  for  the  transfer  but  the  change  of 
title,  and  the  insurer  may  very  naturally 
have  considered  an  entry  for  foreclosure 
as  a  material  change  in  the  title  of  the 
assured,  and  in  his  relation  to  the  prop- 
erty. The  parties  in  their  contract  have 
taken  pains  to  avoid  saying  8imi)ly  that 
'  the  foreclosure  of  a  mortgage'  shall  be 
deemed  an  alienation.  There  would  bo 
no  occasion  for  them  to  say  that,  inasmuch 
as  the  law  would  plainly  have  said  it  for 
them." 

■^  Meadows  v.  Ilawkeye  Ins.  Co.  C2 
Iowa,  387. 


3  Titus  V.  Glens  Falls  Ins.  Co.  81  N. 
Y.  410.  The  court,  in  reply  to  this  ar- 
gument, say  :  "  This  reasoning  does  not 
carry  conviction  to  our  minds.  A  provi- 
sion that  a  policy  shall  be  void  in  the  case 
of  foreclosure  procefdings  is  common  in  in- 
surance policies,  and  we  must  assume  that 
experience  has  shown  to  underwriters  that 
such  proceedings  increase  the  risk  to  the 
insurer.  The  insurance  company  might 
have  been  willing,  for  the  premium  charged, 
to  insure  this  barn  with  the  mortgage 
upon  it,  and  yet  not  willing  to  insure  it 
in  case  of  proceedings  to  foreclose  the 
mortgage.  It  did  assent  to  the  mortgage, 
and  agree  that  the  loss,  if  any,  be  paid  to 
the  mortgagee,  but  it  did  not  assent  to 
continue  the  insurance  in  case  the  risk  was 
increased  by  proceedings  to  foreclose  the 
mortgage.  Before  commencing  the  fore- 
closure the  plaintiff  should  have  obiained 
the  assent  of  the  insurance  coiiij)any.  It 
might  have  examined  the  circumstances 
and  granted  such  assent  without  any  con- 
ditions, or  it  might  have  required  an  ad- 
ditional premium  for  the  increased  risk. 
It  might  have  refused  altogether,  and  in 

333 


§§  425,  426.] 


INSURANCE. 


425.  But  -when  the  title  becomes  absolute  in  the  mortgagee 
by  a  strict  foreclosure,  or  by  a  foreclosiu*e  effected  by  entry  and 
possession,  or  when  the  title  passes  to  another  by  a  sale  under,  a 
power  contained  in  the  mortgage,  or  by  a  sale  under  a  decree  of 
court  in  a  foreclosure  suit,  the  transfer  is  then  complete,  and  the 
change  of  title  is  an  alienation  within  the  terms  of  the  policy  of 
insurance.^.  When,  however,  there  is  a  right  of  redemption  after 
sale,  and  there  is  no  change  of  possession  until  the  period  for  re- 
demption has  expired,  the  foreclosure  does  not  operate  as  "  a  sale, 
transfer,  or  change  in  title,"  within  the  meaning  of  a  policy,  so  as 
to  defeat  a  recovery  for  a  loss  acci'uing  after  the  sale,  and  before 
the  expiration  of  the  time  of  redemption.^ 

In  case,  however,  the  foreclosure  is  effected  by  the  mortgagor 
for  the  benefit  of  the  mortgagee,  who  signs  the  premium  note  and 
pays  the  assessments,  foreclosure  is  not  an  alienation,  if  the  mort- 
gagee thereby  obtains  absolute  title  to  the  property,  as  he  is  al- 
ready the  person  liable  under  the  contract  of  insurance.^ 

426.  Alteration  of  ownership.  —  But  a  mortgage  is  a  viola- 
tion of  a  condition  against  an  "  altei'ation  of  ownership,"  '^  as  also 
of  a  condition  against  a  sale  or  alienation  "  in  whole  or  in  part."  ^ 


that  case  the  phiintiff  could  have  dehiyed 
his  foreclosure  uutil  the  end  of  the  year, 
or  surrendered  the  policy  and  procured  in- 
surance elsewhere.  Even  if  the  provi- 
sion were  found  to  be  very  inconvenient 
and  embarrassing,  there  is  no  help  for  it. 
There  it  is,  and  we  cannot  take  it  out 
of  the  policy  by  construction.  There  are 
two  provisions :  one,  that  liens,  without 
the  assent  of  the  company,  shall  avoid  the 
policy  ;  and  another,  that  foreclosure  pro- 
ceedings shall  avoid  it;  and  effect  must 
be  given  to  both.  According  to  the  con- 
struction contended  for  on  the  part  of  the 
plaintiff,  the  latter  provision  would  be 
wholly  useless  or  nullified  in  every  case, 
because  all  liens  avoid  the  policy  unless 
assented  to,  and  according  to  that  con- 
struction, when  assented  to,  foreclosure 
proceedings  may  be  instituted  without 
avoiding  the  policy.  If  such  proceedings 
may  be  instituted  as  incident  to  the  mort- 
gage, then  they  may  be  carried  to  their 
conclusion  by  a  sale  and  conveyance,  and 
thus,  by  assenting  to  a  mortgage,  a  com- 
pany may  be  held  to  have  assented  to  a 

334 


change  of  title  of  the  insured  property. 
Such  a  construction  is  unreasonable  and 
unwarranted."  But  in  this  case  it  was 
held  that  the  insurance  coni])auy  had  by 
its  acts  waived  the  forfeiture. 

1  Macomber  v.  Cambridge  Mut.  F.  Ins. 
Co.  8  Cush.  (Mass.)  133;  McLaren  v.  Hart- 
ford Fire  Ins.  Co.  5  N.  Y.  151 ;  Mt.  Ver- 
non Manuf.  Co.  v.  Summit  Co.  Mut.  Fire 
Ins.  Co.  10  Ohio  St.  347 ;  Georgia  Home 
Ins.  Co.  V.  Kinnier,  28  Gratt.  (Va.)  88; 
Campbell  v.  Hamilton  Mut.  Ins.  Co.  51 
Me.  69 ;  Abbott  v.  Hampden  Mut.  F.  Ins. 
Co.  30  Me.  414;  Brunswick  Sav.  Inst.  v. 
Commercial  Union  Ins.  Co.  68  Me.  313; 
S.  C.  8  Ins.  L.  J.  86,  120;  McKissick  r. 
Mill  Owners'  Mut.  F.  Ins.  Co.  50  Iowa,  116. 

2  Loy  V.  Home  Ins.  Co.  24  Minn.  315; 
S.  O.  7  Ins.  L.  J.  763. 

3  Bragg  V.  N.  E.  Mut.  Fire  Ins.  Co.  "> 
Fost.  (N.  H.)  289. 

*  Edmands  t-.  Mut.  Safety  Fire  Ins.  Co. 
1  Allen  (Mass.),  311. 

^  Abbott  V.  Hampden  Mut.  Fire  Ins.  Co. 
supra  ;  Bates  v.  Com.  Ins.  Co  2  Cin.  Supr. 
Ct.  (Ohio)  195. 


A   MORTGAGE   IS   NOT    AN   ALIENATION.  [§  427. 

A  breach  of  such  or  other  like  condition  avoids  the  policy  ;  and 
the  breach  is  sufficiently  established,  in  the  absence  of  any  evi- 
dence to  the  contrary,  by  putting  in  evidence  a  certified  copy  of 
the  record  of  the  mortgage. ^ 

A  conveyance  and  mortgage  back  to  secure  the  purchase  money 
is  such  an  alienation  as  will  avoid  a  polic}'^  upon  the  pi'operty, 
although  it  is  provided  that  the  mortgagee  shall  retain  possession 
until  the  purchase  money  is  paid.^  But  a  conveyance  by  the  in- 
sured, with  a  simultaneous  reconveyance  in  trust  for  the  first 
grantor,  is  held  not  to  be  such  an  alienation  or  transfer.^  And  so 
if  the  sale  and  reconveyance  constitute  merely  a  conditional  sale, 
they  are  regarded  as  parts  of  one  entire  contract,  and  are  held 
not  to  be  such  an  alienation  as  will  avoid  the  policy.* 

A  foreclosure  of  a  mortgage  is  such  a  transfer  of  the  property 
as  will  terminate  an  insurance  conditioned  to  be  void  "  if  any 
change  shall  take  place  in  the  title  or  possession  of  the  property," 
or  "  if  the  property  is  disposed  of,  so  that  all  interest  on  the  part 
of  the  assured  has  ceased."  ^ 

427.  If  the  mortgagor  has  already  assigned  the  policy  to 
the  mortgagee  with  the  consent  of  the  insurers,  his  subse- 
quent transfer  of  the  equity  of  redemption  is  no  breach  of  the 
stipulation  in  the  policy  against  alienation,  so  far  as  the  assignee 
is  concerned.^ 

This  view  has  been  criticised  in  some  courts  as  contrary  to 
the  principle  of  public  policy,  that  no  man  shall  be  allowed  to 
bargain  for  an  advantage  to  arise  from  the  destruction  of  prop- 
erty.' 

1  Gould  V.  Holland  Purchase  Ins.  Co.  ^  Bishop  v.  Clay  F.  &  M.  Ins.  Co.  45 
16  Hun  (N.  Y.),  538.  Conn.  430. 

2  Tittemore  v.  Vt.  Mut.  Fire  Ins.  Co.  *>  Foster  v.  Equitable  Mut.  Fire  Ins.  Co. 
20  Vt.  546;  Moulthrop  v.  Farmers'  Mut.  2  Gray  (Mass.),  216;  Fogi?  v.  Middlesex 
F.  Ins.  Co.  52  Vt.  123 ;  German-Americaa  Mut.  Fire  Ins.  Co.  10  Cush.  (Mass.)  337  ; 
Bank  v.  Agricultural  Ins.  Co.  8  Mo.  App.  Bragg  v.  N.  E.  Mut.  Fire  Ins.  Co.  5  Fost. 
101.  (N.  H.)  289  ;  Boynton  v.  Clinton  &  Essex 

3  Morrison  v.  Tenn.  Mar.  &  Fire  Ins.  Mut.  Ins.  Co.  16  Barb.  (N.  Y.)  2.54. 

Co.  18  Mo.  262.  7  Kernocban  v.  N.  Y.  Bowery  F.  Ins. 

*  Tittemore  v.  Vt.  Mut.  Fire  Ins.  Co.     Co.  17  N.  Y.  428. 


oipra. 


335 


CHAPTER  XI. 


FIXTURES. 


I.  Rules  for  determining  what  fixtures 

a  mortgage  covers,  428-443. 
II.  Machinery  in  mills,  444-451. 


III.  Rolling  stock  of  railways,  452. 

IV.  Remedies    for   removal  of    fixtures, 

453-455. 


I.  Rules  for  determining  what  Fixtures  a  Mortgage  covers. 

428.  In  general.!  —  A  mortgage  of  real  property,  as  a  gen- 
eral rule,  carries  as  part  of  the  security  all  fixtures  belonging  to 
the  realty,  without  any  special  mention  of  them  being  made  in 
the  conveyance.  In  determining  what  chattels  when  annexed  to 
the  land  become  fixtures,  and  therefore  bound  by  a  mortgage, 
very  much  the  same  rules  apply  as  between  a  grantor  and  his 
grantee  in  case  of  an  absolute  conveyance ;  ^  but  although  in  the 
case  of  a  deed  the  construction  is  generally  favorable  to  holding 
that  things  attached  to  the  land  are  part  and  parcel  of  the  realty 
rather  than  personalty,  yet  in  the  construction  of  a  mortgage 
even  greater  favor  in  the  same  way  seems  to  be  shown  the  mort- 
gagee. The  reason  seems  not  to  be  far  away.  When  the  ques- 
tion arises  under  a  mortgage,  the  mortgagor  always  has  the  right 
to  redeem,  and  in  this  way  to  gain  the  benefit  of  any  addition 
made  to  the  realty  ;  and  any  one  claiming  under  him  has  only  his 
rights,  and  acquires  these  with  full  knowledge  of  the  incumbrance 
and  of  the  condition  of  the  property. 

All  buildings  and  other  fixtures  annexed  to  the  freehold  be- 
come part  of  it,  and  enure  to  the  benefit  of  those  who  are  entitled 
to  it ;  both  to  the  mortgagee  as  an  increased  security  for  his  debt, 
and  to  the  mortgagor  to  the  same  extent  as  enhancing  the  value 
of  his  equity  of  redemption.  The  latter  can  obtain  the  full  ben- 
efit of  all  improvements  he  has  made  by  paying  his  debt  and  re- 

1  See,   also,  on  this  subject,  Jones  on  Smith  (N.  Y.),  273  ;  Robinson  v.  Pres- 
Chattel  Mortgages,  §§  123-137.  wick,  3  Edw.  (N.  Y.)  246  ;  foote  v.  Gooch, 

2  Longstatr  v.  Meagoe,  2  Adol.  &  El.  96  N.  C.  265. 
167  ;  Main  v.  Schwarzwaelder,  4   E.  D. 

336 


RULES   FOR   DETERMINING.  [§  429. 

gaining  his  estate  bj^  redemption.  This  rule,  and  the  exceptions 
to  it  as  well,  are  applicable  to  deeds  of  trust  equally  with  mort- 
gages.^ 

429.  The  intention  with  which  an  article  of  personal  prop 
erty  is  attached  to  the  realty,  whether  for  temporary  use  or 
for  permanent  improvement,  has  within  certain  limits  quite  as 
much  to  do  with  the  determination  of  the  question  whether  it  has 
thereby  become  a  permanent  fixture,  as  has  the  way  and  man- 
ner in  which  it  is  attached.^  If  it  is  something  necessary  for  the 
proper  enjoyment  of  the  estate,  it  may  be  presumed  that  it  was 
annexed  for  its  permanent  improvement,  and  therefore  tliat  it 
goes  to  the  benefit  of  the  mortgagee.  The  fixtures  may  be  so 
adapted  to  the  building  in  which  they  are  placed,  and  to  the  pur- 
poses for  which  the  building  is  to  be  used,  as  to  show  clearly  that 
they  were  designed  to  be  permanent.^  Such,  for  instance,  are  the 
fixtures  in  a  manufactory  necessary  for  furnishing  the  motive 
power,  or  for  the  proper  carrying  on  of  the  business.*  A  mort- 
gage of  a  machine-shop  includes  a  lathe  and  other  fixtures  neces- 
sary for  the  prosecution  of  the  business  of  the  shop.^  A  mort- 
gage of  a  building  erected  for  a  steam  saw-mill,  and  which  would 
be  of  little  use  for  any  other  purpose,  embraces  also  the  boilers, 
engines,  saws,  gearing,  and  machinery  necessary  for  the  working 
of  the  mill,  and  without  which  it  would  be  incomplete.'^  Boilers, 
engines,  shafting,  and  steam-pipes  for  heating  a  large  building, 
are  covered  by  a  mortgage  of  the  realty." 

1  Grasmei'.  Cullen,2.3  Gratt.  (Va.)266;  ger,   99    Pa.   St.    320.      Massachusetts: 

Moore  r.  Valentine,  77  N.  C.  188.  Smith  Paper  Co.  v.  Servin,  130  Mass.  511. 

■■^  New  Jersey:   Quinbj'  v.   Manhattan  Alabama:  Rogers  v.  Prattville  Manuf.  Co. 

Cloth  &  Paper  Co.  24  N.  J.  Eq.  260.     Ver-  81  Ala.  483 ;  1   So.  Rep.  643  ;  Tillman  u. 

mont:  Hill  v.  Wentworth,  28  Vt.  428,  per  Do  Lacy,  80  Ala.  103.    North  Carolina: 

Bennett,  J.    New  York  :  Bishop  v.  Bishop,  Footc  v.  Gooch,  96  N.  C.  265.     Michigan : 

11  N.  Y.  123,  as  to  hop-poles;  Voorhees  Manwaring  v.   Jenison,  27    N.   W.   Rep. 

V.   McGinnis,   48   N.    Y.   278  ;  Potter  v.  899. 

Cromwell,  40  N.  Y.  287;  McRea  v.  Cen-         3  Equitable  Trust  Co.  v.  Christ,  2  Flipp. 

tral  Nat.  Bank  of  Troy,  66  N.  Y.  489;  599. 

Sullivan  v.  Toole,  26  Hun,  203;  Hart  v.         *  Millikin  v.  Armstrong,  17  Ind.  456  ; 

Sheldon,  34  Hun,  38.     Iowa:   Ottumwa  Crane  v.  Brigham,  3  Stockt.  (N.J.)  29; 

Woollen  Mill  Co.  v.  Hawley,  44  Iowa,  57.  Keve  v.  Paxton,  26  N.  J.  Eq.  107  ;  Till- 

niinois  :    Kelly   i;.   Austin,   46   111.    156;  man  i;.  De  Lacy,  sw/jra. 
Jones  V.  Ramsey,  3  Brndw.  303 ;  Arnold         6  Hoskin  i;.  Woodward,  45  Pa.  St.  42. 
y.  Crowder,  81  111.56;  25  Am.  Rep.  260;         «  Brennau    v.  Whitaker,    15   Ohio   St. 

Kisterhock   v.  Lanning,  7  Atl.   Rep.   596.  446;  Quinbyr.  Manhattan  Cloth  &  Paper 

Wisconsin:    Taylor  v.   Collins,   51    Wis.  Co.  supra. 

123.    Pennsylvania  :  Morris's  App.  88  Pa.         ''  Ex  parte  Montgomery,  &,c.  4  Irish  Ch. 

St.  368;  Harmony  Building  Atao.  i;.  Ber-  520.     In   this   case  the  Lord  Chancellor 
22  JJ37 


§  429.]  FIXTURES  : 

The  principles  by  which  to  determine  whether  a  personal  arti- 
cle after  being  attached  to  the  realty  still  remains  a  chattel  are 
two :  first,  the  mode  and  degree  of  the  annexation  ;  and  second, 
the  purpose  of  it.i  The  first  cannot  of  course  be  defined  with 
any  exactness.  The  modes  of  annexation  may  be  almost  as  nu- 
merous as  the  instances  that  occur.  The  degrees  of  physical  force 
with  which  the  chattels  are  annexed  may  be  as  many  as  the 
modes  of  annexation.  The  degree  may  be  very  slight,  and  yet  be 
sufficient  to  make  the  article  a  fixture  and  part  of  the  realty.  As 
the  result  of  the  numerous  cases,  it  is  safe  to  say  that  this  is  the 
less  important  part  of  the  criterion.  If  the  intent  is  manifest 
that  the  chattel  is  attached  to  the  estate  for  its  permanent  im- 
provement, the  mode  and  degree  in  which  it  is  attached  are  of 
little  importance.  In  a  case  before  the  English  Court  of  Queen's 
Bench,2  in  regard  to  a  hydraulic  press  placed  in  a  factory,  but  not 
essential  to  its  work,  Mr.  Justice  Mellor  said  :  "  If  we  could  see, 
as  in  the  gas-works  case,^  an  intention  that  the  chattel  should 
remain  fixed  to  the  factory  so  long  as  the  factory  remained  a  fac- 
tory, then  we  might  think  the  press  to  be  sufiiciently  fixed  to 
become  a  part  of  the  freehold  ;  but  we  see  no  such  intention." 

The  criterion  adopted  by  several  courts  for  determining  whether 
property  ordinarily  regarded  as  personal  becomes  a  part  of  the 
realty  is  the  united  ajsplication  of  the  following  requisites  :  1st. 
Actual  annexation  to  the  realty-,  or  something  appurtenant 
thereto.  2d.  Appropriation  to  the  use  or  purpose  of  that  part  of 
the  realty  with  which  it  is  connected.  3d.  The  intention  of  the 
party  making  the  annexation  to  make  the  article  a  permanent 
accession  to  the  freehold,  —  this  intention  being  inferred  from 
the  nature  of  the  article  afiixed,  the  relation  and  situation  of  the 
party  making  the  annexation,  the  structure  and  mode  of  annexa- 
tion, and  the  purpose  or  use  for  which  the  annexation  has  been 
made."  * 

said:  "I  find  that  all thecases come  round  sion.     I  therefore  think  that  the  possibil- 

to  the  same  question,  namely,  what  are  ity  of  removal  is  not  so  much  the  test  as 

fixtures?    Now,  it  appears  to  me  that  this  the  nature  of  the  article." 

does  not  at  all  depend  upon  the  power  of  i  Hellawell  v.  Eastwood,  6  Exch.  295 ; 

removal ;  the  owner  in  fee  has  the  right  to  Clarke  v.  Crownshaw,  3  B.  &  Ad.  804. 

remove  all  fixtures  ;  the  tenant  has  a  ri<,^ht  2  Parsons  v.  Hind,  14  W.  R.  8G0. 

to  remove  fixtures  erected  for  trade  pur-  3  Reg.  v.  Lee,  L.  R.  1  Q.  B.  241  ;  S.  C. 

poses;  but  until  they  are  severed  they  are  14  W.  R.  311. 

still  fixtures,  and  as  between  mortgagor  *  So  stated  in  Teaff  v.  Hewitt,  1  Ohio 
and  mortgagee  they  are  not  removable,  St.  511,  530,  and  expres-ly  adopted  in  Pot- 
though  the  mortgagor  remain  in  potses-  ter  y.  Cromwell,  40  N.  Y    287;  McRea  f. 
S38 


RULES   FOR   DETERMINING.  [§§  430,  431. 

It  is  in  tlie  application  of  the  criterion  that  the  courts  chiefly 
differ.  While  some  look  to  phj-sical  attachment  to  the  realty  as 
the  chief  requisite  of  a  fixture,  others  regard  chiefly  the  intention 
of  the  party  making  the  annexation,  and  hence  arises  an  irrecon- 
cilable conflict  of  authorities.  The  mode  and  degree  of  annex- 
ation may  determine  the  intention.  Especially  is  this  the  case 
when  an  article  is  attached  so  as  to  be  an  inseparable  and  perma- 
nent part  of  the  realty.  When  the  annexation  is  less  complete, 
it  may  still  afford  convincing  evidence  of  the  intention  ;  as,  for 
instance,  where  the  building  is  constructed  expressly  to  rectve 
the  machine  or  other  article,  and  this  could  not  be  removed  with- 
out material  injm-y  to  the  building,  or  where  the  article  would 
be  of  no  value  for  use  in  that  particular  building,  or  could  not  be 
removed  without  being  destroyed  or  greatly  damaged. ^ 

430.  The  fact  that  a  mortgage  enumerates  some  fixtures, 
but  does  not  enumerate  others,  which  afterwards  become  the 
subject  of  dispute,  affords  reason  to  suppose  that  these 
tentionally  omitted  in  the  mortgage  deed,  and  did  not  pass  by  it  ;^ 
upon  the  principle,  "  Expressio  unius  est  exclusio  alteriusJ^ 

431.  The  fact  that  a  chattel  has  been  mortgaged  before,  or 
at  the  time,  it  was  attached  to  the  realty,  seems  to  liave  been  of 
weight  in  some  cases  in  leading  to  the  determination  that  such 
mortgage  carries  the  fixture  as  against  a  mortgage  of  the  realty 
already  existing  ;3  and  an  agreement  made  by  the  mortgagor  with 

Central  Nat.  Bank  of  Trov,  66  N.  Y.  489,  ^  Trappes  v.  Ilarter,  2  C.  &  M.  153, 

496;    Qiiinby  v.  Manhattan  Cloth  &  Pa-  177. 

per  Co.   24   N.  J.   Eq.    260;    Rlaneke  v.  3  §  445 .  Jones  on  Chattel  Morfgages, 

Rogers,  26  N.  J.  Eq.  56.3  ;  Williiimson  v.  §§  124-137;  Eaves  v.  Estes,  10  Kan^.  314; 

N.  J.  Southern  R.  R.  Co.  29  N.  J.  Eq.  Tibbetts  v.  Moore,  23  Cnl.  208 ;  Ford  v. 

311,  329 ;  McMillan  v.  N.  Y.  Water  Proof  Cobb,  20  N.  Y.  344  ;  Sheldon  v.  Edwards, 

Paper  Co.  29  N.  J.  Eq.  610;    State  Sav-  35  N.  Y.  279;  United  States  v.  New  Or- 

ings  Bank  v.  Kercheval,  65  Mo.  682  ;  Dud-  leans  Railroad,  12  Wall.  362  ;  Fir.-t  Nat. 

ley  V.  Hurst  (Md.),  8  All.  Rep.  901 ;  Till-  Bank  v.  Elmore,  52  Iowa,  541 ;  Henry  v. 

man  v.  De  Lacy,  80  Ala.  103;  Rogers  v.  Von  Braudenstein,  12  Daly,  480;  Sword 

Prattville  Manuf.  Co.  81  Ala.  483;  I  So.  v.   Low   (111.),   supra;  Miller  v.    Wilson 

Rep.  C43;  Capen  v.  Pcckham,  35  Conn.  (Iowa),  33  N.  W.  Rep.  128;  Hart  v.  Shel- 

88;    Brcnnan  v.   Whitaker,  15  Ohio  St.  don,  34  Hun    (N.   Y.),   38;  Case    Manu- 

446;  Thomas  r.  Davi.'.,  76  Mo.  72;  5.  C.  facturing  Co.   v.  Garver  (Ohio),  13  N.  E. 

43  Am.  Rep.  756  ;  Sword  v.  Low  (III.),  13  Rep.  493. 

N.  E.  Rep.  826.  See  Ba.ss  Foundry  i-.  Gallentine,  99  Ind. 

1  McRca  V.  Central  Nat.  Bank  of  Troy,  525,  where  it  was  held  a  m()rt-:ag(!  of  the 

66  N.  Y.  489  ;  Tillman  v.  Dc  Lacy,  supra  ;  realty  attaches  to  machinery  atla'-hed  to 

Equitable  Trust  Co.  v.   Christ,   2  Fiipp.  it  under  an  a^'rc(■ment  that  the  till.;  to  the 

^^-  machinery  should  not  jiass   until    it  was 

paid  for. 

339 


§  431.]  FIXTURES  : 

a  third  person  to  whom  the  chattels  belonged,  that  they  should 
remain  his  after  the}^  are  affixed  to  the  realty  until  paid  for,  or 
that  they  should  be  subject  until  paid  for  to  his  right  to  remove 
them,  has  been  held  to  have  the  same  effect.  In  a  case  before  the 
Court  of  Appeals  of  New  York,i  it  was  held  that  such  an  agree- 
ment preserved  the  character  of  the  chattels  as  personal  property 
when  ihey  would  otherwise  have  become  fixtures  so  as  to  pass  by 
a  mortgage  of  the  realty.  But  it  was  said  that  while  there  was 
no  doubt  that  the  owner  of  the  land  intended  that  the  ar- 
ticles, which  were  an  engine  and  boilers,  should  ultimately  be- 
come a  part  of  the  realty,  and  be  permanently  affixed  to  it,  yet 
this  intention  was  subordinate  to  the  prior  intention  expressed 
by  the  agreement,  that  the  act  of  annexing  them  should  not 
change  their  character  as  chattels  until  the  price  should  be  fully 
paid. 

If  the  real  estate  is  subject  to  a  mortgage  when  chattels  are 
annexed  to  it,  which  are  not  at  the  time  subject  to  any  personal 
mortgage,  or  to  any  equitable  agreement  for  their  subsequent  re- 
moval, the  chattels,  if  of  the  nature  to  become  fixtures,  become 
so  immediately  upon  being  attached  to  the  land :  and  any  chattel 
mortgage,  or  agreement  that  the  articles  should  be  considered  per- 
sonal property,  will  have  no  effect.^  The  chattels  once  having 
been  annexed  to  the  realty  and  become  bound  by  a  mortgage  of 
the  realty  cannot  be  dissevered,  except  with  the  consent  of  the 
mortgagee. 

In  a  case  where  machinery  for  a  saw-mill  was  sold  to  the  owner 
under  a  condition  that  it  should  remain  the  property  of  the  ven- 
dor until  paid  for,  and  after  a  part  of  it  had  been  set  up  in  the 
mill  a  mortgage  was  made  of  the  mill  premises,  the  mortgagee 
having  no  notice  of  this  agreement,  it  was  held  that  the  part  of 
the  machinery  which  had  been  put  up  in  the  mill  passed  by  the 
mortgage;  but  that  as  to  such  of  the  machinery  as  was  then 
lying  in  the  mill  yard  the  mortgagee  gained  no  title  as  against 
the  unpaid  vendor.^ 

1  Tifft  V.  Horton,  53  N.  Y.  377.     This  2  Vanderpoel  v.  Van  Allen,  10  Barb, 

case  is  not  entirely  in  accord  with  the  case  (N.  Y.)   157;  United  States   v.  New  Or- 

of  Voorhees  v.  McGinnis,  48  N.  Y.  278,  leans  Kailroad,  12  Wall.  362. 

which  related  to   an   engine   and  boilers  ^  Davenport    v.   Shants,    43   Vt.    546 ; 

which  were  covered  by  a  chattel  mortgage.  Miller  v.  Wilson  (Iowa),  33  N.  W.  Rep. 

It  seems,  however,  that  part  of  the  articles  128. 
had  been  attached  to  the  realty  before  the 
execution  of  the  chattel  mortgage. 

340 


RULES   FOR   DETERMINING.  [§§  4312,  433. 

432.  Hired  fixtures.  —  It  has  been  held,  however,  that  boilers 
put  into  a  steam-mill,  after  the  execution  of  a  mortgage  upon  the 
mill,  under  an  acjreement  with  the  mortgagor  that  he  should  have 
the  use  of  them  at  a  certain  rental,  and  that  they  should  remain 
the  property  of  the  person  who  put  them  in,  and  who  should  have 
the  privilege  of  removing  them  at  his  pleasure,  were  not  subject 
to  the  mortgage.! 

In  like  manner  machinery  put  into  a  mill  subject  to  a  mort- 
gage, merely  to  exhibit  it  to  the  public  by  one  not  a  party  to  the 
mortgage,  is  not  covered  by  the  mortgage.^  Although  such  ma- 
chinery be  afterwards  bought  by  one  of  the  mortgagors,  if  this 
be  not  done  with  the  intent  to  use  it  in  connection  with  the  busi- 
ness carried  on  upon  the  premises,  it  does  not  then  come  within 
the  operation  of  the  mortgage.^ 

433.  Buildings  erected  on  the  mortgaged  premises  by  the 
mortgagor  are  annexed  to  the  freehold  and  cannot  be  removed 
by  him,  or  by  any  one  under  his  authority,  while  the  debt  re- 
mains unpaid.*  When,  however,  the  building  is  erected  merely 
for  temporary  use,  and  it  is  apparent  that  there  was  an  intention 
that  it  should  not  become  attached  to  the  land  even  so  slightly 
as  by  the  sinking  into  the  soil  of  the  blocks  upon  which  it  rested, 
the  mortgagee  of  the  land  will  acquire  no  interest  in  it,  although 
placed  tliere  by  the  mortgagor.  If  erected  by  a  firm  of  which 
the  mortgagor  is  a  member  for  purposes  of  trade,  it  is  all  the 
more  clear  that  it  was  not  intended  as  a  permanent  improvement, 
or  to  become  a  part  of  the  realty.^  But  a  building  erected  by 
the  side  of  a  mill  for  use  as  an  office  in  connection  with  the  mill 
was  held  to  be  a  part  of  the  realty,  although  intended  to  be  tem- 
porary only,  and  to  be  ultimately  removed,  and  not  attached  to 
the  mill  nor  fixed  to  the  ground,  but  resting  upon  wooden  blocks 
upon  the  surface  of  the  earth.  The  use  for  which  the  building 
was  erected  was  regarded  as  determining  its  character  as  part  of 
the  realty.^^ 

'   Hill  V.  Sewald,  53  Pa.  St.  271.  35  Vt.  317,  per   KellogiG:,  J.     Wisconsin  : 

■■^  Stell  V.  Paschal,  41  Tex.  640.  Frankland  v.  Moulton,  5  Wi.s.  1.     Louis- 

8  Stell  >.•.  Paschal,  «H/>ra.  iana:   New   Orleans   Nat.  Bank   v.   Uay- 

♦  New  Hampshire :  Hiiniside  v.  Twitch-  mond,  29  La.  Ann.  355.     Illinois:  IJaird 

ell,  43  N.   11.  300.     Massachusetts:  Cole  r.  Jackson,  98  111.  78;  Wood  r.  Wiielen, 

V.  Stewart,  1 1  Cu.sh.  181 ;  Winslow  v.  Met-  93  111.  153  ;  Matzoii  v.  GrilViii,  78  III.  477  ; 

chants'   Ids.   Co.   4  Met.   306;   Butler  v.  Dorr  t-.  Diuldeiar,  88  111.  107. 

Page,  7  Met.  40  ;  Guernsey  v.  Wilson,  134  ^  Kelly  v.  Austin,  40  111.  150. 

Mass.  482.     Vermont:  Swectzer  u.  Jones,  »  State  Savin;,'S  Bank  y.  Kerchcvnl,  65 

341 


§  433  a.]  FIXTURES : 

The  owner  of  a  lot  of  land  having  by  parol  license  allowed  a 
third  person  to  erect  a  building  upon  it,  afterwards  made  a  mort- 
gage of  it  to  one  who  had  no  notice  of  such  license.  It  was  held 
that  he  was  entitled  to  the  building,  afid  having  entered  into  pos- 
session might  maintain  trespass  against  one  removing  it ;  and  it 
was  held,  too,  that  the  mere  fact  that  the  person  who  erected  the 
building  occupied  it  was  no  notice  of  his  claim  to  it.^ 

433  a.  Fixtures  in  and  about  a  house.  —  A  mortgage  of  a 
house  passes  the  presses,  cupboards,  glazed  doors,  movable  parti- 
tions, grates,  ranges,  and  other  like  fixtures  contained  in  it.^  It 
also  passes  the  windows  and  blinds,  though  temporarily  separated 
from  the  house  ;  the  door  keys  ;  ^  a  sun  dial  erected  on  a  perma- 
nent foundation  ;  *  a  furnace  so  placed  in  a  house  that  it  cannot 
be  removed  without  disturbing  the  brick-work  of  the  house,  and 
causing  a  portion  of  the  ceiling  to  fall.^  But  a  portable  iron  fur- 
nace for  heating  a  house,  standing  on  the  cellar  floor,  and  held  in 
position  merely  by  its  own  weight,  and  capable  of  being  removed 
without  injury  to  the  building,  is  not  a  fixture  covered  by  a  mort- 
gage of  the  realty.^  Articles  of  furniture  are  not  fixtures,  though 
attached  to  the  building.  On  this  principle  gas-fixtures  adjusted 
to  the  gas-pipes  do  not  pass  with  the  realty.'^  Mantel  mirrors 
hung  upon  hooks  driven  into  the  walls,  and  pier  mirrors,  though 
made  to  order  for  the  house,  and  having  cornices  of  the  same 
design  as  those  of  the  room  and  connected  with  them,  but  so  at-, 
tached  that  the}^  can  be  removed  and  put  into  another  house,  are 
not  covered  by  a  mortgage  of  the  realty.^     But  mirrors  set  into 

Mo.  682;    27  Am.   Rep.  310;    Wight  v.  Mass.  21;   Eahway  Sav.  Inst.  v.  Irving 

Gray,  73  Me.  297.  St.  Bap.  Church,   36  N.  J.  Eq.  61. 

1  Powers  ».  Deunison,  30  Vt.  7.52.  6  Rahway  Sav.  Inst.  v.  Irving  St.  Baptist 

2  Longstaff  v.  Meagoe,  2  Ad.  &  El.  167  ;  Church,  supra.  "  It  cannot  be  held  that 
Colegrave  v.  Dias  Santos,  2  Barn.  &  Cress,  the  mere  fact  that  a  chattel  is  placed  in 
76-  a  part  of  a  house  which  has  been  adapted 

3  Liford's  case,  11  Coke,  50.  to  receive  it,  will  make  it  a  fixture;  for 
*  Snedeker  v.  Warring,  12  N.  Y.  170.  example,  a  bedstead  in  a  house  obviously 
°  Main    v.    Schwarzwaelder,    4    E.  D.     would  not  be  made  a  fixture  by  the  mere 

Smith  (N.  Y.),  273 ;  Stockwell  v.  Camp-  fact  that  it  was  placed  in  an  alcove  made 

bell,  39  Conn.  362.  to    receive   a    bedstead."      Per   Runyon, 

Whether  a  portable  furnace  set  in  brick  Ch. 

is  a  part  of  the   realty,  is  a  question  of  "^  Shaw  v.  Lenke,  1  Daly  (N.  Y.)  487  ; 

fact,  or  of  mixed  law  and  fact.     Allen  v.  McKeage  v.  Hanover  F.  Ins.  Co.  81  N.  Y. 

Mooney,  1.30  Mass.  155;  Turner  z;.  Went-  38;  37  Am.  Rep.  471,  affirming  16  Hun, 

worth,  119  Mass.  459;    Towne  v.  Fiske,  239. 

127   Mass.   125;    Maguire  v.  Park,   140  8  McKeage  v.  Hanover  F.  Ins.  Co.  su- 
pra. 

342 


RULES   FOR   DETERMINING.  [§  434. 

the  walls  so  as  to  be  a  part  of  them  at  the  time  of  the  erection 
of  a  house  are  a  part  of  the  realt3\i  A  show-case  with  drawers 
and  sash,  though  fastened  in  place  by  nails,  does  not  become  part 
of  the  realty .2  , 

A  mortgage  of  a  plantation  will  not  cover  the  wagons  and  tools 
used  upon  it,  or  the  stock  and  cattle,  unless  such  property  be  ex- 
pressly included  in  the  mortgage.^  A  mortgage  of  a  tract  of  land 
does  not  include  as  a  fixture  a  portable  steam  saw-mill,  boiler  and 
engine,  which  are  not  attached  to  the  soil,  but  may  be  moved 
from  place  to  place.* 

Manure  made  in  the  ordinary  course  of  husbandry  upon  a  farm 
in  possession  of  the  mortgagor  is  so  attached  to  the  realty  that,  in 
the  absence  of  any  express  stipulation  to  the  contrary,  it  is  con- 
sidered a  part  of  the  realty,  either  as  appurtenant  to  the  freehold 
or  as  being  in  the  nature  of  a  fixture.  The  title  to  it  is  vested  in 
the  mortgagee,  and  the  mortgagor  has  no  right  to  remove  it,  and 
can  give  no  title  to  it  by  sale.^ 

434.  Trees  and  shrubs  planted  in  a  nui'sery  garden,  for  the 
temporary  purpose  of  cultivation  and  growth  until  they  are  fit 
for  market,  and  then  to  be  taken  up  and  sold,  pass  by  a  mortgage 
of  the  land,  so  that  neither  the  mortgagor  nor  his  assignee  or 
creditors  can  remove  them  as  personal  property.^  One  claiming 
that  trees  and  shrubs,  whether  growing  naturally  or  planted  and 
cultivated  for  any  purpose,  are  not  part  of  the  realty,  must  show 
special  circumstances  which  take  the  particular  case  out  of  the 
general  rule ;  he  must  show  that  the  parties  intended  that  they 
should  be  regai-ded  as  personal  chattels.  The  mere  fact  that  the 
trees  and  shrubs  were  the  stock  in  trade  of  the  mortgagor  in  his 
business  as  a  nursery  gardener  is  insufficient  for  this  purpose. 
They  are  prhyid  facie  parcel  of  the  land  itself,  and  would  pass  to 
a  vendee  upon  a  sale  of  the  land  unless  specially  excepted,  and 
in  the  same  way,  unless  excepted,  pass  to  a  mortgagee."  Although 
planted  by  the  mortgagor  after  the  execution  of  the  mortgage, 
tliey  become  a  part  of  the  realty  and  part  of  the  mortgage  secu- 
rity.8 

1  Ward  u.  Kilpatrick,  85  N.  Y.  413.  6  Maples    v.    Millon,    31    Conn.    598; 

-  Cross  V.  Marsioii,  17  Vt.  533.  Adams  v.  Beadle,  47  Iowa,  439.     And  see 

*»  Vason  V.  Bull,  5C  Ga.  268.  Bank  of  Lansinj^bnrgh  v.  Crnry,  1  Barb. 

♦  Taylor  v.  Watkins,  62  Irid.  511.  (N.  Y.)  542;  Kin;,'  n.  VVilconib,  7  lb.  263. 

''  Chase  v.  Wingate,  68  Me.  204  ;  and  ''  I'er  llinman,  C.  J.,  iu  Maples  v.  Mil- 
see  Fay  i'.  Mtizzcy,   13  Gray  (.Vlas.s  ),  53;  \oa,  supra. 

Kittiedi.,'e  v.  Woods,  3  N.  II.  503  ;  Norton  "  Trice  v.  Braytoii,  19  Iowa,  309. 

V.  Craig,  68  Me.  275.  343 


§  435.]  FIXTURES : 

435.  A  fixture  annexed  to  the  land  before  the  execution 
of  the  mortgage  will  pass  by  the  mortgage  without  any  special 
niention  of  the  fixture,  and  even  without  any  general  description 
of  it,  or  evidence  of  intention  to  include  it,  such  as  might  be  af- 
forded as  to  machinery  or  other  articles  employed  for  manufac- 
turing purposes  by  a  special  mention  of  a  mill  aside  froui  the  de- 
scription of  the  land.^  This  was  the  decision  in  an  early  case  in 
Massachusetts,^  in  which  it  was  held  that  a  kettle  in  a  fulling-mill 
set  in  brick-work,  and  used  for  dyeing  cloth,  passed  by  a  mort- 
gage of  the  land  upon  which  the  mill  stood.  The  grounds  of  the 
decision  were,  that  this  fixture  could  not  be  removed  without  ac- 
tual injury  to  the  mill;  that  it  was  essential  to  the  use  of  the 
mill ;  and  that,  being  attached  to  it  at  the  time  of  making  the 
mortgage,  it  passed  by  it  as  part  of  the  security. 

As  a  general  rule  a  mortgage  of  land  passes  the  fixtures  al- 
ready upon  it  without  any  special  mention  being  made  of  them. 
They  pass  with  the  estate  and  as  a  part  of  it.  In  a  mortgage 
deed  the  premises  were  described  as  certain  land  "  with  the  pa- 
per-mill, etc.,  thereon,  and  water  privilege,  appurtenances,  etc., 
together  with  all  its  privileges  and  appurtenances."  The  ma- 
chinery in  controversy  was  fastened  to  the  floor  of  the  mill  by 
means  of  iron  bolts  with  nuts  upon  the  ends  of  them.  The  ma- 
chinery, however,  could  be  removed  without  injury  to  the  build- 
ing, and  might  be  used  in  other  paper-mills.  The  machinery  was 
subsequently  attached  by  a  creditor  of  the  mortgagor,  but  it  was 
held  that  it  passed  by  the  mortgage  of  the  land  and  mill  as  a  part 
of  the  realty .3 

The  intention  of  the  parties  to  a  purchase  money  mortgage,  as 
regards  fixtures,  may  be  gathered  from  their  intention  in  the 
other  part  of  the  transaction,  namely,  the  sale  of  the  property  by 

1  Clore  V.  Lambert,  78  Ky.  224.  that  certain    carding-machines   conld   be 

2  Union  Bank  v.  Emerson,  15  Mass.  removed  from  the  mill  without  injury  to 
l.'jg.  See,  also,  Southbridge  Sav.  Bank  it,  and  might  be  used  in  any  other  build- 
V.  Stevens  Tool  Co.  130  Mass.  547 ;  Ham-  ing  erected  for  a  similar  purpose,  was 
ilton  V.  Huntley,  78  Ind.  521 ;  S.C.  41  Am.  a  reason  for  considering  them  personal 
Rep.  593.  In  Hunt  v.  Mullanphy,  1  Mo.  property,  and  not  covered  by  a  mortgage 
508,  a  kettle  annexed  in  a  like  manner  of  the  realty.  A  like  view  was  taken  in 
to  the  freehold  was  held  not  to  be  covered  EuUam  v.  Stearns,  30  Vt.  443,  in  respect 
by  the  mortgage,  on  the  ground  that  it  to  a  planing-machine,  a  circular  saw  and 
was  not  permanently  annexed.  frame,  and  a  boring-machine. 

^  Lathrop  v.  Blake,  3  Fost.  (N.  H.)  46;  See,  on  meaning  of  "appurtenances" 
Burnside  v.  Twitchell,  43  N.  H.  390.  In  in  a  chattel  mortgage  of  a  building,  Frey 
Gale  V.  Ward,  14  Mass.  352,  356,  the  fact     v.  Drahos,  6  Neb.  1. 

'       344 


RULES   FOR   DETERMINING.  [§  435. 

the  mortgagee  to  the  mortgagor.  Thus  the  owner  of  a  twine 
factor}',  the  hind  upon  which  it  was  situated,  and  the  machinery 
in  the  mill,  contracted  to  sell  the  whole  for  a  gross  sum,  and  exe- 
cuted a  conveyance  describing  the  land  only,  and  took  back  a 
mortgage  with  the  same  description.  This  was  held  to  cover  the 
machinery  of  the  mill,  on  the  ground  that  the  parties  manifestly 
intended  the  mortgage  to  cover  the  same  property  that  passed  by 
the  deed.i 

But  where,  upon  the  sale  of  a  brewery,  a  deed  was  given  of  the 
real  estate  and  a  separate  bill  of  sale  of  the  fixtures,  and  the  ven- 
dor took  a  mortgage  for  a  part  of  the  purchase  money,  contain- 
ing a  description  of  the  land  alone,  and  the  purchaser  afterwards 
gave  a  mortgage  of  the  fixtures  mentioned  in  the  bill  of  sale,  it 
was  held  that  the  fixtures  were  not  included  in  the  mortgage  of 
the  land.2  But  if  it  appears  that  a  manufacturing  establishment 
was  sold  as  a  whole  for  a  gross  sum,  the  mere  fact  that  a  bill  of 
sale  was  made  of  part  of  the  fixtures  does  not  change  their  char- 
acter ;  but  a  mortgage  of  the  land  and  improvements  for  the  pur- 
chase money  will  cover  whatever  was  a  fixture  to  the  realty.^ 

A  mortgage  of  a  mill  passes  the  stones,  tackling,  and  imple- 
ments necessary  for  working  it.*  A  mortgage  of  a  sugar-house 
carries  with  it  an  engine  and  machinery  attached  to  it.^  Ma- 
chinery set  in  bricks  and  run  by  steam  power,  for  the  purpose  of 
manufacturing  cotton-seed  oil,  constitutes  a  part  of  the  realty,  and 
part  of  the  security  nnder  a  mortgage  of  the  realty.^  A  cotton- 
gin  and  press  are  fixtures  and  a  part  of  the  freehold,  and  are  car- 
ried by  a  mortgage  of  it,  whether  erected  before  or  after  the 
mortgage."  Hop-poles  upon  a  farm  are  covered  by  a  mortgage  of 
the  land.^  Platform  scales  fastened  to  sills  laid  upon  a  brick 
wall  set  in  the  ground,  intended  for  permanent  use,  are  fixtures.^ 

Of  course,  whenever  it  appeal's  from  the  instrument  itself  that 
the  parties  did  not  intend  that  the  machinery  in  the  mill  should 

1  McRea  v.  Central  Nat.  Bank  of  Troy,  ^  The  lien  of  the  mortgagee  upon  them 
66  N.  Y.  489.  is    superior    to    tlie   title  acquired  by  one 

2  Fortman  i-.  Gocpper,  14  Oiiio  81.5.58;  who,  with  knowledge  of  such  mortgage, 
Zcller  f.  Adam,  .30  N.  J.  Eq.  421.  takes  a  chattel  mortgage  upon  the  poles 

'  Morri.s's  App.  88  Pa.  St.  308.  immediately  after  their  removal   from  the 

*  Place  V.  Fagg,  4  Man.  &  R.  277.  farm,  to  secure  an  antecedent  debt.     Sul- 

^  Citizens'  Bank  v.  Knajip,  22  La.  Ann.  livan  i;  Toole,  20  Hun  (N.  Y.),  203. 

117.  '■'Arnold   v.   Crowder,   81    111.    56;    25 

'■'  Theurer  v.  Nautre,  23  La.  Ann.  749.  Am.  Kep.  260  ;  Bliss  v.  Whitney,  9  Allen 

7  Bond  V.  Coke,  71  N.  C.  97;  Latham  (Mass.),  114. 

V.  Blakely,  70  N.  C.  308 ;  Fairis  v.  Walker, 

1  Bailey  (S.  C),  540.  345 


§  436.]  FIXTURES  : 

be  covered  by  the  mortgage,  it  will  not  constitute  a  part  of  the 
mortgagee's  security.^ 

436.  Fixtures  attached  to  the  realty  after  the  execution 
of  a  mortgage  of  it  become  a  part  of  the  mortgage  security,  if 
they  are  attached  for  the  permanent  improvement  of  the  estate 
and  not  for  a  temporary  purpose  ;  ^  or  if  they  are  such  as  are  re- 
garded as  permanent  in  their  nature  ;  ^  or  if  they  are  so  fastened 
or  attached  to  the  realty  that  the  removal  of  them  vrould  be  an 
injiuy  to  it.*  A  mortgagor  left  in  possession,  who  improves  the 
premises  by  the  ei'ection  of  new  works,  or  by  the  introduction  of 
new  machinery  intended  to  be  permanent,  is  not  at  liberty  to  im- 
pair the  iucreased  security  by  removing  them.^  The  question 
whether  fixtures  annexed  to  the  realty  after  a  mortgage  of  it  has 
already  been  executed  become  a  part  of  it,  and  thus  become  also 
subject  to  the  mortgage,  is  a  different  one  in  some  I'espects  from 
that  which  arises  when  the  same  fixtures  are  already  attached  to 
the  realt}'^  when  the  mortgage  is  made.  As  to  tliose  articles 
which  in  their  nature  ai-e  such  as  to  render  it  doubtful  whether 
they  should  be  properly  classed  as  fixtures  or  not,  the  tendency  of 
the  decisions  seems  to  be  to  require  stronger  evidence  of  intention 
that  things  annexed  to  the  realty  after  the  making  of  the  mort- 
gage are  actually  fixtures,  and  therefore  form  with  the  land  one 
security,  than  is  required  when  they  are  affixed  bef<n'e  the  making 
of  the  mortgage.^  The  reason  of  this  apparentl}'^  is,  that,  when 
the  personal  articles  are  already  attached  to  the  realty  when  the 
mortgage  is  taken,  it  is  more  likely  that  they  entered  into  the 
consideration  of  the  parties,  in  estimating  the  value  of  the  secu- 
rity, than  it  is  when  they  are  not  attached  to  the  realty  and  may 

1  Waterfalls.  Penistone,  6  Ell.  &  Bl.  ter  (Ky.),  7  S.  W.  Rep.  170;  Wight  v. 
876;  and   see  Begbie   v.  Fenwick,  L.  R.     Gray,  73  Me.  297. 

8  Ch.  App.  1075;  S.  C.  19  W.  R.  402;  In  a  few  cases  considerable  stress   has 

Brown  on  Fix.  3d  ed.  pp.  148,  149.  been  placed  upon  the   fact  that  the  per- 

2  Winslow  V.  Merchants'  Ins.  Co.  4  sonal  chattels  had  already  been  mortgaged 
Met.  (Mass.)  306;  Gardner  v.  Finley,  19  as  personal  before  they  were  attached  to 
Barb.  (N.  Y.)  317;  Roberts  v.  Dauphin  the  realty.  Eaves  ?;.  Estes,  10  Kans.  314  ; 
Deposit  Bank,  19  Pa.  St.  71 ;  Bond  v.  Tibbetts  v.  Moore,  23  Cal.  208 ;  Daven- 
Coke,  71    N.  C.  97:  Ex  parte  Belcher,  4  port  u.  Shants,  43  Vt.  546. 

Dea.  &  Chit.  703;  Hubbard  v.  Bagshaw,         ^  Cokman  v.   Stearns   Manuf.  Co.   38 
4  Sim.  326  ;  Ex  parte   Reynal,  2  Mont.,     Mich.  SO. 

Dea.  &  De  G.  443  ;  Wood  ;;.  Whelen,  93         *  Clore  v.  Lambert,  78  Ky.  224. 
111.  153  ;  Foote  v.  Gooch  (N.  C),  1  S.  E.         6  Foote  v.  Gooch,  supra. 
Eep.  525;  Bank  of  Louisville  u.  Baftmies-         ^  Tillman   v.  De   Lacy,  80  Ala.   103; 

Gardner  v.  Finley,  19  Barb.  (N.  Y.)  317. 

346 


RULES   FOR   DETERMINING.  [§  436. 

never  be.^  It  is  true  that  there  may  be,  in  the  taking  of  a  mort- 
gage before  the  fixtures  are  annexed,  an  expectation  of  an  in- 
creased vahie  to  arise  from  their  being  subsequently  attached  to 
the  realty,  as  when  a  building  has  been  erected  for  a  certain  pur- 
pose, and  it  is  contemplated  that  the  machinery  or  otlier  articles 
adapted  to  be  used  in  it  will  be  placed  in  it ;  but  it  is  evident  that 
less  reliance  would  be  placed  upon  this  expectation  than  upon  the 
actual  fact  of  the  existence  of  the  things  upon  the  mortgaged 
estate.  It  does  not  follow,  however,  from  the  fact  that  the  fix- 
tures constituted  no  part  of  the  mortgage  security  when  it  was 
taken,  that  they  may  therefore  be  removed  without  any  wrong  to 
the  mortgagee.  He  is  entitled  to  the  benefit  of  any  improvement 
of  the  property  from  whatever  cause  it  may  arise,  just  as  he  may 
suffer  from  a  depreciation  of  it  arising  from  accident  or  neglect, 
or  from  fluctuations  in  value  due  to  general  causes.^ 

The  track  of  a  railroad  laid  upon  mortgaged  lands  under  an 
arrangement  with  the  mortgagor,  without  condemnation  under 
the  right  of  eminent  domain,  is  subject  to  the  mortgage  lien,  and 
may  be  sold  with  the  land  under  foreclosure  proceedings.^ 

A  mortgage  by  a  gas  company  of  its  real  estate  with  all  the 
appurtenances  thereto,  its  gas-mains,  sewer-pipes,  and  meters, 
covers  an  enlargement  of  its  works,  and  an  extension  of  its  mains 
and  pipes.*  A  mortgage  by  such  company  of  its  office  furniture 
and  fixtures  covers  additions  made  thereto  from  time  to  time  as 
the  necessities  of  the  works  required.^ 

Machinery  or  other  property,  when  affixed  to  the  realt}',  does 
not  become  subject  to  an  existing  mortgage  of  the  realty  unless  it 
is  affixed  by  the  owner  of  the  chattel  or  with  his  assent.  Thus, 
if  machinery  belonging  to  a  third  person  be  put  into  a  mill  upon 
a  written  agreement  that  it  is  to  remain  subject  to  the  order  of 
such  third  person  until  it  be  paid  for  in  full,  the  act  of  the  mill- 
owner  in  affixing  the  machinery  to  the  mill  is  not  sufficient  to 
subject  it  to  the  operation  of  an  existing  mortgage.  The  owner 
of  tiie  machinery  is  not  put  upon  inquiry  as  to  the  state  of  the 
title  to  the  mill  so  as  to  be  charged  with  constructive  notice  of 

1  Clorc  V.   Lambert,    78  Ky.    224,   ap-     J.  Eq.  31  ;  Hunt  v.  Bay  State  Iron  Co.  97 
proviiif,' t<!xt.  Mass.  279;  Mcriain  v.  Brown,  128  Mass. 

2  S<-e  liobcrtsu.  Dauphin  Deposit  Bank,     391. 

19  Pa.  St  71.  *  Wood  v.  Wlulcii,  9.'i  111.  153. 

'  Price  V.  Weehawkcn  Ferry  Co.  31  N.         ^  Wood  v.  WlicUsn,  siijira. 


§§437,438.]  fixtures: 

the  mortgage,  and  he  does  not  assent  to  the  affixing  of  the  ma- 
chinery to  the  realty  absolutely,  but  only  in  a  qualified  way.^ 

But,  on  the  other  hand,  it  is  held  that  an  agreement  between 
the  seller  and  buyer  of  a  boiler,  placed  in  a  machine-shop,  and  so 
annexed  to  the  realty  as  to  become  a  part  of  it,  that  the  boiler 
should  remain  the  personal  property  of  the  seller  until  paid  for, 
does  not  bind  a  subsequent  mortgagee  without  notice.^ 

437.  An  equitable  mortgagee  has  the  same  right  to  hold 
fixtures  as  part  of  his  security  that  a  legal  mortgagee  has.^  A 
woollen  manufacturer  mortgaged,  by  deposit  of  the  title-deeds,  a 
piece  of  land,  with  a  building  upon  it,  and  then  built  a  mill  upon 
the  land  and  fitted  it  with  a  steam-engine  and  machinery  neces- 
sary for  his  ti'ade.  Subsequently  he  assigned  to  another  all  the 
machinery  and  fixtures  in  the  mill,  and  after  this  executed  to  the 
equitable  mortgagee  a  legal  mortgage  of  the  estate.  The  Court 
of  Queen's  Bench  held  that  all  the  machines  which  were  fixed  in 
a  quasi  permanent  manner  to  the  floor,  roof,  or  side-walls,  passed 
to  the  equitable  mortgagee,  but  that  those  which  were  merely 
removable  articles  passed  to  the  assignee  under  the  bill  of  sale.^ 

438.  If  the  mortgagee  assent  to  an  arrangement  between 
the  mortgagor  and  a  mechanic,  whereby  the  latter  builds  and 
sets  up  a  machine  upon  the  mortgaged  premises,  under  a  contract 
that  the  machine  shall  remain  his  property  until  paid  foi*,  or  if 
the  mortgagee,  being  in  possession,  treats  it  as  personal  property, 
and  consents  to  its  removal,  a  subsequent  assignee  of  the  mort- 
gage cannot  insist  that  under  it  he  became  the  owner  of  the  ma- 
chine, as  property  annexed  to  the  realty  by  the  mortgagor.  Such 
an  agreement  supersedes  the  general  law  as  to  fixtures  between 
the  mortgagor  and  mortgagee.^  And  such  is  the  case,  also,  where 
a  person  sets  up  a  steam-engine  and  boiler  upon  land  owned  by 
another,  under  an  agreement  that  he  may  remove  them  at  any 
time,  and  afterwards  takes  a  mortgage  of  the  land  from  the  owner 
of  it.  The  engine  and  boiler  never  become  the  property  of  the 
mortgagor,  or  fixtures  to  the  land,  and  therefore  are  not  included 
in  the  mortgage.*^ 

1  Cochran  v.  Flint,  57  N.  H.  514.  *  Longbottom  v.  Berry,  L.  R.  5  Q.  B. 

•■^  Southbridge  Savings  Bank  v.  Exeter  123;  >?.  G.  39  L.J.  (N.  S.)  Q.  B.  87.    See, 

Machine  Works,  127  Mass.  542 ;    South-  also,  Tebb  v.  Hodge,  39  L.  J.  (N.  S.)  C. 

bridge  Sav.  Bank  v.  Stevens  Tool  Co.  130  P.  56. 

Mass.  547.  5  Bartholomew  i;.  Hamilton,  105  Mass. 

3  Williams  v.  Evans,  23  Beav.  239  ;  Ex  239  ;  Frederick  v.  Devol,  15  Ind.  357 ;  and 

parte  Astbury,  L.  K.  4  Ch.  App.  630,  see  Wight  v.  Gray,  73  Me.  297. 

348  ^  Taft  V.  Stetson,  117  Mass.  471. 


RULES    FOR   DETERMINING.  [§  489. 

A  mortgagee  waives  his  claim  that  certain  machinery  and  tools 
in  a  mill  are  covered  by  his  mortgage  by  requesting  the  mort- 
gagor, after  he  had  removed  such  machiner}'^  and  tools,  to  repay 
to  him  the  amount  he  had  paid  vipon  them  as  taxes,  and  by  ac- 
cepting and  retaining  the  money  so  demanded,  with  full  knowl- 
edge of  the  facts  and  situation  of  the  property .^ 

439.  If  fixtures  be  added  to  the  property  by  a  tenant  at 
will  of  the  mortgagor  after  the  mortgage,  the  right  to  remove 
them  is  determined  by  the  rule  which  prevails  as  between  mort- 
gagor and  mortgagee,  and  not  that  which  prevails  as  between 
landlord  and  tenant ;  and  they  cannot  be  removed  without  the 
consent  of  the  mortgagee.^  It  does  not  avail  the  tenant  that  he 
annexed  the  fixtures  under  a  special  contract  with  the  mortgagor,^"* 
or  that  the  holder  of  the  mortgage,  who  seeks  to  enforce  his  claim 
to  the  fixtures,  took  the  assignment  of  the  mortgage  with  notice 
of  the  tenant's  claim.*  Where,  during  the  pendency  of  a  suit  to 
foreclose  a  mortgage,  a  stranger,  by  permission  of  the  mortgagor, 
erected  a  barn  on  the  mortgaged  premises,  it  was  held  that  as 
against  the  mortgagee  he  had  no  right  to  remove  it.^ 

A  lessee  who  has  erected  a  building  upon  mortgaged  land, 
under  an  arrangement  with  the  mortgagor  by  leasing  the  build- 
ing of  the  mortgagee  after  the  latter  has  purchased  the  mortgaged 
premises  upon  foreclosure  sale,  is  estopped  from  setting  up  title 
thereto  in  himself.^ 

When  permanent  structures  are  erected  by  a  lessee  upon  the 

1  Foster  v.  Prentiss,  75  Me.  279.  to  accept  the  machinery  and  give  his  notes 

2  Lynde  v.  Rowe,  12  Allen  (Mass.),  100 ;  as  agreed,  and  he  subsequently  quit  posses- 
Clary  V.  Owen,  15  Gray  (Mass.),  522;  sion  of  the  mill,  leaving  the  machinery  in 
Hunt  V.  Bay  State  Iron  Co.  97  Mass.  279 ;  it,  and  another  tenant  took  possession  of 
Day  V.  Perkins,  2  Sandf.  (N.  Y.)  Ch.  359.  it.    It  was  held  that,  as  between  the  makers 

3  Clary  v.  Owen,  supra.  of  the  machinery  and  the  mortgagee,  the 
The  mortgage  will  even  attach  to  ma-     machinery  was  part  of  the  realty.     See, 

chinery  put  into  a  mill  by  the  maker  for  Bass  Foundry  v.  Gallentine,  99  Ind.  525. 
trial,  and  to  he  purchased  upon  its  prov-  There  is  a  tendency  in  some  cases  to 
ing  satisfactory.  Hamilton  v.  Huntley,  68  hold   that  where  the  fixtures  are  erected 
Ind.  521  ;  S.  C.  41  Am.  Hep.  593.     In  this  by  a  tcnaut  of  the  mortgagor,  under  an 
case  the  person  who  ordered  the  machiu-  agreement   that   they    sliall    remain    the 
ery  was  nottlic  owuer  but  a  tenant  of  tlie  property  of  the  tenant,  the  mortgagee  can- 
mill.     The  machinery  was  attached  to  the  not   interpose,    before    taking    jjossession 
mill  only  in  a  temporary  manner,  so  that  of  the  premises,  to  prevent  the  carrying 
it  could  be  removed  without  injury  to  the  out  of  such  agreement.     Tifft  v.  Ilorton, 
mill.     It  was  to  become  the  property  of  53  N.  Y.  377,  380. 
the  tenant  of  the  mill  upon  his  giving  his  *  Clary  v.  Owen,  supra. 
notes  for  the  price  of  the  machinery  after  ''  Preston  v.  Briggs,  IG  Vt.  124. 
sixty  days'  trial  of  it.    The  tenant  refused  "  Betts  v.  Wurth,  32  N.  J.  Kq.  82. 

349 


§  440.]  FIXTURES  : 

mortgaged  estate,  the  mortgagee's  consent  is  necessary  for  their 
removal ;  but  if  they  are  erected  for  a  temporary  purpose,  and 
with  the  intention  of  removing  them,  the  lessee  may  remove  them 
at  any  time  during  his  term.^ 

A  tenant's  fixtures  are  not  brought  within  a  subsequent  mort- 
gage of  the  premises  by  his  neglect  to  remove  them  on  a  renewal 
of  his  lease  by  a  new  landlord.^  Where  one  who  has  leased  land 
to  a  firm  buys  out  the  right  of  one  of  the  partners  and  afterwards 
gives  a  mortgage  on  the  premises,  the  possession  of  the  new  firm 
is  notice  to  the  mortgagee  that  erections  put  up  by  the  former 
firm  are  not  covered  by  the  mortgage  because  the  other  partners' 
rights  cannot  be  taken  away.^ 

If  a  lessee  subsequently  purchases  the  reversion  of  the  premises, 
machinery  and  other  fixtures  set  up  by  him  become  subject  to  an 
existing  mortgage  of  the  realt5\* 

If  a  lessee  mortgages  his  leasehold  estate,  the  same  rules  in  re- 
lation to  fixtures  upon  the  estate  appl}^  as  between  him  and  his 
mortgagee  that  would  apply  if  he  owned  the  estate  in  fee.^ 

Trade  fixtures  set  up  by  a  partnership  upon  land  owned  by  the 
individual  partners,  which  the  partnership  has  no  interest  in  be- 
yond the  use,  do  not  become  part  of  the  realty,  and  may  be  re- 
moved by  the  partnership  when  its  occupation  of  the  premises 
ceases.^ 

440.  If  a  lessee  mortgages  tenant's  fixtures,  and  afterwards 
surrenders  his  lease,  the  mortgagee  has  a  right  to  enter  and 
sever  them.  The  surrender  of  the  term  does  not  operate  to  ex- 
tinguish the  right  or  interest  already  granted,  but  is  subject  to 
that  interest,  for  the  support  of  which  the  original  term  still  con- 
tinues. The  mortgagee's  right  to  sever  the  fixtures  from  the  free- 
hold is  an  interest  of  a  peculiar  nature,  in  many  respects  rather 
partaking  of  the  character  of  a  chattel  than  of  an  interest  in  real 
estate.  "But  we  think,"  said  Mr.  Justice  Williams,  in  a  (3ase 
before  the  English  Court  of  Common  Pleas,^  "  that  it  is  so  far 
connected  with  the  land  that  it  may  be  considered  a  right  or  in- 
terest in  it,  which,  if  the   tenant  grants  away,  he  shall  not  be 

1  Kelly  w.  Austin,  46  111.  156;   Early  v.  591;  Ex  parte   Wilson,   4  Dea.   &  Chit- 

Burtis,  40  N.  J.  Eq.  501.  143;  S.  C.  2  Mont.  &  Ayr.  61 ;  Shuart  v. 

^Kerr  v.  King.sbury,  39  Mich.  150.  Taylor,  7  How.  (N.  Y.)  Pr.  251. 

3  Ktrr  V.  Kingsbury,  su/jra.  ^  Robertson  v.  Corsett,  39  Mich.  777. 

*  Jones  V.  Detroit  Chair  Co.  38  Mich.  ''  London   &    Wotmiuster    Loan    and 

92.  Discount  Co.   v.  Drake,  6  C.  B.  N.  S. 

5  Ex  parte  Bentley,   2  M.,  D.  &  De  G.  798. 
350 


RULES   FOR   DETERMINING.  [§  441. 

allowed  to  defeat  liis  grant  by  a  subsequent  voluntary  act  of  sur- 
render." 

441.  It  is  a  settled  rule  of  law  that  fixtures  annexed  to  the 
freehold  by  a  tenant  for  the  purposes  of  trade  or  manufacture 
may  be  removed  by  him  at  the  expiration  of  his  term,  whenever 
the  removal  of  them  is  not  contrary  to  any  prevailing  practice, 
and  the  articles  can  be  removed  without  causing  material  injury 
to  the  freehold.^  The  purpose  of  this  rule  is  to  encourage  the 
putting  up  of  works  beneficial  to  the  public  by  persons  whose 
tenure  of  the  property  is  so  short  or  so  uncertain  that  they  would 
not  make  the  improvements  or  put  in  the  machinery  necessary 
for  the  profitable  pursuit  of  their  business,  unless  they  had  the 
right  of  removing  these  things  at  the  termination  of  their  tenancy. 
The  reason  of  this  rule  does  not  apply  when  the  fixtures  are  an- 
nexed by  one  who  has,  instead  of  the  limited  interest  of  a  tenant, 
an  unlimited  ownership  in  fee ;  or  an  ownership  which  is  qualified 
only  by  the  condition  of  a  mortgage  upon  the  land  which  it  is  pre- 
sumed he  intends  to  fulfil,  and  which  at  any  rate  he  would  be 
estopped  to  say  he  did  not  intend  to  meet,  and  thus  to  keep  the 
ownership  of  the  land.  Even  after  a  forfeiture  of  the  condition, 
he  is  allowed  a  considerable  time  within  which  to  redeem,  or  else 
obtain  the  full  value  of  the  land  and  of  all  the  personal  articles  he 
has  affixed  to  it  by  a  sale  of  the  whole  interest  upon  foreclosure. 
In  a  recent  case  before  the  Court  of  Exchequer,^  the  question  of 
the  application  of   this  rule  to  the  removal  of  a  steam-engine  and 

1  Tyler  on  Fixtures,  p.  267  ;  Trappes  fixture  be  annexed  to  land  at  the  time  of 

V.  Harter,  3  T}  rw.  603  ;  Coombs  v.  Beau-  the  mortgage,  or  if  the  mortgngor  in  pos- 

mont,  5  B.  &  Ad.  72;  Holbrook  v.  Cham-  session  afterward  annexed  a  fixture  to  it, 

berliii,  116  Slass.  155;  Guthrie  v.  Jones,  that  the  fixture  shall  be  deemed  an  addi- 

108  Mass.  191 ;  McConnell  v.  Blood,  123  tional  security  for  the  debt,  whether  it  be 

Mass.  47.  a  trade  fixture  or  a  fixture  of  any  other 

-  Climie  v.  Wood,  L.  R.  3  Exch.  257.  kind.  It  has  already  been  observed  that 
Kelly,  C.  B.,  delivering  the  judgment  of  no  authority  has  been  cited  to  show  that 
the  court,  said  :  "It  is  a  case  between  trade  fixtures  may  be  removed  by  the 
mortgagor  and  mortgagee,  and  no  author-  mortgagor,  but  there  are  several  to  the 
ity  has  been  cited  to  show  that  a  niort-  contrary  ;  and  unless  we  are  preiiaicd  to 
gagor  is  entitled  to  remove  such  trade  overrule  them,  our  judgment  must  be  ad- 
fixtures.  There  have  been  several  cases  verse  to  the  plaintiff'." 
where  the  courts  have  decided  that,  upon  To  like  effect  see  Culhvick  v.  Swindell, 
the  true  construction  of  the  mortgage  L.  R.  3  ICq.  Cas.  249,  jjcr  hord  Komilly  ; 
deedB,  trade  fixtures  were  removable  by  .£Jx /;arte  Cotton,  2  Mont.,  1).  &l)e(i.725; 
the  mortgagor,  but  not  one  to  show  that  Ilawtry  v.  Butlin,  L.  R.  8  Q.  B.  290;  «S\  C. 
such  right  exists  without  a  special  pro-  21  W.  R.  633;  Day  v.  IVrkius,  2  ISaudf. 
vision.  A  mortgage  is  a  security  or  pledge  (N.  Y.)  Ch.  359;  Maples  c.  Millon,  31 
for  a  debt,  and  it  is  not  unreasonable,  if  a  Conn.  598. 

351 


§  441.]  FIXTURES  : 

boiler  used  in  a  saw-mill  upon  the  mortgaged  premises  before  the 
execution  of  the  mortgage,  was  full}"  discussed.  It  was  found  by 
the  jury  that  these  things  were  put  up  by  the  mortgagor,  not  to 
improve  the  inheritance,  but  for  the  better  use  of  the  property, 
and  that  they  could  be  removed  without  any  appreciable  damage 
to  the  freehold ;  but  the  court  held  that  these  findings  were  im- 
material, because  the  right  of  the  mortgagee  attached  by  reason 
of  the  annexation  to  the  land,  and  therefore  that  the  intention  of 
the  mortgagor  in  respect  of  them  could  not  prevail  against  the 
legal  effect  of  the  deed. 

This  case  was  carried  by  appeal  to  the  Exchequer  Chamber,^ 
where  the  judgment  of  the  court  below  and  the  law  there  de- 
clared were  affirmed.  Mr.  Justice  Willes,  speaking  of  the  reason 
why  the  engine  and  boiler,  though  they  might  have  been  re- 
moved by  a  tenant  at  the  expiration  of  his  terra,  yet  could  not 
be  removed  by  a  mortgagor,  said :  "  And  we  are  of  opinion  that 
the  decisions  which  establish  a  tenant's  right  to  remove  trade  fix- 
tures do  not  apply  as  between  mortgagor  and  mortgagee  any  more 
than  between  heir  at  law  and  executor.  The  irrelevancy  of  these 
decisions  to  cases  where  the  conflicting  parties  are  mortgagor  and 
mortgagee  was  pointed  out  in  Walmsley  v.  3Iilne?  and  we  concur 
with  the  observations  made  in  that  case  by  the  Court  of  Common 
Pleas."  As  illustrating  this  distinction  and  the  reason  of  it,  the 
learned  judge  quotes  the  language  of  Lord  Cottenham,  in  a  case 
before  the  House  of  Lords,  where  it  was  sought  to  extend  the 
rule  in  regard  to  trade  fixtures  to  a  case  arising  between  an  heir 
at  law  and  executor. ^ 

1  Climie  v.  IVood,  L.  E.  4  Exch.  328.  supposed    to  be  beneficial  to  the  public, 

2  7  C.  B.  N.  S.  115.  that  any  rule  of  that  kind  should  be  es- 

3  Fisher  v.  Dixon,  12  CI.  &  F.  312.  tablished,  because  he  was  master  of  his 
"  The  principle  upon  which  a  departure  own  land.  It  was  quite  unnecessary, 
has  been  made  from  the  old  rule  of  law  therefore,  to  seek  to  establish  any  such 
in  favor  of  trade  appears  to  me  to  have  no  rule  in  favor  of  trade  as  applicable  here, 
application  to  the  present  case.  The  in-  the  whole  being  entirely  under  the  con- 
dividual  who  erected  the  machinery  was  trol  of  the  person  who  erected  this  ma- 
the  owner  of  the  land,  and  of  the  personal  chinery."  To  like  effect  Chief  Justice 
property  which  he  erected  and  employed  Shaw,  in  a  case  before  the  Supreme  Court 
in  carrying  on  the  works ;  he  might  have  of  Massachusetts,  Winslow  v.  Merchants' 
done  what  he  liked  with  it ;  he  might  Insurance  Co.  4  Met.  (Mass.)  306,  said  : 
have  disposed  of  the  land  ;  he  might  have  "  The  mortgagor,  to  most  purposes,  is 
disposed  of  the  machinery  ;  he  might  have  regarded  as  the  owner  of  the  estate  ;  in- 
separated  them  again.  It  was  therefore  deed,  he  is  so  regarded  to  all  purposes, 
not  at  all  necessary,  in  order  to  encourage  except  so  far  as  it  is  necessary  to  recog- 
him  to  ercet  those  new  works  which  are  nize   the  mortgagee  as  legal  owner  for 

352 


RULES   FOR   DETERMINING.  [§  442. 

If  the  premises  are  mortgaged  by  the  lessor  during  the  exist- 
ence of  a  tenancy,  the  mortgagee,  or  any  one  denying  title  to 
the  premises  under  the  mortgage,  occupies  the  position  of  the 
lessor  towards  the  lessee  ;  and  the  latter  may  remove  in  that  case 
fixtures  erected  by  him  whenever  he  could  do  so  as  against  his 
lessor.^ 

442.  In  Vermont  the  rule  as  to  fixtures  seems  to  be  excep- 
tionally strict  in  requiring  that  they  shall  in  all  cases  be  substan- 
tially attached  to  the  freehold,  and  in  holding  that  it  is  not  sufl&- 
cient  to  make  personal  chattels  a  part  of  the  freehold  that  they 
are  attached  to  the  building  in  which  they  are  used  in  a  manner 
adapted  to  keep  them  steady,  or  that  they  are  essential  to  the 
occupation  of  the  building  for  the  business  carried  on  in  it.  "  The 
rule  requiring  actual  annexation,"  says  Mr.  Justice  Bennett,^  "  is 
not  atiected  by  those  cases  where  a  constructive  annexation  has 
been  held  sufficient.  These  cases  may  be  regarded  as  exceptions 
to  the  general  rule,  or  else  as  cases  where  the  things  were  mere 
incidents  to  the  freehold,  and  became  a  part  of  it,  and  passed  with 
it,  upon  a  principle  different  from  that  of  its  being  a  fixture."  It 
was  moreover  said  that  reference  must  be  had  not  only  to  the 
annexation,  but  also  to  the  object  and  purpose  of  it ;  and  that  to 
change  the  nature  and  legal  qualities  of  a  chattel  into  a  fixture 
requires  not  only  a  positive  act  on  the  part  of  the  person  making 
the  annexation,  but  also  that  his  intention  to  make  this  change 
should  particularly  appear ;  and  that  if  this  intention  be  left  in 
doubt,  the  article  should  still  be  regarded  as  personal  property. 
It  was  accordingly  held  in  this  case  that  in  a  mortgage  of  a  mill 
for  manufacturing  paper,  the  iron  shafting  used  to  communicate 
the  motive  power  to  the  machinery,  and  fastened  to  the  building 
by  means  of  bolts,  should  be  regarded  as  a  constituent  part  of  the 
mill,  and  therefore  as  included  in  a  mortgage  of  that ;  but  that  a 
large  iron  boiler  supported  by  brick-work,  laid  on  a  stone  founda- 
tion placed  on  the  ground  near  the  centre  of  the  building,  and 
also  the  machines  for  grinding  rags  into  pulp,  the  paper-presses, 
and  other  machinery,  were  no  part  of  the  real  estate,  as  between 
the  mortgagor  and  mortgagee. 

the  purposes  of  his  security.  The  improve-  value  of  the  estate,  and  not  for  its  tcmpo- 

inems,  therefore,  which  the  mortgaf^or,  re-  rary  enjoyment." 

maining  in  the  possession  and  enjoyment  i  Glohc  Marble  Mills  Co.  v.  Quinn,  76 

of  the  mortgaged  premi.se«,  makes  upon  N.  Y.  23. 

them,  in  contemplation  of  law  he  makes  "  Hill  v.  Wentworth,  28  Vt.  429. 

for  himself,  and  to  enhance   the  general 

VOL.  I.           23  353 


§§  443,  444.]  FIXTURES. 

This  decision  was  followed  by  another  to  like  effect  in  the 
same  court,  holding  that  while  the  steam-engine  and  boilers  used 
in  a  marble  mill  were  fixtures  as  between  mortgagor  and  mort- 
gagee, yet  the  saw-frames,  though  fastened  to  the  building  by 
bolts,  were  not  such  fixtures.  The  manner  in  which  they  were 
attached  to  the  building  was  not  considered  to  be  such  as  to 
operate  to  change  their  character  as  chattels.^ 

443.  Statutory  provisions.  —  In  Vermont  it  is  provided  by 
statute  that  machinery  attached  to  or  used  in  any  shop,  mill, 
printing-ofiice,  or  factory  may  be  mortgaged  by  deed,  executed, 
acknowledged,  and  recorded  as  deeds  of  real  estate.  Such  mort- 
gages may  be  assigned,  discharged,  or  foreclosed  like  mortgages  of 
real  estate.^ 

In  Connecticut,  it  is  provided  that  the  fixtures  of  a  manufac- 
turing or  mechanical  establishment,  or  of  a  printing  or  publishing 
house,  the  furniture  of  a  dwelling-house,  and  the  hay  in  a  barn, 
may  be  mortgaged  with  the  realty  when  the  mortgage  contains  a 
particular  description  of  the  machinery,  furniture,  or  other  prop- 
erty, to  the  same  effect  as  if  the  same  were  a  part  of  the  real 
estate.  The  same  may  be  mortgaged  separate  from  the  realty,  if 
par^icularl)^  described,  and  the  deed  be  executed,  acknowledged, 
and  recorded  in  all  respects  as  a  mortgage  of  land.^ 

II.  Machinery  in  Mills. 

444.  Intention.  —  A  distinction  is  properly  made  between 
such  fixtures  in  a  mill  as  are  indispensable  to  its  use  as  a  mill, 
and  the  movable  machines  used  in  it,  which  may  be  dispensed 
with  upon  a  change  in  business  to  which  the  mill  may  be  readily 
adapted.*  Of  the  former  class  are  such  as  are  used  for  furnish- 
ing the  motive  power ;  and  if  the  mill  is  adapted  to  one  business 
only,  the  machinery  necessary  for  that  business  may  be  included 
in  the  same  class.^     Of  the  latter  class  are  movable  machines  used 

1  Sweetzer  v.  Jones,  35  Vt.  317;  and  v.  Ficklin,  32  Gratt.  (Va.)  727;  Morris's 
see  FuUam  v.  Stearns,  30  Vt.  443;  Bart-  App.  88  Pa.  St.  368  ;  Price  v.  Jenks,  14 
lett  V.  Wood,  32  Vt.  372.  Phila.  228 ;  Tillman  v.  De  Lacj,  80  Ala. 

2  R.  S.  1880,  §  1980.  103. 

3  G.  S.  1888,  §  3016.  5  Delaware,  L.  &  W.  R.  R.  Co.  v.  Ox- 
*  Farrar  v.  Chauffetete,  5  Den.  (N.  Y.)     ford  Iron   Co.  36  N.  J.  Eq.  452 ;  Teaif  v. 

527;  McConnellz;.  Blood,  123  Mass.  47';  Hewitt,  1  Ohio  St.  511;  Potts  v.  N.  J. 
Smith  Paper  Co.  v.  Servin,  130  Mass.  Arms  Co.  17  N.  J.Eq.  395  ;  Bigler  r.  Nat. 
511;  Keeler  v.  Keeler,31  N.  J.  Eq.  181  ;  Bank,  26  Hun  (N.  Y.),  520;  Case  Man- 
Ferris  V.  Quimby,  41  Mich.  202  ;  Shelton  ufacturing  Co.  v.  Garver  (Ohio),  13  N.  E. 
354  Rep.  493. 


MACHINERY    IN   MILLS.  [§  444. 

in  a  mill  adapted  to  various  kinds  of  business,  which  may  be 
wholly  set  aside,  and  still  the  value  and  usefulness  of  the  mill 
property  would  not  be  materially  impaired.  Such  machinery, 
not  being  indispensable  to  the  enjoyment  of  tlie  realty,  is  gen- 
erally considered  not  to  be  a  part  of  it,  and  not  to  pass  by  a  mort- 
gage of  it.i 

A  mortgage  was  made  of  certain  land,  and  tlie  mills  thereon.^ 
In  the  mills  were  various  articles  of  machinery  for  carding,  spin- 
ning, and  preparing  cotton  yarn  and  cotton  twine.  These  were 
subsequently  seized  upon  an  execution  against  the  mortgagor, 
and  were  claimed  as  well  by  the  mortgagee.  It  appeared  that 
the  machines  might  be  easily  removed  without  injury  to  them  or 
to  the  building,  and  might  be  used  for  the  same  purpose  in  any 
other  building.3  'Pl^e  court  held  that  they  were  not  properly 
fixtures,  and  therefore  not  subject  to  the  mortgage.  Under  quite 
similar  circumstances  a  mortgage  of  a  woollen  factory  was  held 
not  to  pass  the  looms  used  in  it  for  the  manufacture  of  broad- 
cloth, and  merely  fastened  to  the  floor  by  screws  to  keep  them  in 
their  places.*  In  these  cases  the  intention  was  held  to  govern 
the  character  of  the  articles  under  consideration.  It  is  to  be  ob- 
served, however,  that  other  courts  have  decided  cases  quite  sim- 
ilar, if  not  altogether  like  these  cited  from  the  New  York  reports, 
directly  contrary  to  the  decisions  in  these  ;^  and  it  is  to  be  further 

1  Eogers  v.  Brokaw,  25  N.J.  Eq.  496;  2  Vanderpoel  v.  Van  Allen,  10  Barb. 

Robertson     v.    Corsett,    39    Mich.    777 ;  (N.  Y.)  157.     See,  also,  Cresson  v.  Stout, 

Scheifele   v.   Schmitz,  42  N.  J.  Eq.  700;  17  Johns.   (N.  Y.)   116;  Potter  v.  Crom- 

Penn.  Mut.  Ins.  Co.  v.  Semple,  38  N.  J.  well,  40  N.  Y.  287. 

Eq.  575  ;  Wolford  v.  Baxter,  33  Jlinn.  12  ;  ^  The  highest  authorities  agree  in  hold- 

.y.  C.  53  Am.  Rep.  1 ;  Maguire  v.   Park,  ing  that  these  facts  alone  should  have  lit- 

140  Mass.  21  ;  Carpenter   v.  Walker,  140  tie  weight  in  deciding  the  question.    See 

Mass.  416  ;  Southbridge  Sav.  Bank  v.  Ex-  cases  cited  in  this  section,  and  ^Yalnlsley 

eter  Machine  Works,  127   Mass.  542  ;  25  v.  Milne,  7  C.  B.  N.  S.  115,  118. 

Am.  Rep.  47  ;  Ilubbell  v.  Savings  Bank,  *  Murdock  v.  Gifford,  18  N.  Y.  28.     In 

132  Mass.  447;  S.  C.  42  Am.  Rep.  440 ;  the  Supreme  Court  it  was  held  that  the 

Winslow  y.   Merchants'   lus.  Co.  4   Met.  mortgage  carried  the  looms,  on  the  ground 

(Mass.)    306;    McConneil   v.   Blood,  123  that  they  were  intended  to  be  a  perma- 

Mass.   47  ;  Gale  v.  Ward,  14   Mass.  352.  nent  and  essentia!  part  of  the  woollen  fac- 

In  the  latter  case,  Mr.  Chief  Justice  Par-  tory.     Murdock  v.  Harris,  20  Barb.  (N. 

ker  said  the  articles  in  controversy  "  must  Y.)    407.      See    McRea   v.   Central   Nat. 

l>e  considered   as  personal   property,  be-  Bank  of  Troy,  66  N.  Y.  489,  for  a  review 

cause,  although  in  some  sense  attached  to  of  the  cases  in  New  York, 

the  freehold,  yet  they  could  be  easily  dis-  ^  Qttumwa  Woollen  Mill  Co.  v.  Ilaw- 

connected,  and  were  capable  of  being  used  ley,  44  Iowa,  57. 
in  any  other  building  erected  for  similar 
purposes." 

355 


§  444.]  FIXTURES. 

observed  that  the  policy  of  the  decisions  in  New  York,  Vermont, 
and  Ohio  seems  to  be  to  favor  treating  machinery  and  like  arti- 
cles fixed  to  the  realty  as  chattels.^  Other  courts,  for  good  rea- 
sons, hold  such  machinery  to  be  fixtures,  and  to  be  covered  by  a 
mortgage  of  the  realty  without  particular  mention.  Thus  in  a 
case  recently  decided  in  lowa,^  the  mortgage,  after  describing  the 
land,  upon  vrhich  was  situated  a  woollen  manufactory  filled  with  . 
machinery  for  making  cloth  from  wool,  granted  "  all  and  singular 
the  tenements,  hereditaments,  and  appurtenances  thereto  belong- 
ing or  in  anywise  appertaining."  Other  mortgages  were  subse- 
quently made  which  in  terms  covered  the  machinery,  and  upon  a 
foreclosure  of  the  former  mortgage  a  contention  arose  in  regard  to 
the  machinery  of  the  mill.  The  court,  after  critically  reviewing 
the  cases,  say :  "  It  being  conceded  by  all  the  cases  that  the  en- 
gine, boiler,  and  attachments,  being  the  motive  power,  are  fix- 
tures, and  that  the  stones  or  burrs  of  a  grist-mill,  with  the  attach- 
ments, are  likewise  fixtures,  it  is  not  easy  to  understand  why  any 
dividing  line  should  be  made  at  the  point  where  the  belting  at- 
taches to  the  other  machinery.  Is  there  anything  in  the  whole 
record  of  this  case  tending  to  show  that  the  machinery  in  question 
was  intended  to  be  any  less  permanent  than  the  engine,  shafting, 
or  belt  ?  The  fair  presumption  is,  that  the  whole  machinery,  in- 
cluding that  now  in  question,  was  placed  in  the  building  with  the 
intention  that  it  should  remain  there  as  part  of  the  machinery 
until  worn  out  or  displaced  by  other.  This  assumption  is  as 
strong  and  controlling  as  to  the  carding-raachines,  spinning-jacks, 
et  cetera^  as  it  is  as  to  the  engine,  shafting,  and  belts."  Therefore 
the  court  conclude  that  all  of  the  machinery  which  was  propelled 
by  the  engine  was  part  of  the  real  estate,  and  passed  by  the  fore- 
closure sale.^ 

There  is  no  certain  criterion  by  which  to  determine  in  all  cases 
what  belongs  to  the  one  class  and  what  to  the  other.  Different 
courts  decide  differently  in  regard  to  the  same  articles ;  and  even 
the  decisions  of  the  same  courl  do  not  always  seem  to  be  per- 
fectly consistent.  The  varying  circumstances  of  the  cases  seem 
sometimes  to  have  an  immediate  influence  upon  the  determination 
of  the  courts,  greater  than  the  statement  of  them  in  the  reports 

1  See  §  442 ;   Teaff  v.  Hewitt,  1  Ohio        3  To  like  effect  see  Parsons  v.  Cope- 
St.  511.  land,  38  Me.  .537;  Harlan  v.  Harlan,  15 

2  Ottumwa  Woollen  Mill  Co.  v.  Haw-  Pa.  St.  507  ;  Teaff  v.  Hewitt,  supra. 
ley,  44  Iowa,  57. 

356 


MACHINERY   IN  MILLS.  [§  445. 

would  seem  to  warrant.  But  in  doubtful  cases,  where  the  mode 
and  extent  of  the  annexation  of  the  chattels  to  the  realty  do  not 
determine  their  character  as  fixtures,  the  intention  with  which 
they  were  put  upon  the  estate,  whether  for  permanent  use  or  for 
a  temporary  purpose,  comes  in  with  a  controlling  influence  to 
settle  the  doubt. ^  This  intention  is  to  be  gathered  not  merely  or 
chiefly  from  the  manner  in  which  the  chattels  are  annexed  to  the 
realty,  but  from  the  character  of  the  improvement,  whether  it  is 
essential  to  the  proper  use  of  the  realty.^ 

445.  An  existing  mortgage  of  the  realty  may  have  priority 
of  a  chattel  mortgage  of  machinery  subsequently  annexed,  al- 
though the  chattel  mortgage  be  made  at  the  time  the  articles 
were  attached.-^  If  the  mortgagee  of  the  chattels  has  actual  knowl- 
edge of  the  mortgage  of  the  realty,  or  constructive  knowledge  of 
it  by  record,  his  mortgage  of  chattels  annexed  or  about  to  be  an- 
nexed to  the  realty  is  subject  to  the  legal  consequences  of  the  an- 
nexing of  such  chattels  to  the  mortgaged  realty.  In  a  late  case  in 
Massachusetts  the  right  to  certain  machinery  in  a  building  used  as 
a  machine-shojD  was  contested  between  a  mortgagee  of  the  real 
estate  and  a  mortgagee  of  the  machinery  described  as  personal 
property.*  Before  either  of  the  mortgages  was  made  the  mort- 
gagor owned  the  machine-shop,  and  also  the  machinery,  and  used 
both  for  manufacturing  purposes.  It  was  held  that  such  ma- 
chines and  their  appurteiiances  as  were  specially  adapted  to  be 
used  in  the  shop  and  were  annexed  to  it  passed  by  the  mortgage 
of  the  real  estate.  In  this  class  were  included  punches,  polishing 
frames,  vibrators,  a  polisher  and  fan-blower,  the  pulleys,  shafting, 
and  hanfrers.  These  were  bolted  or  screwed  to  the  floors  or  tim- 
bers  of  the  building,  although  it  appeared  that  they  could  be  re- 
moved without  substantial  injury  to  it.  The  wheels  belonging  to 
the  polishing  machines  were  placed  in  the  same  class,  although 

>  Kelly    V.    Austin,    40    111.    156,    per  3  Jones,  Chattel  Mortgages,  §§  123-125; 

Walker,  J.;  Ottumwa  Woollen  Mill  Co.  Roddy  r.  Brick,  42  N.J.  Eq.  218.  See,  also, 

V.  Ilawiev,  44  Iowa,  57  ;  McReaf.  Central  Bass  Foundry  v.  Gallentine,  99  Ind.  525. 

Nat.  Bank  of  Troy,  G6  N.  Y.  489;  Mor-  *  Pierce  v.  George,  108  Mass.  78;  and 

ris's  A]»p.  88  Pa.  St.  368;    Smith  Paper  see,  also,  Winslow  t;.  Merchants'  Ins.  Co. 

Co.  V.  Servin,  130  Mass.  511.  4  Met.  (Mass.)  306 ;  McConnell  v.  Blood, 

•■=  Green  I'.  Phillips,  26  Gratt.  (Va.)  752;  123    Mass.   47;    Allen   v.  Woodard,    125 

Shelton  r.  Ficklin,  32  Gratt.   (Va.)  727;  Mass.  400 ;  Parsons  v.  Copeland,  38  Me. 

Tillman  I'.  Dc  Lacy,  80  Ala.  103;  Rogers  537;    Richardson    v.   Copeland,    6    Gray 

V.  I'rattville   Manuf.    Co.    81     Ala.    483;  (Mass.),  536;    Millikin  v.  Armstrong,  17 

Maguirc  V.  Park,  140  Mass.  21;  Carpen-  Ind.  456  ;  First  Nat.  Bank  i;.  Elmore,  52 

ter  V.  Walker,  140  Mass.  416.  Iowa,  541. 

357 


§  445.]  FIXTURES. 

they  could  be  detached  and  removed  without  injury.  But  other 
articles  not  appearing  to  be  essential  parts  of  the  shop,  and  not 
attached  to  it,  were  held  not  to  pass  by  the  mortgage  of  the  real 
property  but  by  the  mortgage  of  the  personalty.  Of  these  arti- 
cles not  considered  fixtures  in  any  sense  of  the  word  were  the 
lathes  fastened  to  a  bench  by  screws,  and  operated  by  a  foot 
movement;  grindstones  resting  upon  frames  standing  upon  the 
floor ;  a  rattler  and  frame,  tack  machines,  the  slitter,  the  anvils, 
the  vises,  the  lathes,  and  a  portable  forge. 

In  a  case  in  Ohio  a  similar  question  arose  beWeen  the  holder 
of  a  chattel  mortgage  of  the  fixtures  and  a  mortgagee  of  the 
realty  in  respect  to  the  boilers,  engines,  saws,  and  gearing  of  a 
steam  saw-mill.^  The  chattel  mortgage  was  made  before  the 
articles  were  annexed  to  the  property,  but  it  recited  that  they 
were  designed  to  be  used  in  the  mortgagor's  saw-mill,  and  power 
was  given  the  mortgagees  to  take  possession  of  them  upon  de- 
fault, whether  they  should  be  attached  to  the  freehold  and  in  law 
become  a  part  of  the  realty  or  not.  The  mortgage  of  the  real 
estate  was  afterwards  taken  without  notice  of  this  agreement. 
The  record  of  the  chattel  mortgage  was  constructive  notice  only 
of  an  incumbrance  upon  chattels  ;  but  when  the  mortgage  of  the 
real  estate  was  made,  these  things  were  not  chattels,  but  real 
estate,  and  the  record  of  the  mortgage  as  a  chattel  mortgage  was 
no  notice  to  the  mortgagee  of  the  realty.  The  court  declared 
that  it  devolved  upon  the  mortgagee  of  the  chattels,  who  sought 
to  change  the  legal  character  of  the  property  after  it  was  annexed 
to  the  realty  and  to  create  incumbrances  upon  it,  either  to  pur- 
sue the  mode  prescribed  by  law  for  incumbering  the  kind  of  estate 
to  which  it  appeared  to  the  world  to  belong,  and  for  giving  notice 
of  such  incumbrance ;  or,  otherwise,  take  the  risk  of  its  loss  in 
case  it  should  be  sold  and  conveyed  as  part  of  the  real  estate  of  a 
purchaser  without  notice.^  As  against  a  mortgagee  of  the  realty 
to  sustain  a  claim  to  the  fixtures,  there  must  be  either  an  actual 

1  Brennan    v.   Whitaker,    15    Ohio   St.  in  Ford  v.  Cobb,  20  N.  Y.  344,  where  it 

446.     For  a  similar  case  with  like  deci-  was  held  that  an  agreement  evidenced  by 

sion,  see  Frankland  v.  Moulton,  5  Wis.  1.  a  chattel  mortgage  was  effectual  against  a 

See,  also,  Fortman  v.  Goepper,  14  Ohio  subsequent  purchaser  of  the  land  without 

St.  558 ;  Voorhees  v.  McGinnis,  48  N.  Y.  notice ;  and  cites  to  the  contrary  Eichard- 

278.  son  V.  Copeland,  6  Gray  (Mass.),  536,  and 

-  Per  White,  J.,  in  Brennan  v.  Whita-  other  cases, 
ker,  supra.     He  dissents  from  the  ruling 

358 


MACHINERY   IN   MILLS. 


[§  446. 


severance  of  tbem  previously  made,  or  actual  notice  of  the  agree- 
ment by  the  mortgagor  that  they  should  be  severed. 

446.  A  steam-engine  and  boiler,  with  the  appurtenances  be- 
longing to  them,  used  for  furnishing  the  motive  power  of  a  mill, 
together  with  the  shafts  and  pulleys  connected  with  the  engine, 
are  fixtures,  and  pass  to  a  mortgagee  of  the  realty.^  The  ma- 
chinerj^  of  the  motive  power,  whether  a  steam-engine  or  a  water- 
wheel,  and  all  the  shafting  and  other  means  of  communicating 
this  power,  are  as  a  general  rule  fixtures.^  A  steam-engine  and 
boilers  fixed  in  a  mill  b}^  the  mortgagor  after  the  execution  of  the 
mortgage  become  subject  to  it.^  It  is  not  material  that  they  are 
the  property  of  another,  as,  for  instance,  that  they  were  leased  to 
the  mortgagor,  if  he  annexes  them  to  the  freehold  with  the  con- 
sent of  the  owner.'^  But  if  the  land  and  the  engine  are  held  by 
different  titles,  the  latter  does  not  necessarily  become  part  of  the 
realty  when  set  up  and  used  by  one  who  does  not  own  the  land.^ 
Even  if  they  were  subject  at  the  time  to  a  chattel  mortgage,  this 
would  not  hold  against  the  mortgage  of  the  realty  after  they  are 
attached  to  it.^     Nor  does  it  make  any  difference  that  although 


1  In  re  M'Kibben,  4  Ir.  Ch.  (N.  S.) 
520;  Hubbard  v.  Bagshaw,  4  Sim.  326; 
Harris  i-.  Haynes,  34  Vt.  220;  Sweetzer 
V.  Jones,  35  Vt.  317;  Ottumwa  Woollen 
Mill  Co.  V.  Hawley,  44  Iowa,  57  ;  Quinby 
V.  Manhattan  Cloth  and  Paper  Co.  24  N. 
J.  Eq.  260;  Keeler  v.  Keeler,  31  N.  J.  Eq. 
181 ;  Watson  v.  Watson  Manufacturing 
Co.  30  N.J.  Eq.  483  ;  Scheifele  v.  Schmitz, 
42  N.  J.  Eq.  700 ;  Roddy  v.  Brick,  42  N. 
J.  Eq.  218;  Coleman  v.  Stearns  Manuf. 
Co.  38  Mich.  30;  Taylor  v.  Collins,  51 
Wis.  123;  Southbridge  Sav.  Bank  v.  E.xe- 
ter  Machine  Works,  127  Mass.  542  ;  Till- 
man V.  De  Lacy,  80  Ala.  103. 

-  Hill  V.  Wentworth,  28  Vt.  428 ;  Keve 
V.  Paxton,  26  N.  J.  Ea.  107 ;  Keeler  v. 
Keeler,  supra  ;  Powell  v.  Monson  &  Brim- 
field  Manuf.  Co.  3  Mason,  459  ;  McCon- 
nell  V.  Blood,  123  Mass.  47. 

In  Ehode  Island,  by  statute,  the  water- 
wheels,  steam-engines,  boilers,  main  belts, 
which  first  give  motion  to  the  shafting, 
all  shafting,  whether  upright  or  horizon- 
tal, and  hangers  for  the  same,  except  such 
as  are  used  to  drive  a  special  machine,  all 
drums,  pulleys,  wheels,  gearing,  steam- 
pipes,  gas-pipes  and  gas-fixtures,  water- 


pipes  and  fixtures,  kettles  and  vats  set 
and  used  in  any  mechanical  or  manufac- 
turing establishment,  are  declared  to  be 
real  estate,  whenever  the  same  belong  to 
the  owner  of  the  real  estate  to  which  they 
are  attached.  All  other  machinery,  tools, 
and  apparatus  of  every  description,  used 
and  employed  in  any  manufacturing  es- 
tablishment, are  declared  to  be  personal  es- 
tate, and  as  such  shall  be  considered,  in  as- 
signments of  dower,  in  attachments,  and 
in  all  cases  whatsoever,  except  in  the  as- 
sessment and  payment  of  taxes.  P.  S. 
1882,  ch.  171,  §§  1,  2. 

'^  Winsiow  V.  Merchants'  Ins.  Co.  4  Met. 
(Mass.)  306  ;  McKim  v.  Mason,  3  Md.  Ch. 
Dec.  186;  Rice  v.  Adams,  4  Harr.  (Del.) 
332 ;  Randolph  v.  Gwynne,  7  N.  J.  Eq. 
(3  Ilalst.)  88;  Cope  v.  Romeyne,  4  Mc- 
Lean, 384 ;  Dudley  v.  Hurst  (Md.),  8  Atl. 
Rep.  901. 

*  Eryatt  v.  Sullivan  Co.  5  Hill  (N.  Y.), 
1 16  ;  and  see  Roberts  v.  Dauphin  Deposit 
Bank,  19  Pa.  St.  71. 

^  Robertson  v.  Corsett,  39  Mich.  777. 

*J  Fraukland  v.  Moulton,  5  Wis.  1  ; 
Voorhees  v.  McGinnis,  48  N.  Y.  278. 

369 


§  447.]  FIXTURES. 

erected  in  a  permanent  manner  they  can  be  removed  without  in- 
jury to  the  building  in  which  they  are  placed  or  with  which  they 
are  connected.^  A  mortgage  of  a  factory  hj  a  lessee  passes  to  the 
mortgagee  a  steam-engine  used  in  it,  although  the  lessor  could  not 
claim  it.^ 

447.  Various  articles  of  machinery.  —  A  shingle-machine 
put  into  a  mill  by  a  mortgagor  becomes  a  part  of  the  mortgage 
security.'"^  Mill-saws  attached  to  a  saw-mill  and  used  in  it  become 
a  part  of  the  realty,  and  subject  to  a  mortgage  of  the  mill  previ- 
ously made.*  Heavy  machinery  for  making  paper,  fastened  to  a 
building  or  to  its  foundations,  is  regarded  as  a  fixture.^  So  ma- 
chinery in  a  fruit-canning  factory.^  So  machinery  in  a  brewery." 
So  machinery  in  a  nail  factory.^  So  a  machine  for  turning  kegs, 
a  machine  for  jointing  staves,  and  a  machine  for  cutting  staves, 
were  held  to  pass  by  a  mortgage  of  a  keg  factory  in  which  they 
were  used,  and  to  which  they  were  attached.^  But,  on  the  other 
hand,  a  planing  and  matching  machine,  and  a  machine  for  making 
mouldings,  used  in  a  sash  and  blind  factory,  were  held  not  to  pass 
by  a  mortgage  of  the  realty .^'^  And  so  machines  used  in  a  shoe- 
shop,  although  attached  to  the  building  by  nails  or  bolts,  are  not 
covered  by  a  mortgage  of  the  realty .^^  To  constitute  such  ma- 
chines fixtures,  they  must  be  actually  annexed  to  the  freehold  in 

1  Sparks  v.  State  Bank,  7  Blackf.  (Ind.)  v.   Stearns  Manufacturing  Co.   3S   Mich. 

469;    Voorhees  v.   McGinnis,  48   N.  Y.  30. 
278.  5  Quinby  v.  Manhattan  Cloth  and  Pa- 

-  Day  V.  Perkins,  2  Sandf.  (N.  Y.)  Ch.  per  Co.  24  N.  J.  Eq.  260;   Fish  v.  N.  Y. 

359.  Water  Proof  Paper  Co.  29  N.  J.  Eq.  16; 

3  Corliss  V.  McLagin,  29  Me.  115.     In  Hill  v.  Nat.  Bank,  97  U.  S.  450;  S.  C.  8 

Trull  V.  Fuller,  28  Me.  545,  the  owner  of  Cent  L.  J.  175. 

a  saw-mill  made  a  mortgage  of  a  clap-         ^  Dudley  v.  Hurst    (Md.),  8  Atl.  Rep. 

board-machine   and    shingle-machine    set  901. 

up  in  the  saw-mill  and  used  there,  which         ^  Neilson  i-.  "Williams,  11  Atl.  Rep.  257; 

was    recorded    as   a  personal   mortgage.  Scheifele  v.  Schmitz,  42  N.  J.  Eq.  700; 

Subsequently  a  creditor  of  the  mortgagor  1  Atl.  Rep.  698.     See,  however,  Wolford 

levied  an  execution   upon   the  land   and  v.  Baxter,  33   Minn.    12;  S.  C.  53    Am. 

mill,  and  it  was  held  that  these  machines  Rep.  1. 

passed  to  a  purchaser  of  the  real  estate         ^  Delaware,  L.  &  W.  R.  R.  Co.  v.  Ox- 

under  the  execution  as  parcel  of  the  real-  ford  Iron  Co.  36  N.  J.  Eq.  452. 
ty.     But  in  Wells  v.  Maples,  15  Hun  (N.         ^  Laflin  v.   Griffiths,  35  Barb.   (N.  Y.) 

Y.),  90,  a  shingle-machine  not  fastened  to  58  ;  and  see  Snedeker  v.  Warring,  12  N. 

the  building,  except  so  far  as  necessary  Y.    170,   174;     Walker    i-.    Sherman,   20 

to  keep  it  in  place,  was  not  held  to  be  cov-  Wend.  (N.  Y.)  636,  639. 
ered  by  a  mortgage  of  the  realty.  ^'^  Rogers  ;;.  Brokaw,  25  N.  J.  Eq.  496  ; 

*  Burnside  v.  Twitchell,  43  N.  H.  390 ;  and  see  Wells  v.  Maples,  15  Hun  (N.  Y.), 

Johnston  v.   Morrow,  60  Mo.  339 ;  Rob-  90. 
ertson  v.  Corsett,  39  Mich.  777  ;   Coleman         "  McConnell  v.  Blood,  123  Mass.  47. 

360 


MACHINERY   IN   MILLS.  [§  448. 

such  a  way  as  to  evince  an  intention  of  making  tliem  a  permanent 
accession  to  the  freehold.^ 

Where,  in  the  case  of  machinery,  the  principal  part  is  a  fixture 
by  actual  annexation  to  the  soil,  parts  not  physically  annexed, 
but  which,  if  removed,  would  leave  the  principal  thing  unfit  for  use, 
and  would  not  of  themselves,  and  standing  alone,  be  well  adapted 
for  general  use  elsewhere,  are  considered  constructively  annexed.^ 

The  wires  of  an  electric  light  company,  engaged  in  lighting  a 
city,  are  an  integral  part  of  the  company's  lot  of  land,  and  ma- 
chinery situated  upon  the  lot  for  producing  the  light,  and  they 
pass  as  fixtures  under  a  mortgage  of  the  lot  with  all  machinery 
and  appurtenances.^ 

448.  Looms  in  a  mill.  —  In  the  English  courts  there  have 
been  several  cases  involving  the  determination  of  the  question 
whether  looms  in  a  mill  pass  by  a  mortgage  of  it  in  which  they 
are  not  particularly  named.*  A  mortgage  was  made  of  a  mill 
"  with  the  warehouse,  counting-house,  engine-house,  boiler-house, 
weaving-shed,  wash-house,  gas  -  works,  and  reservoirs  belonging, 
adjoining,  or  near  thereto,  and  also  the  steam-engine,  shafting, 
going-gear,  machinery,  and  all  other  fixtures  whatever,"  affixed 
to  the  land  and  premises.  The  assignees  in  bankruptcy  of  the 
mortgagor  took  possession  of  and  sold,  among  other  things,  a  large 
number  of  looms  that  were  in  the  mill.  Each  loom  rested  upon 
four  feet,  and  was  attached  to  the  floor  by  means  of  a  wooden 
plug  driven  through  each  foot.  The  mortgagee  claimed  the  looms 
as  part  of  his  securit}^  and  the  Court  of  Common  Pleas  gave 
judgment  in  his  favor,  and  this  was  aflfirmed  by  the  Court  of  Ex- 
chequer Chamber.^ 

^  Blanckc  v.  Kogers,  26  N.  J.  Eq.  563;  chines,  and  work-tables,  were  not  actu- 

Roddy  V.  Brick,  42  N.  J.  Eq.  218.  ally  annexed  to  the  soil;  but  being  essen- 

-  Dudley  v.  Ilurst    (Md.),  8  Atl.  Rep.  tially   necessary   to    the   working   of  the 

901.     "  Thus  the  key  of  a  lock,  the  sail  of  principal  machinery,   they  were  regarded 

a  windmill,  the  leather  belting  of  a  saw-  as  constructively  annexed, 

mill,  although  actually  severed  from  the  ^  Fechet   v.   Drake     (Ariz.),    12    Pac. 

principal  thing  and  stored  elsewhere,  pass  Rep.   694  ;  Regina  v.  North  Staffordshire 

by  ton.4tructive  annexation.     They  must  Ry.  Co.  3  El.  &  El.  392. 

be   such   as   to   go   to   complete   the  ma-  *  Holland  v.  Hodgson,   L.  R.  7  C.  P. 

chinery  which  is  affixed  to  the  land,  and  328;  S.  C.  41  L.  J.  C.  P.  N.  S.  146;  20 

which,  if  removed,  would  leave  the  princi-  W.    R.    990.     For   American    cases   see 

pal  thing  incomplete  and  unfit  for  use."  §  444. 

Per  Stone,  J.     In  this  case  the  entire  ma-  ^  In  the  latter  court  Mr.  Justice  Black  - 

chinery  of  a  fruit -canning   factory   was  bum  said:    "Since  the   decision   of  this 

held  to  pass  under  a  mortgage,  though  court  in  Climic  v.   Wood,  L.  R.  3  Exch. 

some  articles,  such  as  crates,  capping-ma-  257,  and   on  appeal,  L.   R.  4  Exch.  328, 

3G1 


§  449.] 


FIXTURES. 


449.  Cotton  looms.  —  Under  a  mortgage  of  a  mill  for  the 
manufacture  of  cotton  cloth,  with  the  appurtenances,  "  together 
with  the  steam-engines,  boilers,  shafting,  piping,  mill-gearing, 
gasometers,  gas-pipes,  drums,  wheels,  and  all  and  singular  other 
the  machines,  fixtures,  and  effects  fixed  up  in  or  attached  or  be- 
longing to  the  said  mill'  or  factory,  buildings,  or  premises,"  the 
question  arose,  upon  a  subsequent  sale  of  the  estate  under  a  power 
■of  sale  contained  in  the  mortgage,  whether  a  large  number  of 
looms  for  weaving  cotton  yarn  into  cloth,  and  which  were  set  into 
the  floors  without  any  fastening,  passed  by  mortgage,  and  by  the 
subsequent  sale.  Lord  Romilly,  giving  the  decision  of  the  Court 
of  Chancery,!  said :  "  My  opinion  is,  that  those  words  mean  that 


it  must  be  considered  as  settled  law  (ex- 
cept perhaps  in  the  House  of  Lords),  that 
what  are  commonly  known  as  trade  or 
tenant's  fixtures  form  part  of  the  land, 
and  pass  by  a  conveyance  of  it ;  and  that 
though  if  the  person  who  erected  those 
fixtures  was  a  tenant  with  a  limited  in- 
terest in  the  land,  he  has  a  right  as  against 
the  freeholder  to  sever  the  fixtures  from 
the  land ;  yet,  if  he  be  a  mortgagor  in  fee, 
has  no  right  as  against  his  mortgagee.  .  .  . 
It  was  admitted,  and  we  think  properly 
admitted,  that  where  there  is  a  convey- 
ance of  the  land  the  fixtures  are  trans- 
ferred, not  as  fixtures,  but  as  a  part  of 
the  land,  and  the  deed  of  transfer  does  not 
require  registration  as  a  bill  of  sale." 

The  learned  judge  further  says  that  it 
has  been  contended,  and  justly,  that  Hel- 
lawell  V.  Eastwood,  6  Exch.  295,  is  very 
like  the  present  case,  with  this  exception  : 
that  there  the  tenant  had  a  limited  inter- 
est only,  whereas  here  he  has  the  fee;  and 
if  that  case  should  apply  to  this  case,  it 
would  follow  (but  for  that  exception,  per- 
haps) that  the  looms  which  were  in  ques- 
tion remained  chattels.  But  that  case 
was  decided  in  1851.  In  1853,  the  Court 
of  Queen's  Bench  had,  in  Wiltshear  v. 
Cottrell,  1  E.  &  B.  674,  to  consider  what 
articles  passed  by  the  conveyance  in  fee 
of  a  farm ;  and  there  the  court  decided 
that  a  certain  threshing-machine  inside  a 
barn,  fixed  by  screws  and  bolts  to  four 
posts  which  were  let  into  the  earth,  passed 
by  the  conveyance.  It  seems  difficult  to 
point  out  how  the  threshing-machine  in 

362 


that  case  was  more  for  the  improvement 
of  the  inheritance  of  the  farm  than  the 
looms  in  the  present  case  were  for  the  im- 
provement of  the  manufactory.  Then 
there  was  the  case  of  Mather  v.  Fraser,  2 
Kay  &  J.  536,  in  1856,  and  that  of 
"Walmsley  v.  Milne,  7  C.  B.  N.  S.  115, 
in  1859,  in  which  similar  decisions  to 
that  in  Wiltshear  v.  Cottrell  were  given. 
These  cases  "seem  authorities  for  this 
principle,  —  that  when  an  article  is  affixed 
by  the  owner  of  the  fee,  though  only  af- 
fixed by  bolts  and  screws,  it  is  to  be  con- 
sidered as  part  of  the  land,  at  all  events 
where  the  object  of  setting  up  the  article 
is  to  enhance  the  value  of  the  premises  to 
which  it  is  annexed,  for  the  purposes  to 
which  those  premises  are  applied.  The 
threshing-machine  in  Wiltshear  v.  Cot- 
trell was  affixed  by  the  owner  of  the  fee 
to  the  barn  as  an  adjunct  to  the  barn,  and 
to  improve  its  usefulness  as  a  barn,  in 
much  the  same  way  as  the  hay-cutter  in 
Walmsley  v.  Milne  was  affixed  to  the 
stable  as  an  adjunct  to  it,  and  to  improve 
its  usefulness  as  a  stable.  And  it  seems 
difficult  to  say  that  the  machinery  in 
Mather  v.  Fraser  was  not  as  much  affixed 
to  the  mill  as  an  adjunct  to  it,  and  to  im- 
prove the  usefulness  of  the  mill  as  such, 
as  either  the  threshing-machine  or  the 
hay-cutter."  In  conclusion,  he  says,  it  is 
of  great  importance  that  the  law  as  to 
what  is  the  security  of  a  mortgage  should 
be  settled,  and  that  these  decisions  should 
not  be  reversed  unless  clearly  wrong. 
1  Hutchinson  i;.  Kay,  23  Beav.  413.  See, 


MACHINERY   IN   MILLS.  [§  450. 

tlie  mill  and  everything  that  properly  belongs  to  the  mill  is  the 
thing  that  is  mortgaged.  I  do  not  think  that  the  furniture  of  the 
mill  does  properly  belong  to  the  mill ;  it  is  liable  to  be  changed 
from  time  to  time.  ...  I  do  not  doubt  that  looms  are  machinery 
in  one  sense ;  but  the  question  is,  are  they,  properly  speaking, 
machinery  belonging  to  the  mill  ?  In  one  sense,  no  doubt,  they 
belong  to  the  mill,  because  they  are  put  into  the  mill ;  but  I  read 
those  words  as  '  belonging  essentially  to  the  mill,'  and  forming 
necessarily  a  part  of  it,  whatever  may  be  the  purpose  to  which 
the  mill  may  be  applied.  To  whatever  purpose  the  mill  may  be 
appplied,  the  steam-power,  the  gas-lighting,  and  the  like,  do  form 
a  part  of  it ;  but  the  others  do  not,  being  merely  accidental,  and 
no  more  form  a  jjart  of  the  mill  than  a  carpet  forms  part  of  a 
house.  If  a  house  and  all  the  things  belonging  to  the  house 
were  assigned,  that  would  not  necessarily  include  the  furniture 
unless  it  was  so  specified.  ...  I  am  clear  the  looms  are  not  fix- 
tures in  any  proper  sense  of  the  term."  ^ 

In  like  manner,  in  a  recent  case  in  New  Jersey,  it  was  held 
that  spinning-frames,  twisting-frames,  and  like  machinery,  though 
fastened  to  the  floor  by  nails  or  screws,  or  held  in  position  by 
cleats,  are  personal  property,  and  pass  under  a  chattel  mortgage 
as  against  a  mortgage  of  the  realty  subsequently  given  ;  but  that 
the  steam-engine,  boilers,  shafting,  belting,  couplings  and  pulleys 
used  to  communicate  the  power,  the  water-wheels  and  water- 
wheel  governors,  the  gas-generator  and  gas-pump  connected  with 
it,  the  gas-pipes  and  burners,  and  the  steatn-heating  pipes,  whether 
laid  on  hooks  along  the  walls  or  resting  on  the  floor,  are  parts  of 
the  mill  and  pass  by  the  mortgage  of  the  realty  as  against  a 
prior  chattel  mortgage.^ 

450.  Machinery  of  a  silk-mill.  —  A  silk  manufacturer  mort- 
gaged certain  land,  "  also  all  that  silk-mill  there  erected  or  in 
the  course  of  erection,  and  all  other  buildings  then  or  thereafter 
to  be  erected  thereon  ;  and  also  all  those  the  steam-engine  or 
steam-engines,  boilers,  steam-pipes,  main  shafting,  mill-gearing, 
millwright's  work,  and  all  other  machinery  and  fixtures  whatso- 
ever there  erected  or  set  up,  or  to  be  thereafter,  etc.,  upon  the  said 
plat  of  land,  mill,  and  premises,  with  the  appurtenances."^     A 

also,  McKim  v.  Mason,  .3  Md.  Ch.  Dec.  -  Keeler  v.  Kecler,  .31  N.  J.  Eq.  181. 

180,  relatiiif,'  to  machinery  for  the  mauu-  ^  Haley  v.  llninmerslcy,  3  l)e  Gex,  F.  & 

facture  of  cotton  (,'oo(ls.     See  §  444.  J.  587  ;  S.C.  0  W.  R.  5G2. 
'  Not  in  accord  with  §§  448,  450. 

363 


§  451.]  FIXTURES. 

second  mortgage  was  made  more  comprehensive  in  terms,  and  the 
jBrst  mortgagee  having  sold  the  property  under  an  order  of  court, 
the  question  ai'ose  upon  a  claim  by  the  second  mortgagee  whether 
the  spinning-mills  and  other  machinery  passed  under  the  first 
mortgage.  The  Master  of  the  Rolls  held  that  only  such  machin- 
ery passed  by  the  mortgage  under  the  words  "  other  machinery  " 
as  was  of  the  same  nature  with  the  articles  specified  in  the  enu- 
meration previously  made,  and  that  therefore  only  the  machin- 
ery used  for  the  purpose  of  giving  power  to  the  mill  was  included 
in  the  mortgage.  On  appeal,  however,  it  was  decided  that  all  the 
machinery  placed  in  the  mill,  whether  for  creating  power  or  for 
being  moved,  was  included  in  the  mortgage.  "  It  seems  rather 
improbable,"  said  Lord  Chancellor  Campbell,  "  that  the  parties 
should  have  contemplated  such  a  damaging  disruption  of  the  ma- 
chinery as  must  take  place  if  the  mortgagees,  in  seeking  to  make 
good  their  security,  must  tear  in  pieces  the  machinery  in  the  mill, 
removing  and  selling  one  half  of  it,  which  would  be  compara- 
tively of  little  value  without  the  other  half."  .  .  .  He  concurs 
with  the  Vice-Chancellor  Page  Wood,  in  his  general  view  of  the 
law  upon  this  subject  in  Mather  v.  Fra%er}  and  is  of  opinion  that, 
according  to  the  true  construction  of  the  mortgage  deed,  all  the 
disputed  articles  are  included  in  the  mortgage  to  the  defendants. 

451.  A  mortgage  of  an  iron  rolling-mill  was  held  to  pass  the 
entire  set  of  rolls  used  in  the  mill,  whether  in  place  and  fixed  for 
use  or  temporarily  detached.^  The  rolls,  being  adapted  to  the 
manufacture  of  bars  of  different  shapes  and  sizes,  cannot  all  be 
used  at  once ;  but  they  are  equally  a  part  of  the  mill  when  un- 
fixed to  give  place  to  others.  "  Duplicates  necessary  and  proper 
for  an  emergency,"  said  Chief  Justice  Gibson,  •"  consequently 
follow  the  realty,  on  the  principle  by^which  duplicate  keys  of  a 
banking-house  or  the  toll-dishes  of  a  mill  follow  it."  A  similar 
decision  was  made  in  a  recent  case  in  England.^ 

^  K.  &  J.  536.  manifest   that  without  rolls  the  machine 

-  Voorhis  v.  Freeman,  2  Watts  &  S.  could  not  do   any  part  of  the  work  for 

(Penn.)  116.  which    it    is    made.      One    set    of    rolls 

3  Ex  ■parte  Astbury,  L.  R.  4  Ch.  App.  clearly  passes.     But  we  have  here  dupli- 

630.      Mr.    Justice    Giffard,    giving    the  cate  rolls,  and  with  reference  to  them  — 

opinion,  said :  "  There  appear  to  be  con-  I  am   not  now   speaking  of  rolls  which 

nected  with  rolling  machines  parts  which,  can  be  considered  as  in  any  sense  unfin- 

beyond   all  doubt,   are  not  fixed,  in  the  ished,  but  of  duplicate   rolls  which  have 

strict  sense  of  the  term  ;  but  it  is  in  evi-  been  actually  fitted   to   the   machine  —  I 

dence  that  if  a  machine  is  ordered  it  is  cannot  see  why,  if  one  set  of  rolls  passes, 

sent  with  one  set  of  rolls,  and  it  is  quite  the  duplicate  rolls  should  not  pass  also. 

364 


ROLLING   STOCK   OF  RAILWAYS. 


[§  452. 


In  the  same  case  it  was  held  that  the  straightening  plates  em- 
bedded in  the  floor  were  also  fixtures,  but  that  the  weighing 
machines  were  not. 

III.  Rolling  Stock  of  Railways. 

452.  Whether  the  rolling  stock  and  fixtures  of  a  railroad 
are  personal  property,  or  are  in  some  sense  fixtures,  and  therefore 
pass  b)^  a  mortgage  of  the  realty,  is  a  question  that  has  been  much 
discussed,  and  the  decisions  are  conflicting.  On  the  one  hand  it  is 
said  that  railway  cars  are  a  necessary  part  of  the  entire  establish- 
ment ;  that  their  wheels  are  fitted  to  the  rails ;  that  they  are  pe- 
culiarly adapted  to  the  use  of  the  railway,  and  cannot  be  used  for 
any  other  purpose  ;  and  that  they  are  necessary  incidents  of  the 
real  estate  in  a  mortgage  of  it.  In  an  early  case  before  the  Su- 
preme Court  of  New  York,  it  was  decided  that  rolling  stock  was 
to  be  deemed  fixtures. ^  But  the  Court  of  Appeals  several  years 
afterwards  established  the  doctrine  in  this  state  to  be  that  rolling 


It  comes,  in  fact,  to  this,  that  the  machine 
with  one  set  of  rolls  is  a  perfect  machine, 
but  the  machine  with  a  duplicate  set  is 
a  more  perfect  machine.  .  .  .  The  fact 
is,  that  whether  there  is  one  set  of  rolls 
or  a  duplicate  set,  they  are  each  part  and 
parcel  of  the  machine,  and  come  within 
the  term  '  belonging  to  tlie  machine  as  part 
of  it.'  Dictum  of  Lord  Cottenham  in 
Fisher  v.  Dixon,  12  C).  &  F.  312.  Then 
comes  the  case  as  to  the  different  sizes  of 
rolls.  But  if  the  duplicates  of  the  same 
size  pass,  it  follows  that  the  rolls  of  dif- 
ferent sizes  pass,  if  they  render  the  ma- 
chine still  more  perfect  than  if  the  rolls 
were  all  of  the  same  size.  .  .  .  But  I 
cannot  hold  that  the  rolls  which  have 
never  been  fitted  to  the  machine,  and  have 
never  been  used  in  the  machine,  and  which 
require  something  more  to  be  done  to 
them  before  they  are  fitted  to  the  machine, 
belong  to  the  machine,  or  that  they  are 
essential  parts  of  it." 

'  Farmers'  Loan  &  Trust  Co.  r.  Ilen- 
drickson,  2.">  Barb.  (N.  Y.)  484.  Mr.  Jus- 
tice Strong,  delivering  tlie  opinion  of  the 
court,  said:  "The  property  of  a  railway 
company  consists  mainly  of  the  road-bed, 
the  rails  upon  it,  the  depot  erections,  and 
the  rolling  stock,   and   the   franchises  to 


hold  and  use  them.  The  road-bed,  the 
rails  fastened  to  it,  and  the  buildings  at 
the  depots,  are  clearly  real  property. 
That  the  locomotives  and  passenger,  bag- 
gage, and  freight  cars  are  a  part,  and  a 
necessary  part,  of  the  entire  establishment, 
there  can  be  no  doubt.  Are  they  so  per- 
manently and  inseparably  connected  with 
the  more  substantial  realty  as  to  become 
constructively  fi.xtures  ?  ...  It  may  be 
that  if  an  appeal  should  be  made  to  the 
common  sense  of  the  community,  it  would 
be  determined  that  the  term  '  fixtures  ' 
could  not  well  be  applied  to  such  movable 
carriages  as  railway  cars.  But  such  cars 
move  no  more  rapidly  than  do  pigeons 
from  a  dovecote  or  fish  in  a  pond,  both 
of  which  are  annexed  to  the  realty." 

This  decision  was  followed  by  Stevens 
V.  Bufl[-alo  &  N.  Y.  City  11.  B.  Co.  31  lb. 
590,  and  Beardsley  v.  Ontario  Bank,  lb. 
G19,  holding  that  rolling  stock  is  person- 
alty, and  a  mortgage  of  it  subject  to  the 
Chattel  Mortgage  Act.  A  few  years  later 
the  same  court  liehl  that  a  mortgage  of  a 
railroad  need  not  be  recorded  as  a  chattel 
mortgage,  in  order  to  bind  the  rolling 
stock.  Bement  v.  I'lattsburgh  &  Mon- 
treal R.  R.  Co.  47  II).  104  ;  5'.  C.  51  lb. 
45. 

366 


§  452.] 


FIXTURES 


stock  is  personal  in  its  character,  and  that  a  mortgage  of  it  must 
be  recorded  as  a  chattel  mortgage.^  And  finally,  in  1868  it  was 
provided  by  statute  that  a  mortgage  executed  by  a  railroad  com- 
pany shall  be  effectual  as  to  personal  property  covered  by  it,  if 
recorded  as  a  mortgage  of  real  estate,  without  filing  it  as  a  chattel 
mortgage.^ 

A  like  confusion  and  contradiction  of  authority  upon  this  sub- 
ject, and  a  like  final  settlement  of  it  by  legislation,  is  to  be  found 
in  many  states.^  As  a  summary  of  the  adjudications  upon  this 
subject,  it  may  be  said  that,  while  there  are  many  and  strong  ar- 
guments for  holding  that  rolling  stock  is  part  of  the  realty  of  a 
railroad,^ —  and  this  view  seems  to  have  the  support  of  the  United 
States  courts,^ —  the  weight  of  authority  in  the  state  courts  seems 
to  be  against  that  position.*^ 


1  Hoyle  V.  Plattsburgh  &  Montreal  R. 
R.  Co.  54N.  Y.  314;  Randall  v.  Elwell, 
52  N.  Y.  521. 

2  R.  S.  1875,  p.  555,  §  115. 

•^  Calfornia:  Such  mortgages  are  re- 
corded in  the  office  of  the  county  recorder, 
where  mortgages  of  real  estate  are  re- 
corded, but  in  books  kept  for  personal 
mortgages.  Civil  Code,  §§  2955,  2959, 
2961.  Connecticut :  Recorded  in  office  of 
secretary  of  state.  Acts  1877,  ch.  38. 
Dakota  T.  :  Recorded  as  real  estate  mort- 
gage in  the  office  of  register  of  deeds  for 
the  county.  R.  C.  1877,  p.  304.  Florida  : 
Rolling  stock  declared  fixtures,  and  mort- 
gage recorded  in  office  of  secretary  of 
state.  Acts  1874,  ch.  1987.  Iowa:  Roll- 
ing stock  regarded  as  fixtures,  and  mort- 
gage recorded  in  office  of  the  county  re- 
corder. Code  1873,  §§  1284,  1285.  Min- 
nesota :  Rolling  stock  part  of  the  realty, 
and  mortgages  of  recorded  in  the  registry 
of  deeds.  Montana  T. :  Mortgages  of  re- 
corded as  mortgages  of  real  estate.  Laws 
1873,  p.  102.  New  Jersey  :  Recorded  as 
mortgages  of  real  estate.  R.  S.  Ib77,  p. 
924,  §  82.  Ohio :  Recorded  in  registry  of 
deeds  as  a  real  estate  mortgage.  R.  S. 
1860,  p.  322.  Vermont :  Recorded  in  office 
of  county  clerk  of  each  county  through 


which  the  road  passes.  G.  S.  1870,  ch.  28, 
§§100-102.  West  Virginia  :  Recorded  in 
county  registry.  Act  April  13,  1873. 
Wisconsin  :  Rolling  stock  declared  fixtures 
and  recorded  in  office  of  secretary  of  state. 
Laws  1872,  ch.  119,  §§  39,  40;  Laws  1877, 
ch.  144,  §  I. 

Rolling  stock  is  declared  personal  prop- 
ertj',  and  subject  to  execution  as  such,  by- 
provisions  of  the  Constitutions  of  Illinois, 
Const.  1870,  art.  xi.  §  10  ;  Missouri,  Const. 
1875,  art.  xii.  §  16  ;  Arkansas,  Const.  1874, 
art.  xvii.  §  11  ;  Nebraska,  Const.  1875, 
art.  xi.  §  2 ;' Texas,  Const.  1876,  art.  x. 
§4;  West  Virginia,  Const.  1872,  art.  xi. 
§8. 

4  Palmer  v.  Forbes,  23  111.  301 ;  Hunt 
V.  Bullock,  23  111.  320 ;  Titus  v.  Mabee, 
25  111.  257 ;  Zoungman  v.  Elmira  &  Wil- 
liamsport  R.  R.  Co.  65  Pa.  St.  278  ;  Covey 
V.  Pittsburgh,  Fort  Wayne  &  Chicago  R. 
R.  Co.  3  Phila.  (Pa.)  173;  Phillips  v. 
Winslow,  18  B.  Mon.  (Ky.)  431 ;  Doug- 
lass V.  Cline,  12  Bush  (Ky.),  608,  630; 
State  V.  Northern  Cent.  R.  R.  Co.  18  Md. 
193  ;  Morrill  v.  Noyes,  56  Me.  458 ;  Pierce 
V.  Emery,  32  N.  H.  484 ;  Meyer  v.  John- 
ston, 53  Ala.  237,  332. 

°  Pennock  v.  Coe,  23  How.  117;  Gal- 
veston R.   R.  Co.  V.  Cowdrey,  11   Wall. 


6  Williamson  v.  N.  J.  Southern  R.  R. 
Co.  29  N.  J.  Eq.  311 ;  Coe  v.  Columbus, 
Piqua  &  Ind.  R.  R.  Co.   10  Ohio  St.  372; 

366 


Boston,  Concord  &  Montreal  R.  R.  Co.  v. 
Gilmore,  37  N.  H.  410. 

This  subject,  imperfectly  presented  here, 
is  more  fully  discussed  in  Jones  on  Rail- 
road Securities,  §§  146-187. 


REMEDIES   FOR  REMOVAL   OF.  [§  453. 

IV.   Remedies  for  Removal  of  Fixtures. 

453.  The  mortgagee  may  follow  and  take  fixtures  covered 
by  a  mortgage  of  the  realty,  and  impi-operly  removed,  wherever 
he  can  find  them.^  The  mortgagor  himself  can  of  course  gain  no 
right  to  hold  them  as  against  the  mortgagee.  A  purchaser  from 
the  mortgagor  has  no  such  right,  because  he  is  affected  with 
knowledge  of  the  existing  lien,  and  as  against  the  mortgagee  his 
purchase  is  therefore  fraudulent  and  void.  "Even  without  knowl- 
edge of  the  mortgage,"  says  Chief  Justice  Lowrie,  of  Pennsylva- 
nia,'^ "  it  is  hard  to  see  how  a  purchaser  could  be  relieved  from  this 
responsibility ;  for  all  purchasers,  hirers,  and  renters  are  bound  to 
ascertain,  or  take  the  risk  of  assuming,  the  title  of  their  vendors 
and  lessors.  But  may  not  a  mortgagor  sfell  in  the  usual  way  the 
lumber,  firewood,  coal,  ore,  or  grain  found  growing  on  the  land, 
without  violating  the  rights  of  the  mortgagee  ?  Yes,  he  may, 
until  the  mortgagee  stops  him  by  ejectment  or  estrepement,  for 
those  things  are  usually  intended  for  consumption  and  sale,  and 
the  sale  of  them  is  the  usual  way  of  raising  the  money  to  pay  the 
mortgage.  But  in  the  case  of  a  factory  or  other  building  it  is 
from  the  use  of  it  as  it  is,  and  not  by  its  consumption  or  its  sale 
by  piecemeal,  that  all  its  profits  are  to  be  derived." 

The  mortgagee's  right  of  action  is  based  upon  his  general  legal 
ownership  under  his  mortgage,  or  upon  his  actual  or  constructive 
possession  at  the  time  of  severance.^  The  mortgagee,  having  the 
legal  title  to  the  property,  may  maintain  replevin  for  fixtures 
removed  from  the  realty.  If  after  the  foreclosure  of  a  mortgage 
the  mortgagor  wrongfully  removes  a  house  from  the  land,  the  pur- 
chaser having  the  legal  title  may  maintain  replevin  for  it."^ 

It  is  held,  however,  under  a  different  view  of  the  nature  of  a 
mortgage,  that  when  a  fixture,  as,  for  instance,  a  house,  annexed 
to  the  real  estate  by  the  mortgagor,  is  afterwards,  before  the  fore- 
closure of  the  mortgage,  by  him  removed  from  the  premises  and 
sold,  although  it  was  part  of  the  mortgaged  premises,  the  mort- 
gagee cannot  recover  it  from  the  purchaser  ;  that  by  the  removal 

459;    Dunham   v.   Cincinnati,   Peru   &c.  nati  &  Chicago  Air-Line  R.  K.  Co.  4  Diss. 

Ky.  Co.   1    Wall.  :i54 ;  Minnesota  Co.  v.  35. 

St.  Paul  Co.  2  Wall.   009,  note,  p.  048 ;         i  See  §§  687,  688. 

-V.  C.  6  lb.  742 ;  Farmers'  Loan  &  Trust         -'  IIo.«kin  v.  Woodward,  45  Pa.  St.  42. 

Co.  V.  St.  Joseph  &  Denver  City  liy.  Co.         '■^  §  688  ;    Gooding  v.  Shea,  103  Mass. 

3  DilL  412  ;  Scott  i;.  Clinton  &  Springfield  300. 

R.  R    Co.  6  Biss.  529;  PuUan  v.  Cincin-         "»  Matzou  v.  Griflin,  78  111.  477;  §  688. 

yo7 


§  454.]  FIXTURES  : 

he  has  lost  his  right  to  the  property,  though  he  might  still  have  a 
cause  of  action  for  the  waste.^  But  justice  would  seem  to  demand, 
and  authority  supports  this  position,  that  one  purchasing  what  he 
either  actually  or  constructively  knows  to  be  mortgaged  to  another 
shall  not  be  allowed  to  shelter  himself  behind  his  wrongful  act, 
and  say  that  thereby  the  nature  of  the  property  was  changed. 
The  remedy  of  the  mortgagee  in  some  states  is  not  at  law  but  in 
equity ;  not  replevin  to  recover  the  property  severed,  but  gener- 
ally injunction  to  restrain  the  commission  of  waste.^ 

Even  in  New  Jersey,  where  the  mortgagee  is  regarded  as  hav- 
ing the  legal  title  for  the  purpose  of  asserting  and  maintaining 
his  possession,  he  is  not  allowed  to  maintain  replevin  for  fixtures 
wrongfully  removed ;  ^  but  he  may  maintain  an  action  on  the  case 
for  the  injury  to  the  security.* 

454.  The  mortgagee,  by  virtue  of  his  interest  in  the  prop- 
erty, may  maintain  an  action  against  the  mortgagor  for  re- 
moving fixtures,  and  thereby  causing  substantial  and  permanent 
injury  and  depreciation  to  the  mortgaged  estate.  The  owner  of 
the  equity  has  no  more  right  than  a  stranger  to  impair  the  security 
of  the  mortgage.  The  damages  are  measured  by  the  extent  of 
the  injury,  and  not  by  the  insufficiency  of  the  remaining  security. 
The  mortgagee  is  not  obliged  to  apply  in  the  first  place  the  prop- 
erty that  remains  at  any  valuation  whatever.  "  He  is  entitled  to 
the  full  benefit  of  the  entire  mortgaged  estate  for  the  full  paj^- 
ment  of  his  entire  debt."  ^ 

But  a  different  rule  of  damages  prevails  in  states  where  a 
mortgage  is  regarded  as  merely  an  equitable  conveyance  to  se- 
cure the  debt.  In  those  states  it  necessarily  follows  that  an  ac- 
tion by  a  mortgagee  for  any  injury  to  the  premises  must  be  based, 
not  upon  the  injury  to  the  premises,  in  which  he  has  only  an 
equitable  interest,  but  upon  the  loss  occasioned  to  him  by  im- 
pairing his  security.  The  measure  of  his  damages  is  therefore 
limited  to  the  loss  he  may  sustain  upon    his   security.^     Under 

1  Clark  w.  Reyburn,  1  Kans.  281 ;  Har-  &  Byrom  v.  Chapin,  113  Mass.  308., 
ris  V.  Bannon,  78  Ky.  568.  To  like  effect  Otherwise  where  a  mortgage  is  regarded 
see  Citizens'  Bank  v.  Knapp,  22  La.  Ann.*  as  a  mere  lien  and  not  a  title  to  the  land. 
117;  Buckout  v.  Swift,  27  Cal.  433;  There  the  insufficiency  of  the  security 
Woehler  v.  Endter,  46  Wis.  301 ;  S.  C.  must  be  shown.  Gardner  v.  Heartt,  3 
8  Cent.  L.  J.  325.  Den.  (N.  Y.)  232  ;  Lane  v.  Hitchcock,  14 

2  Vanderslice  v.  Knapp,  20  Kans.  647.  Johns.  (N.  Y.)  213. 

3  Kircher  v.  Schalk,  39  N.  J.  L.  335.  6  Van  Pelt  v.   McGraw,  4  N.  Y.  110; 
See  §  688.  Schalk  v.  Kingsley,  42  N.  J.  L.  32. 

*  Jackson  v.  Turrell,  39  N.  J.  L.  329.  In  the  New  York  case  the  court  said  : 

368 


REMEDIES    FOR   REMOVAL    OF. 


[§  454. 


this  rule  the  action  must  rest  upon  proof  that,  before  the  alleged 
injur}',  the  mortgaged  premises  were  of  sufficient  value  to  pay 
the  plaintiff's  mortgage,  or  a  part  of  it,  and  that,  by  reason  of 
such  injury,  they  became  inadequate  for  that  purpose.^  This  is 
the  rule  in  New  York  and  New  Jersey .^ 


"This  action  is  not  based  upon  the  as- 
sumption that  the  plaintiffs  land  has  been 
injured,  but  that  his  mortgage  as  a  secu- 
rity has  been  impaired.  His  damages, 
therefore,  would  be  limited  to  the  amount 
of  injury  to  the  mortgage,  however  great 
the  injury  to  the  land  might  be." 

1  Schalk  V.  Kingsley,  42  N.  J.  L.  32,  36, 
per  Van  Syckel,  J. 

-  In  Schalk  i'.  Kingsley,  supra,  the  Su- 
preme Court,  discussing  these  different 
rules  of  damages,  their  adaptation  to  the 
nature  of  the  mortgagee's  estate,  and  the 
practical  results  produced  by  each,  say : 
"  There  is  much  force  in  the  Massachu- 
setts view,  that  the  mortgagee  is  entitled 
to  be  protected  in  the  enjoyment  of  the 
security  for  which  he  contracted,  however 
ample  it  may  be,  and  the  wrong-doer  him- 
self ought  not  to  complain  if  he  is  com- 
pelled to  restore  what  he  unlawfully  re- 
moved. Especially  would  this  be  so  in 
the  case  of  a  mortgage  maturing  at  a  re- 
mote future  period,  when  the  real  value 
of  the  premises  would  depend  upon  con- 
tingencies which  might  not  be  foreseen. 
But  while  injustice  may  in  some  cases  be 
done  by  rejecting  this  rule,  it  is  not  in 
harmony  with  the  nature  of  the  mort- 
gagee's estate,  and  its  adoptic/n  in  practice 
would  lead  to  many  difficulties.  In  Mas- 
sachusetts, by  force  and  effect  of  the  mort- 
gage, and  as  between  the  parlies  to  the 
mortgage,  the  right  of  possession  also 
passes  immediately  to  the  mortgagee,  and 
carries  with  it  the  incidents  of  a  right  to 
sue  in  trespass  for  any  injury  to  the  free- 
hold. There  it  may  be  a  neces^sary  log- 
ical sequence  that  in  an  action  at  law,  the 
damages,  which  represent  the  injury  to 
the  premises,  must  go  to  the  owner  of  the 
legal  estate. 

"The  objections  to  the  Massachusetts 
rule  arc  oinious,  and  are  not  met,  in  my 
judgment,    l)y    the   court    in   Gooding   v. 

VOL.  I.  24 


Shea,  before  cited.  Such  litigation  would 
frequently  result  to  the  benefit  of  the  mort- 
gagor, by  whose  consent  the  wrong  was 
committed,  by  operating  as  a  satisfaction 
of  the  mortgage  when  the  premises  were 
still  ample  to  satisfy  the  mortgage  debt. 
A  more  serious  objection  would  exist  in 
the  fact  that  the  action  would  be  maintain- 
able for  every  slight  injury  to  the  freehold. 
The  person  who  purchased  and  removed  a 
stick  of  timber  or  a  cord  of  wood,  or  the 
mechanic  who  tore  down  an  old  building 
preparatory  to  the  erection  of  a  new  one, 
or  who  made  any  alteration  in  the  struc- 
tures upon  the  premises  which  might  be 
deemed  in  any  degree  detrimental  to  their 
value,  would  be  amenable  to  suit.  But 
admitting  that  the  third  mortgagee  may 
sue  and  recover  for  the  entire  injury  to  the 
premises,  how  shall  the  damages  be  appro- 
priated, and  how  would  the  wrong-doer  be 
shielded  from  further  recovery  by  the  first 
and  second  mortgagees  ?  The  prior  mort- 
gagees could  not  be  made  parties  to  such 
suit,  and  they  would  not  be  bound  by  the 
verdict  as  to  the  amount  of  damages  found 
in  favor  of  the  third  mortgagee;  and,  in 
our  practice,  there  is  no  method  in  which 
the  injury  to  each  mortgagee  could  be  as- 
certained, and  the  distribution  prbperly 
made.  In  fact,  the  rule  repels  the  idea  of 
distribution,  for  it  is  based  upon  the  no- 
tion that  the  mortgagee  plaintiff  is  entitled 
to  the  entire  damage  done  to  the  lands.  A 
rule  which  would  subject  a  defendant  to 
pay  to  each  of  several  mortgagees  the  full 
amount  of  damage  which  he  had  commit- 
ted upon  the  j)remi.ses  would  unhesitatingly 
be  condemned. 

"  It  is  therefore  suggested,  in  the  Mas- 
sachusetts cases,  that  but  one  recovery 
wouhi  be  allowed,  and  that  would  after- 
wards be  aj)i)ropriatcd  under  the  direction 
of  the  court.  A.^idc  from  the  entire  ab- 
sence of  any  recognized  procedure  in  our 

369 


§  455.]  FIXTURES  : 

When  such  injury  has  been  done,  there  can  be  but  one  recovery 
for  it,  and  a  reasonable  satisfaction  made  in  good  faith  to  a  prior 
mortgagee  bars  an  action  by  a  subsequent  mortgagee.^  If  after 
the  removal  of  the  fixtures,  and  before  the  mortgagee  brings  an 
action  of  trespass  to  recover  their  value,  he  sells  the  mortgaged 
premises  under  a  power  of  sale,  and  receives  therefrom  more  than 
enough  to  pay  his  claim  and  all  prior  incumbrances,  this  fact  may 
be  shown  in  mitigation  of  his  claim  for  damages.^  But  upon  the 
question  whether  the  injury  had  been  settled  and  satisfied  by  pay- 
ment to  the  first  mortgagee,  evidence  is  admissible  to  show  that 
the  articles  removed  were  of  greater  value  than  the  sum  so  paid, 
and  that  the  damage  done  to  the  premises  by  their  removal  was 
greater  than  the  value  of  the  articles  so  removed.^ 

In  Wisconsin  it  is  held  the  mortgagee  after  a  decree  of  fore- 
closure may  maintain  an  action  for  an  injury  done  the  mortgaged 
premises,  either  by  the  mortgagor  or  by  a  stranger,  provided  the 
security  be  thereby  impaired  and  the  mortgagor  be  insolvent.* 

A  mortgagee  may  recover  the  value  of  fixtures  wrongfully  re- 
moved from  the  mortgaged  premises,  although  since  such  removal 
of  them  the  property  has  been  sold  under  a  power  in  his  mort- 
gage, and  he  has  himself  purchased  it  at  a  price  sufficient  to  sat- 
isfy his  claim.     His  title  is  sufficient  to  sustain  a  cause  of  action.^ 

455.  A  mortgagee  not  having  possession,  or  the  right  of 
possession,  cannot  maintain  an  action  of  tort  in  the  nature  of  tres- 
pass quare  clausitm  /regit  against  a  stranger  for  breaking  and 
entering  the  mortgaged  premises  and  removing  fixtures.  But  the 
right  to  recover  damages  for  the  value  of  the  fixtures  is  separable 

courts  of  law  by  which  the  several  parties  "  The  action  must  rest  upon  proof  that, 

in  interest  could  be  bound  by  the  verdict,  before  the  alleged  injury,  the  mortgaged 

and  by  which  an  appropriation  could  be  premises  were  of  sufficient  value  to  pay 

made,  such  a  course  would  manifestly  be  the  plaintiff's  mortgage  or  a  part  of  it, 

mere  circumlocution,  leading  to  the  prac-  and  that,  by  reason  of  such  injury,  they 

tical   adoption  of  the  other  rule ;  for,  in  became  inadequate  for  that  purpose.     In 

the  end,  the  distribution  would  necessarily  that  view  the  extent  of  the  loss  can  be  ap- 

be  made  upon  the  basis  of  the  actual  loss  proximately  computed.    This,  in  my  opin- 

to  each  mortgagee.  ion,  is  the  better  rule,  and  one  which,  in 

"All  these  difficulties  will  be  obviated  its  practical  application,  will   not   be  at- 

by  adopting  the  injury  to  the  security  as  tended  with  any  serious  difficulty  " 

the  basis  of  damages.     Under  that  rule,  i  Byrom  v.  Chapin,  113  Mass.  308. 

no  suit  can  be  maintained  unless  the  plain-  ^  2  King  v.  Bangs,  120  Mass.  514. 

tiff  sustains  a  substantial  injury;  and  each  ^  Byrom  v.  Chapin,  supra. 

mortgagee  in  turn  may,  without  reference  *  Jones  v.  Costigan,  12  Wis.  677. 

to  the  other,  recover  such  damage  as  he  ^  Laflin  v.  Griffiths,  35  Barb.  (N.  Y.)  58. 
can  show  he  has  sustained  on  his  part. 

370 


REMEDIES   FOR   REMOVAL    OF.  [§  465. 

from  that  to  recover  for  "  breach  to  the  close."  ^  The  right  of 
present  possession  onlj'^  affects  the  form  of  action.  The  right  to 
recover  depends  upon  the  title,  and  not  upon  possession  or  the 
right  of  possession.  In  an  action  of  tort  for  forcibly  entering 
the  house  and  removing  fixtures,  the  mortgagee,  even  before  con- 
dition broken,  may  recover  the  full  amount  of  damage  done  to 
the  estate  by  the  removal,  without  regard  to  the  sufficiency  of  his 
security.  Until  the  whole  debt  be  paid,  he  cannot  be  deprived 
of  any  substantial  part  of  his  entii-e  security  without  full  redress 
therefor.  "As  the  injury  affects  the  estate,  it  may  be  sued  for 
directly  by  any  one  in  whom  the  legal  interest  is  vested.  A  sec- 
ond or  third  mortgagee,  though  not  in  possession,  has  a  sufficient 
interest  in  the  estate  to  maintain  an  action  for  such  an  injury. 
Although  it  is  true  that  a  stranger  may  thus  be  liable  to  either  of 
the  several  mortgagees,  as  well  as  to  the  mortgagor,  it  does  not 
follow  that  he  is  liable  to  all  successively.  The  superior  right  is 
in  the  party  having  superiority  of  title.  But  the  defendant  can 
resist  neither  by  merely  showing  that  another  may  also  sue  or 
has  sued.  If  he  would  defeat  the  claim  of  either,  he  must  show 
that  another  having  a  superior  right  has  appropriated  the  avails 
of  the  claim  to  himself.  The  demand  is  not  personal  to  either 
mortgagee,  but-^arises  out  of  and  pertains  to  the  estate  ;  and, 
when  recovered,  applies  in  payment,  pro  tanto,  of  the  mortgage 
debt,  and  thus  ultimately  for  the  benefit  of  the  mortgagor,  if  he 
redeems.''  ^ 

The  mortgagee,  even  before  entering  into  possession,  can  main- 
tain an  action  against  the  mortgagor  or  any  other  person  who 
severs  and  removes  from  the  mortgaged  estate  any  articles  which 
have  been  annexed  to  and  made  part  of  it.  It  makes  no  differ- 
ence as  against  the  mortgagee  that  the  fixtures  are  severed  by 
accident.  Therefore  if  a  building  be  partly  destroyed  by  fire,  the 
mortgagor  has  no  right  to  sell  such  parts  of  it  as  are  saved  ;  and 
he  cannot  maintain  an  action  for  the  price  of  such  articles  if  the 
value  of  the  land  is  less  than  the  amount  of  the  mortgage  debt, 
and  the  mortgagee  has  entered  for  breach  of  the  condition  and 
forbidden  the  payment  to  the  mortgagor.'' 

'  Gooding  i-.  Shea,  10.3  Mass.  360;  I'age  the  case.     Jackson  v.  Turrell,  .39  N.  J.  L. 

V.  Robinson,  10  Gush.  (Mass.)  99;  Wood-  329. 

man  t;.  Franci.s,  14  Allen  (Mass.),  198.  »  Wilmarth     v.     Bancroft,     10     Allen 

-  Per  Wells,  J.,  in  Goodinj;  v.  Shea,  su-  (Mass.),  348. 
]>ra.      In  New  Jersey  the  action  is  upon 

371 


§  455.] 


FIXTURES. 


Where  the  mortgagee  has  no  right  to  enter  and  the  mortgagor 
can  be  deprived  of  possession  only  by  a  foreclosure  and  sale,  he 
may  retain  possession  after  the  sale  until  the  delivery  of  the  deed 
to  the  purchaser  ;  but  if  he  remove  fixtures  in  the  mean  time, 
the  purchaser  may  recover  them  by  an  action  of  replevin.  The 
purchaser's  deed  takes  effect  by  relation  at  the  date  of  the  mort- 
gage, and  parses  fixtures  subsequently  annexed  by  the  mortgagor.^ 

A  mortgagee  not  in  actual  possession  and  who  has  not  entered 
to  foreclose  cannot  maintain  trespass  against  the  owner  of  the 
equity  of  redemption  for  cutting  grass  on  the  land,  as  the  owner 
has  a  right  to  take  every  annual  crop.^  But  if  the  property  de- 
tached from  the  realty  be  fixtures  subject  as  part  of  the  realty 
to  a  mortgage,  the  mortgagee,  whether  in  possession  of  the  prem- 
ises or  not,  may  sue  for  the  recovery  of  the  things  themselves  in 
an  action  of  replevin ;  ^  or  may  sue  in  trespass  for  damage  done 
the  freehold ;  or  he  may,  in  an  action  of  trover,  recover  their 
value.^  A  tort-feasor  has  no  right  to  complain  of  the  form  of  the 
remedy. 


1  Sands  v.  Pfeiffer,  10  Cal.  258.  See, 
however,  §§  453,  684,  and  Alexander  v. 
Shonyo,  20  Kans.  705;  Vanderslice  v. 
Knapp,  20  Kans.  647. 

372 


2  Woodward  v.  Pickett,  8  Gray  (Mass.), 
617. 

8  Laflin  v.  Griffiths,  35  Barb.  (N.  Y.)  58. 

*  Hitchman  v.  Walton,  4  M.  &  W.  409 ; 
Holland  v.  Hodgson,  L.  R.  7  C.  P.  328. 


r 


CHAPTER   XII. 

REGISTRATION   AS    AFFECTING   PRIOEITY. 


I.  Nature   and    application    of  registry 

acts,  456-479. 

II.  Registry  acts  of  the   several  states. 

480-526. 
III.  Requisites  as  to   execution   and   ac- 
knowledgment, 527-541. 


IV.  Requisites  as  to  the  time  and  man- 
ner of  recording,  542-549. 
V.  Errors  in  the  record,  550-556. 

VI.  The   effect  of  a  record  duly  made, 
557-569. 


I.    Nature  and  Application  of  Registry  Acts. 

456.  In  general.  —  In  this  country  a  mortgage,  like  any  other 
conveyance  of  real  estate,  is  subject  to  registry  laws,  by  which  its 
priority  depends  for  the  most  part  upon  the  priority  of  its  regis- 
tration. These  laws  in  substance  provide  for  the  recording  of  all 
deeds  properly  executed  which  affect  titles  to  real  property,  and 
establish  priority  of  title  under  that  conveyance  which  is  first 
recorded,  although  another  conveyance  may  have  been  first  exe- 
cuted. 

Every  subsequent  purchaser  is  bound  to  take  notice  of  a  deed 
in  the  line  of  title  previously  recorded,  although  he  had  no  actual 
notice  of  it.  If  he  has  relied  upon  the  representations  of  his 
grantor  in  regard  to  the  title  to  the  premises  without  consulting 
the  record,  which  is  always  open  to  his  inspection,  he  has  done  so 
at  his  peril ;  and  although  he  may  in  such  case  be  an  innocent 
purchaser  in  fact,  he  is  not  regarded  as  such  in  law.^ 

Systems  of  registration  of  land  titles  more  or  less  complete 
liave  for  a  long  time  prevailed  in  Germany,  France,  and  Scotland, 
and  perhaps  in  other  European  states.  Yet  no  general  system 
ni  registration  has  ever  been  adopted  in  England.'^  In  America, 
however,  registry  laws  were  enacted  in  the  several  colonies  very 
-^oon  after  their  settlement.  In  Massachusetts,  as  early  as  1641, 
•*  for  the  avoiding  of  fraudulent  conveyances,  and  that  every  man 
may  know  wiiat  estatti  or  interest  otlier   men    may  iiave   in   any 

•  Buchanan  v.  International  Hunk,  78         -  Sec  §  670. 
111.  500. 

373 


§§  457,  458.]      REGISTRATION    AS    AFFECTING  PRIORITY. 

houses,  lands,  or  other  hereditaments  they  are  to  deal  in,"  it  was 
enacted  that  "  no  mortgage,  bargain,  sale,  or  grant  made  of  any 
houses  or  lands,  rents,  or  other  hereditaments,  where  the  grantor 
remains  in  possession,  shall  be  of  any  force  against  other  persons 
except  the  grantor  and  his  heirs,  unless  the  same  be  acknowledged 
before  some  magistrate  and  recorded."  In  the  Plymouth  Colony, 
convej^ances  of  land,  including  mortgages,  were  required  to  be 
recorded  by  a  law  enacted  five  years  before  that  of  Massachusetts 
Bay. 

457.  Title  deeds.  —  The  English  law  in  regard  to  the  posses- 
sion of  title  deeds  has  generally  no  application  in  this  country,  on 
account  of  the  prevalence  here  of  a  general  system  of  registry. 
Under  the  registry  laws,  the  record  being  notice  to  all  the  world, 
it  is  not  necessary  that  the  mortgagee  should  have  possession  of 
the  title  papers.^  Without  the  protection  of  such  laws,  the  pos- 
session of  the  title  deeds  becomes  an  important  badge  of  title; 
and  it  is  said  that  the  old  rule  in  English  chancery  was,  that  if  a 
person  took  a  mortgage  and  voluntarily  left  the  title  deeds  with 
the  mortgagor,  he  should  be  postponed  to  a  subsequent  mortgagee 
without  notice,  to  whom  the  title  deeds  were  delivered ;  bnt  the 
later  English  doctrine  is,  that  the  mere  circumstance  of  leaving 
the  title  deeds  with  the  mortgagor  is  not  of  itself  sufficient  to 
produce  this  result.  There  must  be  something  like  a  voluntary 
and  unwarrantable  concurrence  of  the  first  mortgagee  in  the 
mortgagor's  retaining  the  title  deeds,  so  that  he  really  concurs  in 
a  fraud  or  is  grossly  negligent,  to  defeat  his  mortgage.^ 

458.  A  mortgagee  of  real  estate  is  a  purchaser  within  the 
meaning  of  the  recording  laws.  This  is  declared  by  statute  in 
some  states,  and  in  others  it  is  a  rule  of  judicial  construction.^ 
"  When  I  speak  of  a  pui'chaser  for  a  valuable  consideration," 
says  Lord  Hardwicke,  "  I  include  a  mortgagee,  for  he  is  a  pur- 
chaser pro  tanto^  ^  A  trustee  in  a  deed  of  trust  is  also  a  pur- 
chaser for  value.     He  occupies  the  same  ground  with  respect  to 

1  Evans  v.  Jones,  1  Yeates  (Pa.),  172,  Chapman?;.  Miller,  130  Mass.  289;  Jor- 
174.  dan  v.  McNeil,  25  Kans.  459;  Whelan  v. 

2  Berry  I'.  Mutual  Ins.  Co.  2  Johns.  (N.  McCreary,  64  Ala.  319;  McDowell  v. 
Y.)  Ch.  603.  Lockhart,  93  N.  C.  191. 

3  §  710 ;  Haynsworth  v.  Bischoif,  6  S.  *  In  Wilioughby  v.  Willoughby,  1  T. 
C.  159;  Bass  V.  Wheless,  2  Tenn.  Ch.  R.  763;  and  see  Porter  v.  Green,  4  Iowa, 
531;  Patten  v.  Eberhart,  52  Iowa,  67;  571;  Seevers  v.  Delashmutt,  11  Iowa, 
Moore  v.  Walker,  3  Lea  (Tenn.),  656;  174;  Salter  r.  Baker,  54  Cal.  140 ;  Singer 
Weinberg   v.   Eempe,    15    W.   Va.   829;  Manufacturing  Co.  v.  Chalmers,  2  Utah, 

374  542. 


NATURE  AND   APPLICATION   OF  REGISTRY   ACTS. 


[§  458. 


notice,  either  actual  or  constructive,  of  any  outstanding  equities, 
that  a  mortgagee  does.^ 

But  a  distinction  is  taken  by  some  courts  between  a  mortgage 
given  to  secure  a  preexisting  debt  and  one  upon  which  the  con- 
sideration is  paid  at  the  time  of  its  execution.  The  former,  al- 
though given  upon  a  valid  consideration  as  between  the  parties, 
is  not  regarded  as  a  purchase  for  a  valuable  consideration  which 
will  entitle  the  mortgagee  to  protection  against  prior  equities, 
although  he  had  no  notice  of  them  when  he  took  the  mortgage.^ 
He  must  have  parted  with  some  value  or  some  right  upon  the 
faith  of  the  mortgage  and  at  the  time  of  it,  to  entitle  him  to 
protection  as  a  purchaser.  He  must  have  received  some  new  con- 
sideration, or  must  have  relinquished  some  security  for  a  pre- 
existing debt  due  him.'^ 

A  mortgage   to   secure  a  future  indebtedness  constitutes  the 


1  New  Orleans  Canal  &  Banking  Co.  v. 
Montgomery,  95  U.  S.  16;  Kesner  v. 
Trigg,  98  U.  S.  50. 

2  Morse  v.  Godfrey,  3  Story,  364,  389. 
New  Jersey  :  Pancoast  v.  Duval,  26  N.  J. 
Eq.  445;  Mingus  v.  Condit,  23  lb.  313. 
Alabama :  Gafford  v.  Stearns,  51  Ala. 
434 ;  Short  v.  Battle,  52  Ala.  456  ;  Alex- 
ander r.  Caldwell,  55  Ala.  517  ;  Coleman 
V.  Smitb,  55  Ala.  368 ;  Cook  v.  Parham, 
63  Ala.  456  ;  Thurman  v.  Stoddard,  63 
Ala.  336  ;  Jones  v.  Robinson,  77  Ala.  499. 
South  Carolina  :  Zorn  v.  R.  R.  Co.  5  S.  C. 
90.  New  York  :  Manhattan  Co.  v.  Evert- 
son,  6  Paige,  457 ;  Van  Heusen  v.  Rad- 
cliff,  17  N.  Y.  580,  584;  Cary  v.  White,  7 
Lans.  I;  S.C.  52  N.  Y.  138 ;  Weaver  v. 
Barden,  49  lb.  286;  Padgett  v.  Lawrence, 
10  Paige,  170,  180;  Stalker  v.  M'Donald, 
6  Hill,  93  ;  Dickerson  v.  Tillinghast,  4 
Paige,  215  ;  Coddington  v.  Bay,  20  Johns. 
637  ;  Westervelt  v.  Ilaff,  2  Sandf.  Cli.  98 ; 
Union  Dime  Savings  Inst.  v.  Duryea,  67 
N.  Y.  84 ;  De  Lancey  v.  Stearns,  66  N.  Y. 
157  ;  Bank  of  Savings  v.  PVank,  13  J.  & 
S.  404  ;  Constant  v.  Am.  Bap.  Soe.  21  J. 
&  S.  170.  Iowa:  Koon  v.  Tramel,  32  N. 
W.  Rep.  243;  Phelps  v.  Fockier,  61  Iowa, 
340;  14  N.  W.  Rep.  729  ;  16  N.  W.  Rep. 
210.  Michigan:  Hoxheimer  r.  Giinn,  24 
Mich.  372 ;  Edwards  v.  McKernan,  55 
Mich.  520,  523. 


The  same  rule  was  laid  down  in  Illinois 
in  the  case  of  Metropolitan  Bank  v.  God- 
frey, 23  111.  579.  In  later  cases,  however, 
it  has  been  held,  so  far  as  negotiable  paper 
is  concerned,  that  an  indorsee  taking  it  be- 
fore maturity  as  payment  or  security  for 
a  preexisting  debt  is  a  holder  for  value, 
and  takes  it  free  from  latent  defences  on 
the  part  of  the  maker.  Doolittle  v.  Cook, 
75  111.  354  ;  Manning  v.  McClure,  36  111. 
490.  In  the  latter  case  Mr.  Justice  Law- 
rence, referring  to  Metropolitan  Bank  r. 
Godfrey,  supra,  said  :  "  We  do  not  desire 
to  be  understood  as  overruling  that  posi- 
tion ;  but  if  that  question  comes  again 
before  us,  it  will  be  open  to  argument 
whether  a  different  principle  should  be  ap- 
plied to  conveyances  of  real  estate  from 
that  which  all  the  members  of  the  court 
agree  should  be  applied  to  the  indorse- 
ment of  a  promissory  note." 

3  Spurlock  V.  Sullivan,  36  Tex.  511; 
Pickett  V.  Barron,  29  Barb.  (N.  Y.)  505  ; 
Webster  v.  Van  Stcenbergli,  46  Barb.  (N. 
Y.)  211;  and  see  Lawrence  v.  Clark,  36 
N.  Y.  128;  Schumpert  t'.  l)illard,55  Miss. 
348;  Hinds  v.  Pugh,  48  Miss.  268,272; 
Perkins  v.  Swank,  43  Miss.  349,360;  Wil- 
son V.  Knight,  59  Ala.  172  ;  Hartlctt  r. 
Varner,  56  Ala.  580;  Withers  r.  Little, 
56  Cal.  370. 

376 


§  458.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

mortgagee  a  purchaser  from  the  time  that  advances  are  made  by 
the  mortgagee  under  the  mortgage  without  actual  notice  of  a  sub- 
sequent mortgage.^ 

But  a  mortgage  to  secure  an  antecedent  debt  is  perfectly  valid 
as  between  the  parties,  whatever  may  be  its  effect  as  to  pur- 
chasers or  incumbrancers.^  Moreover,  such  a  mortgage,  if  taken 
without  notice  of  one  given  to  secure  a  future  indebtedness,  has 
precedence  of  it,  if  it  be  first  recorded.^ 

The  mortgagee  for  an  antecedent  debt  acquires  a  lien  upon  the 
property  to  the  extent  only  of  the  mortgagor's  equitable  interest 
at  the  time.  Thus  if  the  mortgagor  has  then  contracted  to  sell 
the  land,  and  the  vendee  has  paid  a  portion  of  the  purchase 
money,  the  mortgage  is  a  lien  only  to  the  extent  of  the  unpaid 
purchase  money  upon  such  contract.  But  after  the  vendee  has 
received  notice  of  the  mortgage,  he  cannot  make  a  valid  payment 
of  the  remainder  of  the  purchase  money.* 

This  rule  requiring  the  payment  of  an  actual  consideration  at 
the  time  of  the  transaction  to  constitute  a  bond  fide  purchaser, 
within  the  meaning  of  the  recording  acts,  does  not  apply  to  any 
one  but  the  original  purchaser.  He  being  protected  by  the  re- 
cording acts  from  a  prior  unrecorded  conveyance,  any  one  who 
takes  an  assignment  from  him  is  entitled  to  the  same  protection, 
although  the  assignee  parts  with  no  valuable  consideration  for 
the  assignment,  and  even  though  he  has  actual  notice  of  the  prior 
unrecorded  conveyance.^ 

If  the  mortgagee  upon  taking  the  mortgage  has  surrendered 
any  valuable  right,  such  as  a  vendor's  lien  upon  the  property,  the 
mortgage  is  based  upon  a  valuable  consideration  as  much  as  if  he 
had  paid  mone}'  for  it.^ 

If  the  sole  consideration  of  a  conveyance  be  the  love  and  affec- 
tion of  the  grantor,  it  will  not  hold  against  a  prior  unrecorded 
mortgage  of  the  same  property,  or  against  a  mortgage  imper- 
fectly recorded.'' 

But  numerous  authorities  hold  that  a  mortgagee  who  has  taken 
his  mortgage  in  good  faith  to  secure  a  preexisting  debt  is  entitled 

1  Simons  v.  First  Nat.  Bank,  93  N.  Y.  *  Young  v.  Guy,  87  N.  Y.  457,  affirm- 
269.  ing  23  Hun,  1. 

2  Steiner  v.  McCall,  61  Ala.  406  ;  Tur-  ^  Webster  v.  Van  Steenbergh,  46  Barb, 
ner  v.  McFee,  61  Ala.  468.  N.  Y.  211  ;  Wood  v.  Chapin,  13  N.  Y.  509. 

=5  National  Bank  v.  Whitney,  103  U.  S.         6  Lane  v.  Logue,  12  Lea  (Tenn.),  681. 
99.  7  Aubuchon   v.   Bender,  44   Mo.   560; 


376 


Bishop  V.  Schneider,  46  Mo.  472. 


NATURE   AND   APPLICATION   OF   REGISTRY  ACTS.       [§§  459,  460. 

to  be  regarded  as  a  purchaser,  and  to  be  protected  as  such.^     The 
weio-ht  of  authority,  however,  seems  to  be  against  this  position. 

459.  The  giving  of  further  time  for  the  payment  of  an  exist- 
ino-  debt,  by  a  valid  agreement,  for  any  period  however  short, 
though  it  be  for  a  day  only,  is  a  valuable  consideration,  and  is 
sufficient  to  support  a  mortgage  as  a  purchase  for  a  valuable  con- 
sideration.2  But  the  mere  taking  of  collateral  security  on  time  is 
not  by  itself,  and  in  the  absence  of  any  agreement  beyond  it,  an 
extension  of  the  time  of  payment  of  the  original  debt;  and  there- 
fore a  mortgage  taken  as  security  in  such  way  is  not  a  purchase 
for  value.3  Where  a  mortgage  is  made  in  terms  to  secure  an 
existing  note,  and  the  mortgage  declares  that  "  the  same  shall  be 
paid  in  the  manner  following,"  giving  future  days  of  payment 
beyond  the  time  of  payment  mentioned  in  the  note,  the  mortgage 
extends  the  time  of  payment  of  the  note.  The  mortgage  in  such 
case,  by  reason  of  the  extension  of  the  time  of  payment,  is  founded 
upon  a  valuable  consideration.  The  date  of  payment  in  the  note 
cuid  the  date  of  payment  in  the  mortgage  being  inconsistent,  the 
latter  should  prevail.* 

A  mortgage  made  to  secure  a  loan  made  at  the  time,  as  well  as 
a  preexisting  debt,  is  based  upon  a  valid  consideration.^ 

460.  A  judgment  creditor  is  not  a  purchaser  within  the  re- 
cording acts  of  some  states.  He  was  not  regarded  as  a  purchaser 
at  common  law.  In  a  case  in  Peere  Williams,  "  it  was  granted," 
said  the  reporter,  "that  if  Lord  Winchelsea,  the  covenantor,  had 
made  a  mortgage  of  the  premises  for  a  valuable  consideration  and 
without  notice,  such  mortgagee,  in  regard  that  he  might  have 
pleaded  his  mortgage,  and  would  have  been  as  a  purchaser  with- 

1  Babfock   v.  Jordan,  24  Ind.  14,  and  »  Cary  v.  White,  52  N.  Y.  138,  revers- 

ciises  cited;   Jackson  i'.   Reid,   30   Kans.  ing  7  Lans.  (N.  Y.)  1  ;  Wood  i-.  Robinson, 

10;    1   Pac.  Rep.  308;    Ilayner  v.  Eber-  22  N.  Y.  564;  the  dictum  in  the  case  of 

hardt  (Kans.),  15  Pac.  Rep.  168.  Pratt  v.  Coman,  37  N.  Y.  440,  to  the  con- 

■^  §  610;  Hale  v.  Omaha  Nat.  Bank,  33  trary,  is  denied  in  Gary  v.  White,  supra. 

N.  Y.  Superior  Ct.  40 ;  Cary  v.  White,  52  The  courts  have  been  disposed  to  limit  the 

N.  Y.   138;  Gilchrist  v.   Gough,  63  Ind.  authority  of  Cary  v.  White  to  the  facts  of 

576  ;  .S'.  C.  19  Alb.  L.  J.  276;  Schumpert  that  case.     Durkee  v.  Nat,  Bank  of  Fort 

V.  Diliard,  55  Miss.  348;  Port  v.  Embree,  Edward,  36  Ilun  (N.  Y.),  565  ;  Hubbard 

54  Iowa,  14  ;  Koon  v.  Tramel,  32  N.  W.  v.  Gurney,  64  N.  Y.  467  ;  Grocers'  Bank 
Rep.    243;   Phelps   v.   Fockler,  61    Iowa,  y.  Pcnfield,  7  Hun  (N.  Y.),  279,  282. 
.•540;    14  N.   W.    Rep.  729;    16    lb.  210;  ■•  Durkee  i-.  Nat.  Bank  of  Fort  Edward, 
Cook  V.  Parham,  63  Ala.  456  ;  Thanicb  v.  36  Hun  (N.  Y.),  565. 

Kembcrt,  (;:i  Ala.  561  ;  Jones  v.  Robinson,         ^  Branch  v.  Griflin  (N.  C),  5  S.  E.  Rep. 
77  Ala.  49'J;  Sullivan  Sav.  Inst.  v.  Young,     398;    Bunk   v.  Bridgers,  98  N.  C.  67  ;  3 

55  Iowa,  132.  S.  E.  Rep.  826. 

377 


§  461.]  REGISTRATION  AS   AFFECTING   PRIORITY. 

out  notice,  should  have  held  place  against  the  intended  pur- 
chaser, for  then  the  money  would  have  been  lent  on  the  title  and 
credit  of  the  land,  and  would  have  attached  on  the  land  ;  which 
would  not  be  so  in  the  case  of  a  judgment  creditor,  who,  for 
aught  that  appears,  might  have  taken  out  execution  against  the 
person  or  goods  of  the  party  that  gave  the  judgment ;  and  a 
judgment  is  a  general  security,  not  a  specific  lien  on  the  land."  ^ 
And  in  another  case  given  by  the  same  reporter  it  was  said,  that 
"  one  cannot  call  a  judgment  creditor  a  purchaser,  nor  has  such 
creditor  any  right  to  the  land ;  he  has  neither  jus  in  re  nor  ad 
rem."  2  The  recording  acts  do  not  necessarily  change  the  com- 
mon law  in  this  respect,  unless  they  in  tei*ms  interpose  to  protect 
a  judgment  lien ;  and  where  they  do  not  it  stands,  as  at  common 
law,  subject  to  the  prior  conveyance.^  If  there  be  an  existing 
mortgage  at  the  time  the  judgment  is  rendered,  that  will  bind 
only  the  equity  of  redemption  whether  the  mortgage  be  recorded 
or  not,  or  whether  the  judgment  creditor  had  or  had  not  actual 
notice  of  the  mortgage  when  he  obtained  the  judgment.*  An 
attachment  of  land  upon  the  debt  of  one  holding  the  record  title 
does  not  avail  at  all  against  the  equitable  owner  of  the  estate,  or 
against  one  claiming  under  a  mortgage  or  deed  not  recorded.^ 
There  is  no  appreciable  distinction  between  an  attachment  and  a 
levy  of  an  execution  or  a  judgment  lien,  except  that  which  re- 
sults from  the  amount  of  expense  incurred  in  the  latter  proceed- 
ings, and  such  expense  cannot  be  regarded  as  placing  the  cred- 
itor in  the  situation  of  a  bona  fide  purchaser.^  Whether  the 
lien  be  by  attachment  or  by  judgment,  it  is  a  lien  only  upon  the 
real  estate,  or  the  interest  in  it  owned  by  the  debtor,  not  upon 
that  owned  by  another,  as  is  the  case  when  the  debtor  has  con- 
veyed it  or  mortgaged  it,  although  the  deed  be  unrecorded.  The 
creditor  is  entitled  to  the  same  rights  as  the  debtor  had,  and  to 
no  more.'^ 

461.  A  mortgage  recorded  prior  to  an  entry  of  judgment 
which  is  a  lien  upon  the  property  takes  precedence  of  the  judg- 
ment lien ;  ^  and  a  mortgage  recorded  prior  to  an  attachment  is 

1  Finch  V.  Winchelsea,  1  P.  Wms.  277.  *  Knell  v.  Green  St.  Building  Asso.  34 

2  Brace   v.   Marlborough,   2   P.    Wms.     Md.  67. 

491.  5  Hackett  v.  Callender,  32  Vt.  97. 

3  Cover   V.  Black,  I    Pa.    St.  493,  per         ^  Hart  v.  Farmers'  &  Mechanics'  Bank, 
Chief  Justice ';;Gibson;  Rodgers  v.  Gibson,     33  Vt.  252. 

4  Yeates  (Pa.),  Ill  ;  Heister  i;.  Fortner,  2         "^  Norton  v.  Williams,  9  Iowa,  528. 
Binn.  (Pa.)  40.  8  Jackson  v.  Dubois,  4  Johns.   (N.  Y.) 

378  216;  Scott  V.  M'Murran,  7  Blackf.  (Ind.) 


NATURE  AND   APPLICATION   OF   REGISTRY   ACTS.         [§  462. 

superior  to  the  attachment  lien,  although  the  order  for  attach- 
ment be  in  the  sheriff's  hands  at  the  time,  but  it  be  not  actually 
made.i  And  so  if  a  creditor  have  actual  notice  of  a  prior  unre- 
corded mortgage  at  the  time  of  obtaining  his  judgment  lien,^  or 
before  the  debt  was  contracted,^  he  will  hold  his  lien  subject  to 
such  mortgage.  A  mortgage  executed  and  recorded  after  a  judg- 
ment is  entered  against  the  mortgagor  is  of  course  subject  to  the 
judgment  lien.^  As  between  a  mortgage  and  a  judgment  ren- 
dered in  a  county  different  from  that  in  which  the  land  is,  pri- 
ority is  determined  by  priority  of  registration  in  the  county  where 
the  land  is  situate.^  A  mortgage  and  a  judgment  entered  of 
record  on  the  same  day,  the  record  not  showing  which  was  first 
recorded,  are  payable  pro  rata.^  Under  a  statute  which  provides 
that  a  mortgage  recorded  within  a  certain  time  after  its  date  shall 
take  effect  as  between  the  parties  from  its  date,  a  judgment  re- 
covered subsequently  to  the  date  of  a  mortgage,  and  before  the 
recording  of  it,  binds  only  the  equity  of  redemption,  and  is  sub- 
ject to  the  mortgage  without  regard  to  the  question  of  actual 
notice,  if  the  mortgage  is  subsequently  recorded  within  the  time 
prescribed  by  law." 

462.  An  unrecorded  mortgage  is  preferred  to  a  subsequent 
judgment  where  a  judgment  creditor  is  not  considered  a  pur- 
chaser within  the  recording  acts  ;  for  a  judgment  lien  or  attach- 
ment is  not  protected  hj  them ;  and  a  mortgage  being  valid  with- 
out being  recorded,  for  all  purposes  except  that  of  preserving  its 
lien  against  bond  fide  purchasers  and  mortgagees,  is  valid  against 
a  subsequent  judgment  lien.^     In  such  case  it  makes  no  difference 

284  ;  Dunwell  v.   Bidwell,   8   Minn.   34  ;  "^  Knell  v.  Green  St.  Building  Asso.  34 

Wertz's  Appeal,  65  Pa.  St.  306  ;  Tarver  Md.  67. 

V.  Ellison,  57  Ga.  54 ;  Goodenough  v.  Mc-  ®  Burgh   v.    Francis,  1   Eq.    Cas.  Abr. 

Coid,   44    Iowa,   659  ;    Lamberville   Nat.  320,   pi.    1  ;    Finch    v.    Winchelsea,    1   P. 

Bank  v.  Bos.s  (N.  J  ),  13  Atl.  Rep.  18.  Wms.   277;    Burn   v.   Burn,  3  Ves.  582. 

1  Gray  v.  Patton,  13  Bush  (Ky.),  625.  New  York  :  Jackson   i'.  Dubois,  4  Johns. 

2  Williams  V.  Tatnall,  29  111.  553;  210  ;  Schmidt  v.  lioyt,  1  Edw.  652.  Cali- 
Thomas  v.  Vanlien,  28  Cal.  616;  and  see  fomia  :  Pixley  v.  Iluggins,  15  Cal.  127. 
Oheesebrough  v.  Millard,  1  Johns.  (N.  Y.)  Indiana:  Orth  v.  Jennings,  8  Biackf.  420. 
Ch.  409;  Mead  i-.  N.  Y.,  Housatonic  &  Minnesota:  Grcenleaf  v.  Edes,  2  Minn. 
Northern  R.  R.  Co.  45  Conn.  199.  264.    Mississippi:  Kelly  i;.  Mills, 41  Miss. 

3  Britton's  Appeal,  45  Pa.  St.  172;  267.  Iowa:  First  Nat.  Bank  v.  Hayz- 
Lahr's  Ai>pcai,  90  I'a.  St.  507.  ^elt,  40  Iowa,  659  ;  Iloy  v.  Allen,  27  Iowa, 

*  Tarver  v.  Ellison,  57  Ga.  54  ;  Lam-  208;  Churchill  v.  Morse,  23  Iowa,    229; 

bcrtville  Nat.  Bank  V.  Boss,  s»/)ra.  Welton   v.   Tiz/.urd,    15   Iowa,    495;    Bell 

''  FircbauKh  r.  Ward,  51  Tex.  409.  v-   V.Min^,    10   Iowa,    353;    Evans  t;.    Mc- 

«  Heiulri.k.son'.H  App.-»l,24Pa.  St.  363;  tilasson,   18   Iowa,  1.50;   Norton   v.  Wil- 

Maze  V.  Burke  (Pa.),  12  Phila.  335.  379 


§  462.]  REGISTRATION  AS   AFFECTING  PRIORITY. 

that  the  mortgage  was  given  to  secure  future  advances,  which  had 
not  been  made  when  the  judgment  was  rendered.^  Lands  omit- 
ted from  a  mortgage  by  mistake  may  be  regarded  as  conveyed  by 
an  unrecorded  mortgage  so  far  as  a  subsequent  judgment  is  con- 
cerned ;  and  the  lien  of  the  judgment  will  be  subject  to  the 
equity  of  the  mortgage.^  This  decision  is  based  upon  a  statute 
which  is  held  to  accord  priority  only  to  a  lien  evidenced  by  some 
instrument  "  required  to  be  recorded." 

Generally,  knowledge  on  the  part  of  a  judgment  or  attaching 
creditor  of  an  unrecorded  mortgage  upon  the  debtor's  property 
affects  him  as  it  would  a  purchaser  ;  that  is,  the  notice  is  equiv- 
alent to  a  record  of  the  mortgage.^  Although  the  creditor  has 
notice  of  the  mortgage,  a  purchaser  at  the  sale  upon  execution  is 
not  affected  by  it,  and  being  without  notice  himself,  he  acquires 
a  title  superior  to  the  unrecorded  mortgage.*  And,  on  the  other 
hand,  a  judgment  creditor  having  gained  priority  over  an  unre- 
corded mortgage,  a  purchaser  at  the  execution  sale  obtains  the 
same  priority,  notwithstanding  he  has  notice  of  the  mortgage.^ 

The  lien  of  a  mortgage  unrecorded  at  the  date  of  a  judgment, 
but  recorded  before  the  sale  upon  an  execution  thereon,  is  prior 
to  the  lien  of  the  judgment,  and  the  purchaser  buys  with  con- 
structive notice  of  the  mortgage.^  But  where  a  statute  provides 
that  a  mortgage  shall  not  be  a  lien  upon  the  property  until  it 
shall  have  been  recorded,  then  the  doctrine  of  notice,  it  has  been 
held,  does  not  apply  to  a  creditor,  but  to  purchasers  only.'^ 

An  unrecorded  mortgage  given  by  an  ancestor  retains  its  prior- 
ity over  a  judgment  recorded  against  an  heir  at  law  during  the 

liams,  9  Iowa,  528;  Patterson);.  Linder,  14  ern  R.  R.  Co.  45  Conn.  199;   Priest   v. 

Iowa,4l4  ;  Sigworth  v.  Meriam,24  N.  W.  Rice,  1  Pick.  (Mass.)  164. 

Rep.  4  ;  Duncan  y.  Miller,  64  Iowa,  223,  *  Miles  v.  King,  5  S.  C.  146. 

227;    Phelps   v.   Fockler,   61    Iowa,   340.  ^  Smith  v.   Jordan,  25   Ga.  687;  Wait 

Kentucky:  Righter  v.  Forrester,  11  Bush,  v.  Savage  (N.  J.),  15  Atl.  Rep.  225. 

278  ;  Morton   v.   Robards,  4    Dana,  258.  ^  Holden  v.  Garrett,  supra,   which  see 

Kansas :  Holden  v.  Garrett,  23  Kans.  98,  for  a  full  discussion  of  the  subject ;  fol- 

where  the   subject   is   quite  fully  consid-  lowed  in  Wallace  v.  MuhafFey,  supra. 

ered;  Wallace  u.  MahafFej',  12  Pac.  Rep.  "  Hulings   v.   Guthrie,  4  Pa.    St.   123; 

705.     Missouri:  Reed  u    Ownby,  44  Mo.  Jaques  v.   Weeks,   7    Watts   (Pa.),   261. 

204  ;  Sappington  v.  Oeschli,  49  Mo.  244 ;  These   cases    seem    to    be    overruled    in 

Potter  V.  McDowell,  43  Mo.  93;  Stillwell  Solms  v.  McCuUoch,  5  Pa.  St.  473;  but 

V.  McDonald.  39  Mo.  282.  the  authority  of  the  latter  case  is  ques- 

1  Thomas  v.  Kelsey,  30  Barb.  (N.  Y.)  tioued  in  Uhler  v.  Hutchinson,  23  Pa.  St. 
268.  110;  Davis  v.  Ownsby,  14  Mo.  170;  Hol- 

2  Galway  v.  Malchow,  7  Neb.  285.  den  v.  Garrett,  supra. 

3  Mead  v.  N.  Y.,  Housatonic  &  North- 

380 


NATURE   AND   APPLICATION   OF   REGISTRY   ACTS.         [§  463. 

lifetime  of  the  ancestor,  although  the  judgment  creditor  had  no 
notice  of  the  mortgage  when  he  recovered  his  judgment.^ 

463.  But,  on  the  other  hand,  in  many  states  it  is  held  that 
the  lien  of  a  judgment  or  attachment  is  superior  to  an  unre- 
corded mortgage,  or  to  a  recorded  mortgage  which  is  defectively 
executed,  in  the  absence  of  actual  notice  of  the  mortgage  on  the 
part  of  the  judgment  or  attaching  creditor,  or  of  the  execution 
purchaser.^ 

In  many  states  the  statutes  in  terms  provide  that  unrecorded 
conveyances  shall  be  void  as  to  creditors,  or  subsequent  incum- 
brancers ;  or  provide  that  they  shall  not  be  valid  against  other 
persons  than  the  grantors,  their  heirs  and  devisees,  and  persons 
liaving  actual  notice.^ 

In  Ohio,  inasmuch  as  the  statute  declares  that  mortgages  shall 
take  effect  only  from  the  time  they  are  left  for  record,  a  judg- 
ment recovered  after  the  date  of  a  mortgage,  and  before  it  is  re- 
corded, takes  precedence  of  it.*  Yet,  in  this  state,  a  judgment 
creditor  is  not  a  purchaser,  nor  is  he  in  any  way  entitled  to  the 
privileges  of  that  position.^ 

If  a  mortgage  of  land  lying  in  two  counties  be  recorded  in  but 
one,  a  foreclosure  sale  passes  the  land  in  both,  as  against  a  pur- 
chaser under  a  judgment  docketed  in  the  county  where  the  mort- 
gage was  not  recorded  subsequently  to  the  foreclosure  proceed- 
ings. The  want  of  registration  does  not  disable  the  debtor  from 
disposing  of  the  property  by  a  valid  conveyance  before  the  judg- 
ment lien  attaches ;  nor  does  it  prevent  the  court,  in  a  proceeding 
to  which  the  debtor  is  a  party,  from  transferring  it  by  a  judicial 
sale.^ 

1  Voorhis  v.  Westervelt  (N.  J.),  12  Atl.  6  Atl.  Rep.  663.     Massachusetts  :  Roane 

Rep.  53.3  ;  see  Vreeland  v.  Claflin,  24  N.  J.  v.  Baker,  2  N.  E.  Rep.  501.     Mississippi : 

Eq.  313.  Mississippi  Valley  Co.  v.  Chicaj,'0,  St.  L. 

-  Ohio:  Van    Thorniley    v.   Peters,  26  &  N.   0.   R.  R.   Co.  58  Miss.  846.     New 

Ohio    St.   471;  Mayham   v.   Coombs,    14  Mexico:  Moore  i;.  Davey,  1  N.  Mex.  303 . 

Ohio,  428;  White  v.  Uenman,    16   Ohio,  Ludlow  v.  Clinton  Line  R.  R.  Co.  1  Flip. 

59;  1   Ohio  St.  110;  Fosdick  v.  Barr,  3  25. 

lb.  471;  Holliday  v.  Franklin  Bank,   16  ^  Statutes   quoted.      See    §§   481-526; 

Ohio,  533.     New  Jersey  :  Sharp  v.  Shea,  Galla},'hcr  v.  Galletley,  128  Mass.  367. 

32  N.  J.  Eci-  65 ;  lloa^,'  v.  Sayre,  33  N.  J.  ■*  Mayham  v.  Coombs,  supra.     Under  a 

Eq.   552.     Pennsylvania:  Hulings  v.  Gu-  statute  of  the  State  of  Kansas,  quite  sim- 

thrie,  4  Pa.  St.  123;  llibljcrd  v.  Bovier,  1  ilar  in  effect,  the  Supreme  Court  of  the 

Grant  Cas.  266  ;  Uhler  u.  Hutchinson,  23  latter  state  took  a  diflferent  view.     Holdeu 

Pa.  St.  1 10.    Alabama  :  Barker  v.  Bell,  37  v.  Garrett,  23  Kans.  98. 

Ala.  354.     Connecticut :  Moor  v.  Watson,  ''  Tousley  v.  Tousley,  5  Ohio  St.  78. 

1    Root,  388.     Illinois:    Jteicliert  v.  Me-  «  King  r.  Portia,  81  N.  C.  382. 

Clure,  23  111.  516;  Westervelt  v.  Voorhis,  381 


§§  464,  465.]      REGISTRATION   AS  AFFECTING   PRIORITY. 

464.  A  mortgage  given  at  the  time  of  the  purchase  of  real 
estate,  to  secure  the  payment  of  purchase  money,  has  prefer- 
ence over  all  judgments  and  other  debts  of  the  mortgagor,  to 
the  extent  of  the  land  purchased.  It  is  so  provided  by  statute 
in  several  states.^  A  purchase  money  mortgage  is  good  and 
effectual  against  the  wife  of  the  mortgagor,  without  her  joining  in 
the  execution  of  it.  The  seisin  of  the  Imsband  is  instantaneous 
only ;  and  it  is  a  well  settled  rule  that  in  such  case  no  estate  or 
interest  can  intervene.^  On  the  other  hand,  a  mortgage  made  by 
a  married  woman  for  the  purchase  money  of  the  mortgaged  land, 
the  mortgagee  supposing  that  she  was  unmarried,  though  invalid 
because  of  the  wife's  incapacity  to  make  a  separate  grant,  is  a 
good  equitable  mortgage ;  for  the  deed  and  mortgage  are  evidence 
of  an  agreement  for  reconveyance.  The  wife  is  affected  with  a 
trust  for  a  reconveyance,  and  a  subsequent  purchaser  with  notice 
would  take  the  title  in  trust  for  the  payment  of  the  purchase 
money .^  This  rule  applies  even  where  the  mortgage  is  made  to  a 
third  person,*  who  as  part  of  the  same  transaction  advances  the 
purchase  money.  Dower  attaches  as  against  every  one  but  the 
mortgagee  and  his  assigns.'^  A  homestead  exemption  cannot  be 
set  up  against  a  mortgage  for  the  purchase  money,^  or  even  against 
a  mortgage  to  secure  money  borrowed  with  which  to  pay  the  pur- 
chase price  when  such  mortgage  is  executed  simultaneously  with 
the  deed  of  purchase.'^ 

465.  A  mortgage  for  purchase  money,  to  be  entitled  to 
preference,  must  be  executed  simultaneously  with   the  deed   of 

1  Indiana  :  G.  &  H.  Stat.  vol.  ii.  p.  356  ;     N.  H.  619  ;  Thompson  v.  Lyman,  28  "Wis. 
2  R.  S.  1876,  p.  334.     Kansas:  Dassler's     266  ;  Walters  v.  Walters,  73  Ind.  425. 
Stat.  1876,  ch.  68,  §  4.     Mississippi:  Rev.         3  Ogle  v.  Ogle,  41  Ohio  St.  359. 

Code  of  1871,  p.  501;  R.  Code  1880,  *  Clark  v.  Munroe,  14  Mass.  351;  Mc- 
§1205.  Maryland:  Pub.  Gen.  Laws  1860,  Gowan  w.  Smith,  44  Barb.  (N.  Y.)  232; 
art.  64,  §  3.  New  Jersey:  Nixon's  Dig.  Kittle  v.  Van  Dyck,  1  Sandf.  (N.  Y.)  Ch. 
p.  147,  §  20;  R.  S.  1877,  p.  167,  §  77.  New  76  ;  Jones  v.  Parker,  51  Wis.  218  ;  Kaiser 
York:  Code  of  Remedial  Justice  1876,  v.  Lembeck  (Iowa),  7  N.  W.  Rep.  519; 
§  1254.  Delaware:  Rev.  Stat.  269.  North  Billingsley  v.  Niblett,  56  Miss.  537  ;  Brad- 
Carolina:  Battle's  Revisal  1873,  ch.  35,  ley  v.  Bryan  (N.  J.),  13  Atl.  Rep.  806. 
§  30.  Georgia:  Act  of  1875.  Prior  to  &  Young  i;.  Tarbell,  37  Me.  509. 
that  act  dower  had  preference  to  such  a  ^  Kimble  v.  Esworthy,  6  Bradw.  (III.) 
mortgage.  Wilson  v.  Peeples,  61  Ga.  517;  Guinn  v.  Spurgin,  1  Lea  (Tenn.), 
218;  Carter  v.  Hallahan,  61  Ga.  314.  228. 

2  Birnie  z;.  Main,  29  Ark.  591;  Stow  u.  "^  Guinn  v.  Spurgin,  supra;  Middle- 
Tifft,  15  Johns.  (N.  Y.)  458  ;  Mills  v.  Van  brooks  v.  Warren,  59  Ga.  230.  See,  how- 
Voorhies,  20  N.  Y.  412;  Thomas  v.  Han-  ever,  §  465. 

son,  44  Iowa,  651  ;    Hinds  v.  Ballou,  44 

382 


NATURE   AND   APPLICATION   OF   REGISTRY   ACTS.         [§  465. 

conveyance  from  the  vendor.  If  an  interval  of  time  is  left  be- 
tween the  two  transactions,  during  which  the  interest  of  the  pur- 
chaser is  liable  to  be  seized  on  execution  upon  the  judgment,  this 
preference  is  lost,  and  the  judgment  is  entitled  to  priority.^  If 
the  instruments  are  delivered  at  the  same  time,  it  does  not  mat- 
ter that  they  were  executed  on  different  days,  because  they  take 
effect  only  from  the  delivery.^  The  provision  that  a  mortgage 
from  a  purchaser  to  a  vendor,  delivered  simultaneously  with  the 
deed,  to  secure  the  purchase  money,  shall  be  preferred  to  a  pre- 
vious judgment  against  the  vendee,  does  not  imply  that  in  every 
other  case  such  judgment  shall  have  preference.  A  mortgage 
from  a  lessee  to  his  lessor,  delivered  at  the  same  time  with  the 
lease,  to  secure  future  advances,  is  within  this  provision.^ 

If  the  vendor  neglects  to  take  a  mortgage  for  purchase  money, 
until  after  the  execution  of  a  mortgage  to  a  third  person  for  value 
and  without  notice,  the  mortgage  for  purchase  money  is  subject 
to  the  prior  mortgage.* 

A  provision  of  statute,  that  a  mortgage  for  purchase  money 
shall  be  preferred  to  any  previous  judgment  which  may  have 
been  obtained  against  the  purchaser,  applies  only  to  a  mortgage 
made  by  the  purchaser  to  the  vendor,  and  not  to  a  mortgage 
made  to  a  third  person  to  secure  the  payment  of  money  which  was 
applied  by  the  purchaser  to  the  payment  of  the  purchase  money  of 
the  land.  The  term  "  purchase  money  "  does  not  include  money 
that  may  be  borrowed  to  complete  a  purchase,  but  that  which  is 
stipulated  to  be  paid  by  the  purchaser  to  the  vendor.  It  is  only 
between  them  that  it  is  purchase  money.  As  between  the  pur- 
chaser and  a  third  party,  it  is  simply  borrowed  money.  To  give 
this  provision  any  other  construction  would  be  to  assign  and  en- 
large the  vendor's  lien  without  limit.^ 

The  effect  of  a  mortgage  to  secure  purchase  money,  executed 

1  Ahern  v.  White,  39  Md.  409  ;  Ileuis-  v.  Ames,  6  Md.  52,  56  ;   Stansel  v.  Hob. 

ler  V.  Nickum,  38  Md.  270;  Foster's  Ap-  crts,  13  Ohio,  148  ;  Calmcs  v.  McCracken, 

peal,  3  Pa.  St.  79.  8  S.  C.  87.     In  Clabaugh  v.  Byerly,  7  Gill 

•^  Cake's  Appeal,  23  Pa.  St.  186;  May-  (Md.),  354,  it  was  decided  that  a  junior 

burry  v.  Brieu,  15  Pet.  21  ;    Banning  v.  mortgage  was  entitled  to   no   preference 

Edes,  6  Minn.  402;  Summers  i;.  Darne,  31  over  a  prior  one  by   showing    that    the 

Gratt.    (Va.)    791  ;     Lafayette    Building,  money  received  upon   it  was   applied   in 

&c.  Asso.   V.  Erb  (Pa.),  8  Atl.  Kep.  62;  payment  of  judgments  which  had  priority. 

Pascault  I'.  Cochran,  34    Fed.  Kep.  358.  See,    however,   §   464,    and   Flanagan   v. 

^  Ahern  i;.  White,  supra.  Cushman,  48  Tex.  241,  that  a  homestead 

*  Houston  V.  Houston,  67  Ind.  276.  right  does  not  intervene  in  such  case. 


'  Heuiiler  v.  Nickum,  supra ,-  Aldersou 


383 


§  466.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

simultaneously  with  the  deed  to  the  vendee,  is,  that  the  vendee 
has  only  an  instantaneous  seisin,  and  the  legal  title  remains  with 
the  vendor,  who  becomes  the  mortgagee  of  the  land.^ 

A  reservation  in  a  conveyance  of  an  annual  rent,  with  a  con- 
dition that  the  grantor  may  enter  and  take  possession  in  case  of 
non-payment,  is  in  effect  a  conveyance  and  mortgage  back  for 
the  purchase  money,  and  is  superior  to  any  other  incumbrance 
which  the  grantee  can  create.^ 

466.  A  purchase  money  mortgage,  executed  simultane- 
ously with  the  deed  of  purchase,  excludes  any  claim  or  lien 
arising  through  the  mortgagor,  and  no  statute  is  necessary  to 
effect  this.^  "  It  is  a  principle  of  law,"  says  Chief  Justice  Caton, 
of  Illinois,*  "too  familiar  to  justify  a  reference  to  the  authorities, 
that  a  mortgage  given  for  the  purchase  money  of  land,  and  exe- 
cuted at  the  same  time  the  deed  is  executed  to  the  mortgagor, 
takes  precedence  of  a  judgment  against  the  mortgagor.  The  exe- 
cution of  the  deed  and  of  the  mortgage  being  simultaneous  acts, 
the  title  to  the  land  does  not  for  a  single  moment  rest  in  the  pur- 
chaser, but  merely  passes  through  his  hands  and  vests  in  the 
mortgagee,  without  stopping  at  all  in  the  purchaser,  and  during 
this  instantaneous  passage  the  judgment  lien  cannot  attach  to  the 
title.  This  is  the  reason  assigned  by  the  books  why  the  mort- 
gage takes  precedence  of  the  judgment,  rather  than  any  supposed 
equity  which  the  vendor  might  be  supposed  to  have  for  the  pur- 
chase money." 

A  judgment  obtained  against  the  mortgagor  before  the  pur- 
chase does  not  take  priority  over  the  lien  of  the  purchase  money 
mortgage,  though  this  be  not  acknowledged  and  recorded  for  a 
long  period  after  the  recording  of  the  deed.^ 

For  the  same  reason  a  mortgage  for  purchase  money  recorded 
with  the  deed  of  purchase  has  priority  of  a  mortgage  executed 
by  the  purchaser  before  he  concluded  the  purchase  lo  secure  a 
loan  with  which  to  make  the  cash  payment,  though  this  mortgage 
be  recorded  before  the  mortgage  to  the  vendor.^     The  purchase 

1  Baker  v.  Clepper,  26  Tex.  629.  N.  C.  466 ;  Howell  v.  Howell,  7  Ired.  (N. 

2  Stephenson   v.   Haines,    16   Ohio    St.     C.)  491. 

478.  *  Curtis  v.  Root,  20  111.  53. 

3  City  Nat.  Bank  Appeal,  91  Pa.  St.  5  Roane  v.  Baker,  swpra;  Curtis  y.  Root, 
163;  Fitts  v.  Davis,  42  111.  391 ;  Banning  20  111.  518;  Dusenbury  v.  Hulbert,  59  N. 
V.  Edes,  6  Minn.  402;  Bolles  v.  Carli,  12  Y.  541  ;  Ward  v.  Carey,  39  Ohio  St.  361. 
Minn.  113  ;  Roane  v.  Baker  (111.),  11  N.  6  Turk  v.  Funk,  68  Mo.  18  ;  City  Nat 
E    Rep.  246;    Moring  v.  Dickinson,   85  Bank  Appeal,  91  Pa.  St.  163. 

384 


NATURE   AND   APPLICATION   OF   REGISTRY   ACTS.         [§  466. 

monej-  mortgage  might  become  a  second  lien  bj^  the  acquiescence 
of  the  vendor  in  the  claim  of  priority  for  the  other  mortgage.^ 
A  purchase  mone}^  mortgage  loses  its  priority  if  a  later  mortgage 
is  first  recorded.2 

A  change  in  the  form  of  the  security  for  the  purchase  money, 
as  from  a  mortgage  to  a  deed  of  trust,  will  not  change  tlie  char- 
acter of  the  debt.  The  consideration  continues  to  be  purchase 
money .3  The  same  rule  applies  in  case  the  mortgage  is  to  an- 
other than  the  vendor,  who  actually  advances  the  means  to  pay 
the  purchase  money.^ 

It  must  appear,  however,  that  the  deed  and  mortgage  consti- 
tuted but  one  transaction.^  The  seisin  of  the  purchaser  being 
merely  a  transitory  one,  no  lien  can  intervene,  and  therefore  the 
same  rule  applies  to  the  exclusion  of  any  intervening  lien  ;  as,  for 
instance,  a  lien  for  labor  and  materials  furnished  the  purchaser, 
who  has  entered  before  the  execution  of  the  deed  and  mortgage, 
wiiich  are  afterwards  delivered  simultaneously  ;  ^  or  an  agreement 
made  in  relation  to  the  premises  by  the  purchaser  before  the  pur- 
chase; '  or  right  of  homestead  ;>''  or  riglit  of  dower.^  If  there  be 
an  interval  of  time  between  the  purchase  and  the  making  of  a 
mortgage  to  secure  the  purchase  money,  the  wife  is  not  barred  of 
her  right  of  dower  by  reason  of  any  recitals  made  by  the  husband 

1  -Mutual  Loan  Asso.   v.  Elwell,  38  N.     Macintosh  i-.  Thurston,  25  N.  J.  Eq.  242  ; 
'^■'^<1-  1^-  Guy  V.  Carriere,  5  Cal.  511.     Otherwise 

^  Jackson  v.  Reid,  30  Kans.  10.  in   Georgia  by   statute.      Code,   §    1979  ; 

•'•  Curtis  V.  Root,  20  111.  53;   Austin  v.     Tanner  v.  Bell,  61  Ga.  584. 
Underwood,   37    111.    438;    Summers    v.         "  Bolles  r.  Carli,  12  Minn.  113 ;  Morris 

Dame,  31  Gratt.  (Va.)  791.  v.  Pate,  31  Mo.  315. 

*  Curtis   V.    Root,   supra  ;    Jackson   v         8  jjew  England   Jewelry   Co.    v.   Mer- 

Austin,  15  Johns.  (N.  Y.)  477  ;  Haywood  riam,  2  Allen  (Mass.),  390;  Jones  v.  Par- 

V.  Nooney,  3  Barb.  (N.  Y.)  643 ;  Adams  v.  ker,  51  Wis.  218  ;  Carr  v.  Caldwell,  10  Cal. 

Hill,  29  N,  II.  202;  Clark  v.  Munroe,  14  380;  Amphlett  v.  Ilibbard,  29  ]\Iich.  298; 

Mass.  351  ;  Kaiser  i-.  Lenibeck,  55  Iowa_  Nichols  v.  Ovcracker,  16  Kana.  54  ;  Ma- 

"■*■*•  gee  V.  Magee,  51  111.  500  ;  Austin  v.  Un- 

Otherwise   in   Ohio   and   Maryland,  by  derwood,  37    111.  438  ;   Allen  v.   Hawley, 

reason  of  the  terms  of  the  statuie.     Stan-  66  111.  164,  168  ;  Lane  v.  Collier,  46  Ga. 

sel  V.  Roberts,   13  Ohio,  148;  Ileuisler  v.  580.   See  Pratt  v.  Topeka  Bank,  12  Kana 

Nickum,  38  Md.  270.  570,  for  a  case  where  a  mortgage  given 

•'  Grant   i'.   Dodge,  43    Me.   489.     See  upon  a  homestead  by  husband  and  wife 

Hurlbert  v.  Weaver,  24  Minu.  30,  for  pc-  was  partly  paid,  and  a  new  mort-ago  for 

culiar  circumstances  under  which  a  deed  the  balance  given  by  the  husband  alone, 

and  mortjiage  executed  at  diirerent  times  explained  in  Greeno  v.  Barnard,  18  Kans! 

were  regarded  as  consiituiing  one  transac-  518. 
•'''°-  »  George  v.  Cooper,   15   W.   Va.  666  ; 

''  Lamb  v.   Cannon,  38  N.  J.  L.  362;  Jones  w.  Parker,  51  Wis.  218. 


Strong  V.  Van  Deursen,  23  N.  J.  Eq.  369 ; 

VOL.    I.  2 


38 


b 


§  467.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

in  the  mortgage  deed  in  which  the  wife  does  not  join.^  In  such 
case,  also,  a  judgment  rendered  against  the  grantee  prior  to  the 
purchase  takes  precedence  of  the  mortgage.^ 

A  suit  to  foreclose  a  mortgage,  given  to  secure  the  purchase 
money  of  land,  is  not  a  suit  for  the  enforcement  of  a  vendor's 
lien.  Neither  the  husband  nor  wife  can  set  up  a  homestead  right 
against  such  a  mortgage  given  contemporaneously  with  the  deed 
of  purchase.^  A  mortgage  for  purchase  money  has  priority  over 
a  mechanic's  lien  for  a  building  erected  by  the  purchaser  before 
he  received  a  deed,  and  while  he  held  a  bond  for  a  deed,  and  al- 
though the  lien  was  filed  before  the  making  of  the  deed.* 

467.  Of  course  the  recording  of  a  mortgage  is  not  neces- 
sary as  against  the  mortgagor ;  ^  or  against  his  heirs  on  whom 
the  law  casts  the  property,  and  who  are  mere  volunteers  in  ac- 
cepting it ;  ^  and  even  in  those  states  where  it  is  provided  by 
statute  that  a  mortgage  shall  be  recorded  within  a  stipulated  time, 
it  is  still  valid  between  the  parties  without  registration.  The 
mortgagee  by  an  unrecorded  mortgage  will  be  protected  by  a 
court  of  equity,  so  far  as  this  can  be  done  without  infringing 
upon  the  rights  of  subsequent  purchasers,  or  third  persons  who 
have  in  the  mean  time  acquired  liens  of  record  upon  the  prop- 
erty.'^ It  is  for  their  protection,  however,  that  a  record  is  pro- 
vided for.  As  between  the  parties  themselves,  there  is  no  occa- 
sion for  a  public  record  to  give  notice.  Although  it  has  some- 
times been  said  that  the  delivery  of  a  mortgage  for  record  is  a 
part  of  the  execution  of  the  instrument,  this  is  not  true  except  so 
far  as  the  expression  has  reference  to  its  effect  upon  those  who 
are  not  parties  to  it.^     Even  the  destruction  of  the  mortgage  be- 

1  Tibbetts    v.   Laugley   Manufacturing  Busb.  (N.  C.)  L.  283  ;  Seaver  ;;.  Spink,  65 

Co.  12  S.  C.  465.  111.  441 ;  Howard  Mut.  Loan  &  Fund  Asso. 

-  Cohn  V.  Hoffman  (Ark.),  6  S.  W.  Rep.  v.  Mclntyre,  3  Allen  (Mass.),  571  ;  Per- 

511.  due  V.  Aldridge,  19  Ind.  290;  Carleton  v. 

^Hopper   V.   Parkinson,    5    Nev.   233;  Byington,  18  Iowa,  482;  Moore  f.  Thomas, 

Hand  v.  Savannah  &  Charleston  R.  R.  Co.  1  Oreg.  201. 

12S.  C.  314.  6  McLaughlin   v.    Ihmsen,   85   Pa.    St. 

*  Virgin  v.  Brubaker,  4  Nev.  31.  364;  Tryon  v.  Munson,  77  lb.  250;  Wes- 

6  Wood  V.  Chapin,  13  N.  Y.  509;   St.  tervelt  w.  Voorhis  (N.  J.),  6  Atl.  Rep.  665; 

Marks  F.  Ins.  Co.  v.  Harris,  13  How.  (N.  Hoes  v.  Boyer  (Ind.),  9  N.  E.  Rep.  427  ; 

Y.)  Pr.  95  ;  Jackson  v.   Colden,  4  Cow.  Building  Asso.  v.  Clark  (Ohio),  2  N.  E. 

(N.  Y.)  266 ;  Jackson  v.  West,  10  Johns.  Rep.  846. 

(N.  Y.)  466  ;  Fosdick  v.  Barr,  3  Ohio  St.  "  Wynn  v.  Carter,  20  Wis.  107;  Kirk- 

471  ;  Sidle  v.  Maxwell,  4  Ohio  St.  236 ;  patrick  v.  Caldwell,  32  Ind.  299. 

Levinzi'.  Will,  1  Dall.  430;  Bremr.Lock-  ^  Sidle   v.   Maxwell,   4   Ohio  St.  236; 

hart,  93  N.  C.   191  ;  Leggett  v.  Bullock,  limiting   Holliday   v.   Franklin    Bank  of 

38g  Columbus,  16  Ohio,  533. 


NATURE   AND   APPLICATION    OF   REGISTRY    ACTS.       [§§  468,  469. 

fore  the  recording  of  it,  whether  by  accident  or  by  the  wrongful 
act  of  a  third  person,  does  not  annihilate  the  lien  as  between  the 
parties  and  all  others  claiming  with  notice.^ 

An  acknowledgment  is  not  generally  essential  to  the  validity 
of  a  deed  as  between  the  parties,  but  only  requisite  to  the  record- 
ing of  the  instrument,  so  it  may  become  valid  as  against  third 
parties.  There  may  be  a  valid  delivery  without  an  aclvuowledg- 
ment.^ 

A  mortgage  without  acknowledgment  or  record  is  good  against 
the  mortgagor,  and  his  heirs  or  devisees,  and  against  others  who 
have  actual  notice  of  its  existence  before  they  acquired  title.^  If 
the  title  is  not  dependent  upon  the  time  of  recording,  and  the 
record  is  merely  to  authorize  its  introduction  as  evidence,  it  mav 
be  recorded  after  action  brought  to  enforce  it,  and  at  any  time 
before  trial.  This  rule  is  equally  applicable  to  the  case  of  an  as- 
signment of  a  mortgage,  which  may  be  recorded  after  the  assignee 
has  brought  an  action  to  foreclose,  and  at  a,n\  time  before  trial 
and  judgment.^ 

It  is  only  subsequent  purchasers  for  value  without  notice  who 
can  take  advantage  of  the  fact  that  a  prior  mortgage  is  unre- 
corded.'^ 

468.  The  assignee  of  a  bankrupt  has  no  greater  rights  in 
respect  to  unrecorded  deeds  made  by  the  debtor  than  he  himself 
would  have.  He  therefore  takes  the  bankrupt's  estate  subject 
to  any  conveyances  he  has  made,  although  thej'^  remain  unre- 
corded.  But  one  who  purchases  of  the  assignee,  without  notice 
of  an  unrecorded  mortgage,  takes  the  property  unincumbered  by 
it.^'  So  if  an  administrator  of  an  insolvent  estate,  having  no 
knowledge  of  an  unrecorded  mortgage  on  certain  real  estate  of 
the  deceased,  sells  it  under  order  of  court  to  a  purchaser  who  was 
also  ignorant  of  the  mortgage,  and  therefore  acquired  a  title  un- 
affected by  it,  the  mortgagee  is  entitled  to  be  reimbursed  from 
the  proceeds  of  the  land  in  preference  to  the  general  creditors." 

469.  Equitable  mortgages  are  generally  held  to  be  within 
the  recording  acts  as  much  as  are  legal  mortgages.*^     At  lirst  a 

'  Sloa»  t'.  Ilolcomb,  29  Mich.  153.  ■»  Wolcott     v.    Winchester,     1")     Gray 

-  Roaue  v.  Baker  (111.),  11  N.  E.  Rep.  (Mass.),  461. 
246  ;  Darst  v.  Bates,  51  111.  4.39.  6  Merriman  v.  Hyde,  9  Nek  1 13. 

=5  Johnston  v.  Canby,  29  Md.  211 ;  Mar-         c  Uodircn  v.  Guttery,  58  111.  431. 
shall  V.  Fisk,  6  Mass.  24 ;  Dole  i-.  Thur-         '  Kirkpatrick  v.  Caldwell,  92  Ind.  299. 
iow,  12  Met.  (.MasH.)  157,  162;  Sample  v.         »  Hunt  r.  Johnson,  19  N.  Y.  279;  Par- 
Miles,  2  Scam.  (III.)  315.  kist  v.  Alexander,  1  Johns.  (N.  Y.)  Ch. 

387 


§  469.]  REGISTRATION   AS   AFFECTING  PRIORITY. 

different  interpretation  was  put  upon  the  acts,  and  a  mortgage  of 
an  equity  or  of  an  equitable  estate  was  not  constructive  notice 
when  registered.^  But  at  an  early  day  in  this  country  it  was 
established,  either  judicially  or  by  statute,  that  all  riglits,  incum- 
brances, or  conveyances  touching  or  in  any  way  concerning  land, 
should  appear  upon  the  public  records,  and  that  convej'ances  of 
equitable  interests  as  well  as  legal  were  within  the  registry  acts. 
A  mortgHge,  therefore,  of  such  an  interest,  if  first  recorded,  is 
preferred  to  a  mortgage  of  the  legal  estate.^  A  mortgage  of  an 
equitable  interest  under  a  contract  of  purchase,  although  no  legal 
estate  passes  by  it,  is  within  the  operation  of  the  registration  acts, 
and  should  be  recorded  to  entitle  it  to  priority  over  a  subsequent 
mortgage  of  the  same  interest ;  and  an  assignment  of  such  a  con- 
tract as  a  security  for  a  debt  is  regarded  as  a  mortgage.^ 

Generally  the  record  of  an  agreement  constituting  an  equitable 
mortgage  is  notice  to  a  subsequent  purchaser  of  the  legal  estate 
from  the  same  grantor.*  One  in  possession  of  lands  under  a  parol 
contract  to  purchase  them  may  mortgage  his  interest  in  them,  and 
the  record  of  the  mortgage  will  be  notice  to  subsequent  pur- 
chasers and  incumbrancers.^  The  registry  of  a  conveyance  of  an 
equitable  title  is  notice  to  a  subsequent  purchaser  of  the  same 
interest  or  title,  from  the  same  grantor ;  but  it  is  not  notice  to 
a  purchaser  of  the  legal  title  from  a  person  who  appears  by  the 
record  to  be  the  real  owner.  Thus  a  mortgage  by  a  member  of  a 
partnership  of  his  interest  in  the  real  estate  of  the  firm,  the  title 
to  which  stands  in  the  name  of  another  member  of  the  firm,  is 
properly  admitted  of  record  ;  but  it  is  not  notice  to  a  subsequent 
purchaser  or  mortgagee  of  the  legal  title  from  such  other  partner. 
The  two  titles  have  apparently  no  connection.^  The  record  of  a 
mortgage  or  other  conveyance,  which  is  entitled  to  be  recorded, 
operates  as  constructive  notice  to  subsequent  purchasers  claiming 

394;  Crane   v.   Turner,   7    Hun  (N.  Y.),  Dec.  381 ;  and  see  White  &  Tudor's  Lead. 

357;  Bovce  v.  Shiver,  3  S.  C.  515  ;  Stod-  Cas.  in  Eq.  4th  Am.  ed.  vol.  2,  part  1,  p. 

dard  v.  Whiting,  46  N.  Y.  627  ;  Tarbell  v.  204,  where  the  cases  are  collected. 

West,  86  N.  Y.  280;  Tefft  v.  Munson,  63  3  Bank  of  Greensboro'  v.  Clapp,  76  N. 

Barb.  (N.  Y.)  31;  Edwards  v.  McKernan,  C.  482. 

.55  Mich.  520,  524;  Smith  v.  Neilson,  13  ^  Parkist  v.  Alexander,  1  Johns.  (N.  Y.) 

Lea  (Tenn.),  461  ;  O'Neal  v.  Seixas  (Ala.),  Ch.  394  ;  Hunt  v.  Johnson,  19  N.  Y.  279  ; 

4  So.  Eep.  745  ;  Pierce  v.  Jackson,  56  Ala.  General  Ins.  Co.  v.  United  States  Ins.  Co. 

599.  10  Md.  517;  Jarvis  v.  Dutcher,  16  Wis. 

1  Doswell  V.  Buchanan,  3  Leigh  (Va.),  307. 

365,  377.  6  Crane  v.  Turner,  7  Hun  (N.  Y.),  357. 

2  U.  S.  Ins.  Co.  V.  Shriver,  3  Md.  Ch.         e  Tarbell  v.  West,  supra. 

388 


NATURE   AND    APPLICATION    OF   REGISTRY   ACTS.       [§§  470-472. 

under  the  same  grantor,  or  through  one  who  is  the  coinmou  source 
of  title. ^  The  mortgage  of  an  equitable  title,  such  as  that  consti- 
tuted by  a  bond  for  a  deed,  is  not  constructive  notice  to  pur- 
chasers of  the  land  from  a  holder  of  the  legal  title  in  possession 
of  the  land,  inasmuch  as  the  purchaser's  title  is  not  derived 
through  the  title  of  the  mortgagor,  and  he  will  not  take  subject 
to  the  mortgage  of  the  equitable  title,  though  this  be  recoixled.^ 

470.  An  equitable  mortgagee  for  a  precedent  debt  has  no 
equity  superior  to  that  of  a  creditor  having  a  valid  subsequent 
judgment  at  law.  Between  such  contestants  the  first  perfected 
legal  title  should  prevail.  The  rule  is  otherwise  with  regard  to 
lona  fide  purchasers  or  equitable  mortgagees,  where  the  consid- 
eration of  the  mortgage  is  paid  at  the  time  it  is  given.  Equity 
in  tlie  latter  case  regards  the  equitable  mortgagee  as  a  bond  fide 
purchaser.-^ 

471.  The  recording  acts  apply  as  well  to  mortgages  of  lease- 
hold estates  of  such  duration  of  term  as  to  come  within  the  record- 
ing acts  of  the  several  states  as  to  mortgages  of  freehold  estates.* 
Such  mortgages  are  not  only,  as  a  general  rule,  within  the  terms 
of  these  acts,  but  likewise  within  the  reason  and  spirit  of  them, 
inasmuch  as  they  are  equally  within  the  mischief  for  which  they 
provide  a  remedy ;  and  they  do  not  come  under  the  provisions 
relating  to  the  recording  of  mortgages  of  personal  property,  as 
these  have  reference  only  to  chattels  personal.^ 

472.  The  registration  laws  and  the  doctrines  of  priority  by 
record  generally  extend  to  assignments  of  mortgages  as  well.^ 

1  Edwards  v.  McKernan,  55  Mich.  520,  lu  Pennsylvania  a  leasehold  mortgage 
526.  is  required   by  statute  to  be  recorded  with 

2  Halstead  v.  Bank  of  Ky.  4  J.  J.  Marsh,  the  lease ;  the  mortgage  must  refer  to  the 
(Ky.)  554;  Irish  u.  Sharp,  89  111.  261.  record  of   the  lease  ;   or  if  it   is  not  re- 

2  Wheeler  o.  Kirtland,  24  N.  J.  Eq.  552.  corded,  it  must  be  recorded  with  tlie  mort- 
*  Decker  v.  Clarke,  26  N.  J.  Eq.  163;  gage.  Hilton's  A  pp.  9  Atl.  Uep.  342. 
Spielmann  v.  Kliest,  36  N.  J.  Eq.  199;  ^  Decker  i.-.  Clarke,  si/y^ra. 
IJerry  v.  Mutual  lu.s.  Co.  2  Johns.  (N.  Y.)  «  §  820.  New  York:  Belden  v.  Meeker, 
Ch.  603  ;  Johnson  v.  Stagg,  2  Joims.  (N.  47  N.  Y.  307;  S.  C.  2  Lans.  470,  over- 
Y.)  510,  523;  Breese  v.  Bange,  2  E.  I),  ruling  lloyt  i-.  Iloyt,  8  Bosw.  511;  Van- 
Smith  (N.Y.),  474.  The  earlier  New  Jar-  derkemp  v.  Shelton,  11  Paige,  28  ;  S.  V. 
sey  cases  were  in  effect  overruled  by  the  Clarke,  321  ;  Fort  v.  Burch,  5  Den.  187  ; 
recent  decision  in  Hutchinson  v.  Bram-  St.  John  u.  Spalding,  1  Thonip.  &  C.  483; 
hall,  7  At!.  Rep.  873;  42  N.  J.  Eq.  272,  James  v.  Johnson,  6  Johns.  Ch  417; 
reversing  6".  V.  sub.  nom.  Deane  v.  Hutch-  James  v.  Morey,  2  Cow.  246 ;  Campbell 
inson,  2  Atl.  Hep.  292,  and  holding  that  v.  Veddcr,  1  Abb.  App.  Dec.  295.  Iowa: 
the  recording  act  docs  not  apply  to  leases  Bowling  v.  Cook,  39  lowii,  200;  Bank  of 
lor  year.s.  Indiana  v.  Anderson,  14  lb.  544  ;  McCluru 

389 


§  472.] 


REGISTRATION   AS  AFFECTING  PRIORITY. 


The  statutes  themselves  may  not  in  terms  directly  apply  to  assign- 
ments of  mortgages,  but  in  some  instances  the  courts  draw  an  in- 
ference of  such  intended  application. ^  The  assignment  is  invalid 
against  subsequent  purchasers  without  notice  unless  it  is  recorded. 
Consequently  if  a  mortgagee  transfers  the  note  secured  by  the 
mortgage,  or  makes  a  formal  assignment  of  the  mortgage  which 
is  not  recorded,  and  afterwards  enters  a  satisfaction  of  the  mort- 
gage upon  the  record,  or  if  the  mortgagee  takes  a  conveyance  of 
the  equity  of  redemption,  and  then  with  an  apparent  ample  title 
conveys  the  property  to  another,  the  mortgage  ceases  to  be  a  lien, 
as  against  one  who  purchases  the  property  in  good  faith  and 
without  notice.^     In  like  manner  an  assignee  of  the  mortgage  is 


V.  Biirris,  16  lb.  591  ;  Cornog  v.  Fuller,  30 
lb.  212.  New  Jersey:  Stein  v.  Sullivan, 
31  N.J.  Eq.  409;  Tradesmen's  Building 
Asso.  V.  Thompson,  31  N.  J.  Eq.  536. 
Illinois:  Turpin  v.  Ogle,  4  Bradw.  611  ; 
Smith  V.  Keohane,  6  Bradw.  585. 

In  Indiana,  before  the  statute  providing 
fur  the  record  of  assignments,  the  record 
of  them  was  not  notice.  Hasselinan  v. 
McKernan,  50  lud.  441 ;  Dixon  v.  Hunter, 
57  Ind.  278;  Reeves  v.  Hayes,  95  Ind. 
521.  Now,  by  statute,  any  mortgage  of 
record,  or  any  part  thereof,  may  be  as- 
signed, either  by  an  assignment  entered 
on  the  margin  of  such  record,  signed  by 
the  person  making  the  assignment  and 
attested  by  the  recorder,  or  by  a  separate 
instrument  executed  and  acknowledged 
before  any  person  authorized  to  take  ac- 
knowledgments, and  recorded  on  such 
margin,  or  in  the  mortgage  records  of  the 
county.     Acts  1877,  ch.  58,  §  1. 

In  Pennsylvania  the  record  of  an  as- 
signment of  a  mortgage  is  notice  to  sub- 
sequent assignees  of  the  mortgage.  Neide 
V.  Pennypacker,  9  Phila.  86  ;  and  to  sub- 
sequent purchasers  and  mortgagees  as 
well.  Leech  v.  Bonsall,  lb.  204.  These 
decisions  are  based  on  the  Act  of  April  9, 
1849,  §  14.  So  far  as  the  general  record- 
ing Act  of  1715  is  concerned,  ''though 
there  has  been  no  express  decision  that 
under  it  an  assignment  of  a  mortgage 
may  be  recorded,  so  as  to  be  notice  to  sub- 
sequent purchasers,  yet,  taking  the  latest 
expression  of  the  Supreme  Court  on  the 

390 


subject,  we  might  so  decide  without  disre- 
garding any  binding  authority,  or  any 
clearly  indicated  opinion  of  that  court." 
Per  Mr.  Justice  Mitchell  in  Neide  v.  Pen- 
nypacker, supra;  citing  Philips  v.  Bank 
of  Lewiston,  18  Pa.  St.  394,  401.  In 
the  later  case  of  Pepper's  Appeal,  77  Pa. 
St.  373,  it  was  distinctly  held  that  the 
recording  of  an  assignment  is  notice  to 
a  subsequent  assignee  under  the  above 
statute.  Mr.  Justice  Mercur,  delivering 
the  opinion  of  the  court,  said  it  was  al- 
leged in  the  argument  that  it  is  not  cus- 
tomary in  Philadelphia  to  search  the  rec- 
ords for  assignments  of  mortgages.  Be 
that  as  it  may,  if  any  custom  exists  not  in 
harmony  with  the  act,  it  must  give  way. 
Mains  usus  abolendus  est. 

In  Maryland  provision  was  made  for 
recording  assignments  of  mortgages  by 
Act  1868,  ch.  373  ;  R.  Code  1878,  art.  44, 
§§  37,  38 ;  but  this  does  not  affect  an 
equitable  assignment.  Byles  v.  Tome,  39 
Md.  461. 

In  Delaware  an  assignment  of  a  mort- 
gage attested  by  one  credible  witness  is 
valid.     Laws  1887,  ch.  213. 

1  Reeves  v.  Hayes,  supra,  where  the 
subject  is  ably  considered  by  Chief  Jus- 
tice Elliott;  Bowling  v.  Cook,  39  Iowa, 
200;  Summers  v.  Kilgus,  14  Bush  (Ky.), 
449  ;  and  by  Justices  Niblaek  and  Zollars 
in  dissenting  opinions. 

-  Bowling  V.  Cook,  supra;  Henderson 
V.  Pilgrim,  22  Tex.  464 ;  Turpin  v.  Ogle, 
supra ;  Smith  v.  Keohane,  suj^ra ;  Bacon 


NATURE   AND    APPLICATION   OF   REGISTRY    ACTS.  [§  473. 

not  bound  by  an  unrecorded  agreement  executed  between  the 
parties  to  the  mortgage,  whereby  the  mortgagee  was  bound  to 
release  a  portion  of  the  premises  upon  receiving  a  certain  sum  in 
payment.^  The  doctrine,  that  the  assignee  of  a  mortgage  takes 
it  subject  to  all  equities  existing  between  the  mortgagor  or  his 
grantees  and  the  mortgagee,  cannot  be  applied  to  those  instru- 
ments which  are  properly  designated  in  the  recording  acts  as  con- 
veyances, which  both  a  release  of  a  mortgage  and  an  agreement 
for  such  release  would  be,  without  nullifying  the  acts  to  that 
extent,  and  withholding  the  protection  they  were  designed  to 
confer  upon  purchasers.^ 

But  the  record  of  an  assignment  of  a  mortgage  is  not  construc- 
tive notice  of  it  to  the  mortgagor  so  as  to  make  invalid  a  pay- 
ment made  by  him  to  the  mortgagee.^  It  is  desirable,  for  this 
reason,  that  pei'sonal  notice  should  be  given  him  of  the  assign- 
ment, though  the  assignee's  title  is  complete  without  notice  to 
the  owner  of  the  equity  of  redemption.* 

But  a  purchaser  of  the  equity  of  redemption  is  charged  with 
notice  of  an  assignment  of  the  mortgage  which  has  been  recorded 
prior  to  the  purcliase.^  The  record  of  the  assignment  is  a  part  of 
the  record  title  of  which  he  must  take  notice  at  the  time  of  his 
purchase. 

It  has  been  held  that  a  power  of  attorney  to  assign  a  mortgage,^ 
or  one  to  collect  a  mortgage  and  discharge  it,'  are  not  within  the 
recording  acts,  and  therefore  a  record  of  them  is  not  notice. 

473.  It  is  provided  by  statute  in  several  states  that  the 
recording  of  an  assignment  of  a  mortgage  shall  not  in  itself 
be  deemed  notice  of  such  assignment  to  the  mortgagor,  his  heirs 
or  personal  representatives,  so  as  to  invalidate  any  payment  made 
by  them  to  the  person  holding  the  bond  or  note.^     But  such  a 

V.  Van  Schoonhoven,   87   N.  Y.  446;  19  ^  Brewster  y.  Carnes  (N.  Y.),  9  N.  E. 

Hun,  158;  Connecticut  Mut.   L.  Ins.  Co.  Rep.  323. 

V.  Talbot  (Ind.),  14  N.  E.  Rep.  586  ;  Lewis  e  Williams  v.  Birbcek,  Hoffm.  (N.  Y.) 

V.  Kirk,  28  Ivans.  497  ;  ,S'.  C.  42  Am.  Rep.  359. 

173.  "  Jackson  v.  Richards,  6  Cow.  (N.  Y.) 

I  Warner  v.  Winslow,  1   Sandf.  (N.  Y.)  617. 

Ch.  4.30;  St.  John  u.  Spalding,  1   Thomp.  "  California:    Civ.  Code,  §  2935;   Acts 

&  C.  (N.  Y.)  483.  1874,  p.   261  ;    Codes   &   Statutes    1876, 

■^  St.  John  c.  Spalding,  supra.  §  7935. 

3  Ely  V.  Scofield,  3.5  Bar!..  (N.  Y.)  3.30;  Kansas  :   Dassler's  Stnts.  1876,  ch.  68, 

N.  Y.  Life  Ins.  &  Trust  Co.  v.  Smith,  2  §  3. 

Barb.  (N.  Y.)  Ch.  82.    So  provided  hy  stat-  Michigan:    Compiled     Laws    1871,    p. 

ute  in  Wisconsin.   Rev.  Stat.  1871,  p.  I  U'.i.  1347. 

»  Jones   V.    Gibbons,  9   Vcs.  407,  410  ;  Minnesota  :  G.  S.  1878,  cli.  40,  §  24. 

Ex  parte  Burnett.  1  De  G.  194.  391 


§  473.]  REGISTRATION   AS    AFFECTING    PRIORITY. 

statute  does  not  apply  to  a  purchaser  of  the  equity  of  redemp- 
tion, unless  it  is  in  terms  made  applicable  to  him.  A  purchaser 
of  land  already  subject  to  a  mortgage  is  chargeable  with  notice  of 
an  assignment  of  the  mortgage  which  has  been  recorded  prior  to 
his  purchase.^ 

In  New  Jersey,  on  the  other  hand,  the  inference  to  be  drawn 
from  the  statute  in  regard  to  the  recording  of  assignments  is,  that 
this  record  is  notice  to  the  owner  of  the  equity  of  redemption  ; 
for  it  is  provided  that  if  the  assignment  be  not  recorded,  any  pay- 
ments made  in  good  faith  and  without  actual  notice  of  the  assign- 
ment, and  any  release  of  the  premises  to  a  person  not  having 
actual  notice  of  the  assignment,  are  as  valid  as  if  the  mortgage 
had  not  been  assigned.^  It  is  provided,  too,  that  the  record  of  an 
assignment  of  a  mortgage  is  notice  from  the  time  it  is  left  for 
record  to  all  persons  concerned ;  and  an  assignee  by  an  assign- 
ment not  recorded  is  bound  by  any  sale  in  a  foi'eclosure  suit 
instituted  by  the  holder  of  the  recorded  assignment. 

In  Indiana  the  mortgagor  and  all  other  persons  are  bound  by 
the  record  of  an  assignment,  and  the  same  is  deemed  a  public 
record.  Any  assignee  or  his  personal  representative  may  enter 
satisfaction  or  release  of  the  mortgage,  or  the  part  thereof  held 
by  him  of  record.^ 

In  Dakota  Territory  an  assignment  of  a  mortgage  may  be  re- 
corded in  like  manner  with  a  mortgage,  and  such  record  operates 
as  notice  to  all  persons  subsequently  deriving  title  to  the  mort. 
gage  from  the  assignor.* 

The  object  of  the  statutory  provision  that  the  record  of  an 
assignment  shall  not  be  deemed  in  itself  notice  to  the  mortgagor, 
his  heirs,  or  personal  representatives,  of  such  assignment,  so  as  to 
invalidate  any  payment  made  by  him  or  them  to  the  mortgagee, 
is  to  save  the  necessity  of  examining  the  record  every  time  a 
payment  is  made.  It  is  argued,  therefore,  that  for  all  other  pur- 
poses the  record  of  the  assignment  is  notice  even  to  the  mort- 
gagor.    Accordingly  under  such  a  provision  it  has  been  held  that 

Nebraska:  Compiled  Stats.  1881,  p.  392.  2  Nixon's  Dig.  1868,  p.  612. 

New  York:  1  R.  S.  7th  ed.  p.  763,  §  41.  «  Acts   1877,  ch.  58,  §   1  ;    R.  S.  1881, 

Oregon:  G.  L.  1872,  p.  519;  Annotated  §§  1093,  1094;  Connecticut  Mut.  L.  Ins. 

Laws  1887,  §  3030.  Co.  v.  Talbot,  14  N.  E.  Rep.  586.  Prior 
"Wisconsin:  R.  S.  1878,  p.  641,  §  2244.  to  this  statute  the  record  of  an  assign- 
Wyoming  Territory:  R.  S.  1887,  §  22.  ment  was  not  notice.  Reeves  v.  Hayes,  95 
1  Brewster  v.  Carnes  (N.  Y.),  9  N.  E.  Ind.  521. 

Rep.  323.  4  Civil  Code  1871,  §  1629. 

392 


NATURE   AND   APPLICATION   OF   REGISTRY    ACTS.  [§  474. 

the  record  of  an  assignment  of  a  mortgage  is  constructive  notice 
as  against  a  grantee  of  the  mortgagor  that  the  mortgagee  can  no 
longer  deal  with  the  mortgage  title ;  and  that  a  subsequent  dis- 
charge or  release  of  the  mortgage  executed  by  the  mortgagee  is 
invalid.^  If  the  release  is  obtained  by  the  mortgngor  himself 
without  the  payment  of  any  sum  of  money  upon  the  mortgage 
debt,  the  statute  does  not  protect  him  against  the  effect  of  an 
assignment  already  recorded.^ 

474.  The  efifect  of  recording  an  assignment  is  not  only  to 
protect  the  assignee  against  a  subsequent  sale  of  the  mortgage  by 
the  apparent  holder  of  it,  but  also  to  prevent  a  wrongful  discharge 
of  it  by  the  mortgagee.^  It  is  true  that  as  against  subsequent 
purchasers  of  the  premises,  or  the  holders  of  subsequent  mort- 
gages upon  them,  and  attaching  and  judgment  creditors,  the  rec- 
ord of  a  prior  mortgage  is  sufficient  notice  of  its  existence  without 
the  record  of  an  assignment  of  the  mortgage  to  one  who  has  pur- 
chased it.  The  failure  to  record  the  assignment  does  not  blot  out 
the  record  of  the  mortgage  itself.*  If  the  premises  are  conveyed 
to  the  mortgagee  after  he  has  assigned  the  mortgage,  there  is  no 
merger  of  the  mortgage  title. ^  It  makes  no  difiference  that  the 
assignment  is  nut  recorded.  If  the  mortgagee,  in  this  condition 
of  the  title,  then  conveys  the  estate  to  one  who  purchases  without 
knowledge  of  the  assignment  of  the  mortgage,  the  question  arises 
whether  the  assignee,  having  omitted  to  record  his  assignment, 
thus  leaving,  so  far  as  the  record  shows,  a  complete  title  in  the 
mortgagee,  can  be  protected  in  his  title  as  against  the  purchaser 
from  the  mortgagee  ?  ^ 

Of  course  such  purchaser  is  charged  with  constructive  notice  of 
the  existence  of  a  mortgage,  and  of  the  continuance  of  its  lien, 
by  its  record.     Having  this  information  he  is  chargeable  in  law 

'  Belden  v.  Meeker,  47  N.  Y.  307;  2  ment  protects  merely  against  a  subsequent 

Lans.  (N.  Y.)  470;    Viele  v.  Judson,  82  assignment  by  the  mortgagee. 

N.  Y.  32.  5  Campbell  v.  Vedder,  supra  ;  Purdy  v. 

2  Belden  v.  Meeker,  supra.  Huntington,  42  N.  Y.  334. 

»  §§  566,  872,  956 ;  Crane  v.  Turner,  67  o  This,  then,  is  the  case  :  "A.  sells  and 

N.  Y.  4-i7  ;   Van   Keuren   v.   Corkius,   66  conveys  land  to  B.     B.  gives  back  a  bond 

N.    Y.    77  ;    Ladd     v.    Campbell,  56  Vt.  and  mortgHge   for  the   ])urcliase   money. 

529  ;  Pariiienter  i.\  Oakley,  69  Iowa,  388.  A.  sells  and  assigns  the  bond  and  mort- 

*  CaMipbell  r.  Vedder,  3  Kcyes  (N.  Y.),  gage  to  C,  and  afterwards  receives  a  con- 

174  ;  .S'.  C.  1  Abl>.  (N.  Y.)  App.  Dec.  295  ;  veyaiice  of  the  equity  of  redeinpiion  from 

Sprague  v.  Rockwell,  51  Vt.  401  ;  Viele  B.,  and  thin  by  a  full  covenant  deed  con- 

i;.  Judson,  supra.  vcys  the  land,  and  all    his   estate  and   in- 

It  is  a  too  narrow  view  of  the  author!-  tcrest  in  the  land,  to  D." 

ties  to  fcay  that  the  record  of  the  assign-  393 


§  475.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

with  the  further  notice,  that  the  mortgage  is  a  lien  in  the  hands 
of  any  person  to  whom  it  may  have  been  legally  transferred,  and 
that  the  record  of  such  transfer  is  not  necessary  to  its  validity, 
nor  as  a  protection  against  a  purchaser  of  the  property  mort- 
gaged, or  any  other  person  than  a  subsequent  purchaser  in  good 
faith  of  the  mortgage  itself,  or  the  bond  or  debt  secured  by  it ; 
but  rather  that  one  purchasing  the  premises  from  the  mortgagee 
would  take  them  subject  to  the  lien  of  the  mortgage  irrespective 
of  the  ownership  of  it,  unless  the  mortgagee  was  the  owner. 
That  knowledge  and  notice  make  it  his  duty,  in  the  exercise  of 
proper  diligence,  to  inquire  whether  his  vendor,  the  mortgagee, 
is  still  the  owner  of  the  mortgage,  and  his  omission  to  make  that 
inquiry  deprives  him  of  the  protection  of  a  bond  fide  purchaser.^ 

The  rule  that  a  mortgagor  is  entitled  to  deal  with  the  mort- 
gagee as  the  holder  of  the  mortgage,  until  he  has  actual  notice  of 
an  assignment,  has  no  application  when  the  mortgage  is  given  to 
secure  a  negotiable  note,  and  this  is  transferred  before  it  is  due.^ 

A  different  rule  prevails  in  Massachusetts.^  There  the  estate 
of  a  mortgagee  of  land  is  a  legal  estate,  which  passes  by  the  same 
instruments  of  conveyance  as  other  legal  estates.  It  is  declared 
to  be  as  important  to  be  able  to  ascertain  from  tbe  registry  the 
existence  or  continuance  of  a  mortgage  as  of  any  other  legal  title. 
"  Not  unfrequently  the  whole  or  part  of  an  estate  held  in  mort- 
gage is  released  or  conveyed  when  the  debt  is  not  paid  ;  and  in 
the  absence  of  fraud,  a  conveyance  by  the  party  who  appears  on 
the  record  to  be  the  owner  of  the  mortgage  should  be  sufficient 
to  protect  a  purchaser  who  has  no  actual  or  constructive  notice  of 
title  in  any  other."  ^ 

,  475.  An  assignee  of  a  mortgage  is  a  purchaser,  and  is  en- 
titled to  the  protection  of  the  recording  acts  as  much  as  a  pur- 
chaser of  the  equity  of  redemption.-^  If  he  purchases  in  good 
faith  and  for  a  valuable  consideration,  he  is  not  chargeable  with 
any  notice  his  assignor  had  of  prior  incumbrances  upon  the  prop- 

1  §  804  ;  Purdy  v.  Huntington,  42  N.         2  Jones  r.  Smith,  22  Mich.  360. 
Y.  334,  overruling  S.  C.  46  Barb.  (N.  Y.)         ^  Welch  v.  Priest,  8  Allen  (Mass.),  165  ; 

389  ;   and  see  Van  Keuren  v.  Corkins,  6  Wolcott  v.  Winchester,  15  Gray  (Mass.), 

Thomp.  &  C.  (N.  Y.)  355  ;  S.  C.  4  Hun,  461,  stated  in  §  804;  Blunt  v.  Norris,  123 

129  ;  66  N.  Y.  77  ;  Gillig  v.  Maass,  28  N.  Mass.  55.    So  in  Vermont :  Ladd  v.  Camp- 

Y,  191  ;  Warner  v.  Winslow,  1  Sandf.  (N.  bell,  56  Vt.  529. 

Y.)  Ch.  430;  Burhans  v.  Hntcheson,  25         ^  Welch  y.  Priest,  s«/)n(,  per  Hoar,  J. 
Kans.  625 ;  Oregon  Trust  Co.  v.  Shaw,  5         ^  Westbrook  v.  Gleason,  79  N.  Y.  23  ; 

Sawyer,  336,  quoting  and  approving  tlie  Decker  v.  Boice,  83  N.  Y.  215  ;  Smyth  v. 

text.  Knickerbocker  L.  Ins.  Co.  84  N.  Y.  589. 

394 


NATURE   AND   APPLICATION   OF   REGISTRY   ACTS.  [§  475. 

erty,  provided  he  records  his  assignment  before  such  prior  mort- 
gage or  other  deed  is  recorded. ^  He  is  then  chargeable  only  with 
constructive  notice,  such  as  is  afforded  by  record,  or  by  open  and 
adverse  possession  of  the  premises  by  another.^  The  assignee 
gains  priority  in  such  case,  not  by  the  prior  recording  of  the  as- 
signed mortgage,  but  by  the  prior  recording  of  his  own  assign- 
ment.^ If  the  assignee  omits  to  record  his  assignment,  and  an 
elder  mortgage  of  which  he  had  no  notice,  but  of  which  his  as- 
signor had  notice,  is  first  recorded,  he  will  hold  subject  to  such 
elder  mortgage ;  and  he  would  also  hold  subject  to  it  if  such 
elder  mortgage  had  been  recorded  before  he  took  the  assignment, 
but  after  the  recording  of  the  mortgage  assigned.^ 

Thus  where  there  were  two  successive  mortgages  of  the  same 
land,  and  the  mortgagor  in  the  first  mortgage  was  the  mortgagee 
in  the  second,  and  the  second  mortgage  was  first  recorded  and 
was  then  assigned  to  a  bond  fide  purchaser  for  value  before  the 
first  mortgage  was  recorded,  but  the  assignment  was  not  recorded 
until  after  the  recording  of  the  first  mortgage,  the  mortgagee  in 
the  second  mortgage  could  not  claim  priority,  because  when  he 
recorded  his  mortgage  he  had.  notice  of  the  prior  mortgage  which 
he  had  himself  executed.  It  was  held,  in  a  conti'oversy  between 
assignees  of  the  respective  mortgages,  that  the  assignee  of  the 
second  mortgage  could  derive  no  benefit  from  the  prior  record  of 
his  mortgage,  as  he  stood  as  to  that  in  the  shoes  of  his  assignor  ; 
and  that  he  was  not  entitled  to  priority  by  the  record  of  his  as- 
signment, because  the  first  mortgage  was  recorded  before  the 
recording  of  his  assignment.  But  it  was  conceded,  that  if  he  had 
recorded  his  assignment  before  the  first  mortgage  was  recorded  he 
would  have  gained  a  preference.^ 

If  a  mortgagee  assigns  one  of  the  notes  secured  by  a  mortgage, 
and  afterwards  assigns  another  note  secured  by  it,  together  with 
the  mortgage,  to  another  person,  the  latter  assignee  is  not  pro- 
tected against  the  assignee  of  the  note  as  an  innocent  purchaser, 

1  Docker  v.  Boicc,  83  N.  Y.  215.  ^'alkenburgb,  supra,  is  no  longer  in  force. 

-  Union  College  v.  Wheeler,  59  Barb.  Bank  for  Savings  in  N.  Y.  v.  Frank,  45 

(N.   Y.)    585  ;   Jackson  v.   Van  Valken-  N.  Y.  Superior  Ct.  404. 

burgh,  8  Cow.  (N.  Y.)  260;  Bush  v.  La-  *  Fort  i-.  Bureh,  5  Denio  (N.  Y.),  187  ; 

throp,  22  N.  Y.  535,  549 ;  Varick  v.  Briggs,  De  Lancey  v.  Stearns,  66  N.  Y.  157. 

6  Paige  (N.  Y.),  323  ;  Jackson  v.  Given,  8  ■'''  Westbrook  v.  Gleason,  79  N.  Y.   23, 

Johns.  (N.  Y.)  137;  Jackson  v.  Keid,  30  reversing  same  case,  14  Hun,  245.     This 

Kans.  10.  case  is  stated  and  approved  by  Anilrcws, 

"Decker   v.  Boice,   sni>ra.     The   con-  J.,  in  Decker  y.  Boicc,  83  N.  Y.  215,  221. 
trary    rule   declared    in   Jackson   v.   Van 

395 


§§  476,  477.]       REGISTRATION    AS   AFFECTING   PRIORITY. 

because  the  mortgage  itself  is  notice  to  him  of  the  existence  of 
such  note.^ 

476.  It  is  not  often  that  the  question  of  priority  of  rights 
under  different  assignments  of  the  same  mortgage  can  arise, 
because  an  assignment  is  generally  accompanied  by  a  delivery  of 
the  note  or  bond  secured  by  the  mortgage  and  of  the  mortgage 
itself ;  and  except  under  peculiar  circumstances  a  person  acting 
in  good  faith  would  not  take  a  mere  written  transfer  of  the  mort- 
gage title  without  a  delivery  of  these.^  The  fact  that  the  as- 
signor did  not  have  these  papers  to  deliver  would  be  enough 
ordinarily  to  put  the  purchaser  on  his  guard,  even  if  it  did  not 
amount  to  notice  to  him  of  a  prior  assignment.  At  any  rate,  the 
absence  of  these  papers  would  be  enough  to  put  in  doubt  his  good 
faith  in  taking  the  assignment ;  and  would  make  him  chargeable 
with  notice  of  any  defect  there  may  be  in  the  assignor's  title.^ 

But  if  two  assignments  of  the  same  mortgage  by  any  means  are 
made  and  taken  by  different  persons  in  good  faith,  of  course  the 
assignee  who  first  records  his  assignment  would  gain  the  better 
title  to  the  mortgage,  if  he  has  paid  full  value  for  it  at  the  time 
of  taking  it.  If  he  paid  only  part  of  the  consideration,  then  he 
would  have  priority  only  to  the  extent  of  the  payment  made  by 
him ;  for  he  is  then  a  purchaser,  and  entitled  to  protection  only 
to  that  extent.^ 

477.  Manner  of  recording  an  assignment.  —  When  an  as- 
signment of  a  mortgage  is  indorsed  upon  the  mortgage  deed, 
which  is  referred  to  as  "  the  within  described  mortgage,"  it  is 
sufficient  to  record  the  assignment  without  recording  the  mort- 
gage with  it  anew.^  A  reference  is  usually  made  by  the  register 
from  the  record  of  one  instrument  to  the  other ;  but  unless  re- 
quired by  law,  this  is  not  essential.  A  recital  of  the  names  of  the 
parties  to  the  mortgage,  and  its  date,  is  a  sufficient  identification 
of  it;  although  it  is  usual  in  addition  to  this  description,  when 
the  assignment  is  not  indorsed  upon  the  mortgage,  to  refer,  in  the 
description  of  it,  to  the  book  and  page  of  the  record.  But  neither 
a  reference  to  the  record  of  the  mortgage  nor  a  description  of  the 

1  Wilson  V.  Eigenbrodt,  30  Minn.  4.  Y.)  389  ;  S.  C.  42  N.  Y.  334 ;  Campbell  v. 

2  Porter  v.  King  (D.  C.  Pa.  1880),  1  Vedder,  3  Keyes  (N.  Y.),  174;  Bush  v. 
Fed.  Rep.  755,  quoting  text  with  approval.  Lathrop,  22  N.  Y.  535 ;  Wiley  v.  William- 

3  Kellogg  i>.  Smith,  26  N.Y.  18;  Brown  son,  68  Me.  71;  Oregon  Trust  Co.  v. 
V.  Blydenburgh,  7  N.  Y.  141.  Shaw,  5  Sawyer,  336  ;  Potter  v.  Strausky, 

*  Pickett  V.  Barron,  29  Barb.   (N.  Y.)     48  Wis.  235.     See  §  566. 
505  ;  Purdy  v.  Huntington,  46  Barb.  (N.         ^  Carli  v.  Taylor,  15  Minn.  171. 
396 


NATURE   AND   APPLICATION   OF  REGISTRY   ACTS.      [§§  478,  479. 

mortgaged  lands  is  necessary.  An  assignment  is  sufiBcient  which 
so  identifies  the  mortgage  that  by  examining  the  records  the  one 
referred  to  can  be  ascertained.^ 

It  is  usual  for  the  register  to  note  an  assignment  upon  the  mar- 
gin of  the  record  of  a  mortgage ;  and  in  many  states  it  is  made 
by  statute  his  duty  to  do  so.  But  in  the  absence  of  such  a  stat- 
ute the  omission  of  the  register  to  do  so  does  not  affect  the  right 
of  the  assignee.^ 

478.  The  same  principles  apply  equally  to  the  record  of 
any  agreement  affecting  a  miortgage.  If  not  executed  with  the 
formalities  entitling  it  to  be  recorded,  the  record  affords  no  con- 
structive notice  of  its  contents.  If,  for  instance,  land  subject  to  a 
mortgage  is  sold,  and  mortgaged  back  for  the  purchase  price,  the 
vendor  agreeing  to  pay  off  the  elder  mortgage,  or  in  default  of  so 
doing  to  allow  the  purchaser  to  pay  it,  and  have  the  amount  of  it 
deducted  from  the  mortgage  given  for  the  price  of  the  land,  and 
this  agreement,  without  being  entitled  to  be  recoi'ded,  is  never- 
theless put  upon  record,  and  the  purchaser  subsequently  paj's  the 
elder  mortgage  as  contemplated  by  the  agreement,  an  assignee 
of  the  mortgage  for  the  purchase  money,  having  no  actual  notice 
of  this  agreement,  is  not  concluded  by  it,  but  may  hold  his  mort- 
gage for  the  original  amount  of  it.'^ 

A  release  of  a  part  of  the  mortgaged  premises  is  a  conveyance 
by  which  the  title  to  real  estate  may  be  affected,  and  unless  it  be 
recorded,  it  is  void  against  a  subsequent  assignee  of  the  mortgage 
for  value  and  without  notice.*  An  unrecorded  agreement  to  re- 
lease is  in  like  manner  void  against  an  assignee  of  the  mortgage 
in  good  faith.^ 

479.  The  registry  laws  apply  to  sales  and  mortgages  of 
growing  crops  and  trees,  or  to  an  agreement  constituting  a  lien 
upon  them,  so  long  as  they  are  a  part  of  the  realty.  A  verbal 
agreement,  or  an  agreement  in  Writing  not  recorded,  whereby  the 
crop  is  pledged  by  a  tenant  of  land  to  the  owner  as  security  for 
advances,  is  of  no  validity  as  against  a  mortgage  of  it  afterwards 
made  and  duly  recorded.^ 

*  Vide  V.  Judson,  82  N.  Y.  32.  8  Jones  v.  Cliamberlin,  5  Ileisk.  (Tcnii.) 
-  Vide    V.    Ju(lK«n,    supra,    overrulinf^     210.    This  case  is  distiiif^nished  from  TeJ- 

Moore  i;.  Sloan,  .'JO  Barb.  (N.  Y.)  442.  ford   v.    Wilson,    .'i    Ilead    (Tiiin),    311, 

*  Dutton  V.  Ives,  5  Midi.  515.  where  it  was  a^Tecd  that  the  proceeds  of 

*  Mutual  Life  Ins.  Co.  i;.   Wilcox,  55     a  farm  should  be  liable  for  the  wages  of  a 
How.  (N.  Y.)  Pr.  43.  person  who  entered  into  possession  of  it 

''  St.  .John  V.  Spaldiug,   1   T.  &  C.  (N.     and  carried  it  on  for  the  owner.    Being  in 
Y.)  483.  397 


§§  479  a.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

A  parol  contract  for  the  sale  of  growing  trees  to  be  cut  and  re- 
moved from  the  land  is  ordinarily  a  contract  for  the  sale  of  a 
chattel  interest,  though  the  trees  are  a  part  of  the  realty  so  long 
as  they  remain  standing.  Therefore,  to  insure  protection  against 
a  sale  or  mortgage  of  the  land  before  the  trees  are  severed,  it  is 
desirable  that  the  sale  be  recorded.  If  the  owner  of  land  which 
is  mortgaged  sells  growing  trees,  and  the  purchaser  cuts  and  re- 
moves the  trees  without  knowledge  of  the  mortgage,  which  is  not 
recorded,  the  mortgagee  has  no  title  to  the  timber  as  against  such 
purchaser,  and  cannot  maintain  replevin  for  it.^ 

479  a.  The  statutes  providing  for  mechanics'  liens  qualify 
and  aflfect  and  sometimes  destroy  the  priority  of  mortgages 
as  established  by  the  registry  laws;  and  it  is  therefore  important 
that  these  statutes  should  be  considered  in  connection  with  the 
registry  laws.  Such  liens  may  be  given  priority  of  mortgages 
executed  and  recorded  subsequently  to  the  date  of  the  contract 
under  which  the  lien  is  claimed,  as  is  the  case  in  Massachusetts  ;  ^ 
but  more  frequently  mechanics'  liens  are  given  precedence  of 
mortgages  upon  the  property  recorded  after  the  commencement  of 
the  work  or  improvement  for  which  the  lien  is  claimed.  The 
argument  in  favor  of  such  a  provision  is,  that  one  who  takes  a 
mortgage  upon  a  building  in  process  of  erection,  or  upon  land 
upon  which  any  improvements  for  which  a  lien  is  given  are  mak- 
ing, is  bound  to  know  that  there  may  be  a  lien  upon  the  prop- 
erty for  the  work  already  done,  and  to  assume  that  the  work  is  to 
go  forward,  and  that  there  may  be  a  further  lien  for  completing 
the  work.  It  is  not  desirable,  either,  that  the  execution  of  a 
mortgage  upon  the  hind  should  be  permitted  to  arrest  the  work 
and  prevent  its  completion,  as  would  most  likely  happen  if  tlie 
making  of  the  mortgage  had  the  effect  of  postponing  any  lien 
afterwards  filed.  It  is  regarded  also  as  just  that  the  mechanic 
should  have  the  benefit  of  the  labor  and  materials  that  go  into 

possession,  he  was  held  to  be  entitled  to  For  lien  laws  affecting  the  priority  of 

apply  the  crops  to  the  satisfaction  of  his  railroad  mortgages,  see  Jones  on  Railroad 

claim  for  wages  as  against  a  creditor  of  Securities,  §§  573-613. 

the  owner,  and  that  the  registration   act  For  a  statement  of  the  law  as  to  pri- 

did  not  apply.     As  to  mortgages  of  crops,  ority  between  mechanics'  liens  and  mort- 

see  Jones  on  Chattel  Mortgages,  §§  142-  gages,    see    Jones    on    Liens,    §§  1457- 

146.  I486. 

1  Banton  r.  Shorey,  77  Me.  48.  As   to   priority   of  statutory   liens  for 

^  Dunklee  v.  Crane,  103  Mass.  470.  water  rates,  see  Jones  on  Liens,  §  102. 

398 


NATURE   AND   APPLICATION    OF   REGISTRY   ACTS.        [§  479  a. 

the  property  and  give  it  value,  rather  than  the  mortgagee,  who 
has  taken  his  mortgage  during  the  progress  of  the  work.^ 

Under  such  statutes  a  mortgage  made  in  good  faith  to  secure 
future  advances  on  a  building,  if  recorded  before  the  commence- 
ment of  the  building,  is  entitled  to  priority  over  liens  for  labor  or 
materials,  although  the  advances  are  not  made  till  after  the  com- 
mencement of  the  building.^ 

Under  still  other  statutes  a  hona  fide  mortgagee  is  regarded  as 
a  purchaser  who  is  not  affected  by  a  mechanic's  lien  unless  he 
has  received  actual  or  constructive  notice  of  it  in  a  manner  pre- 
scribed ;  and  the  fact  that  the  mechanic  is  at  work  upon  the 
building,  at  the  time  of  the  mortgage,  is  not  actual  notice  of  his 
lien. -5 

This  lien  is  waived  by  taking  a  mortgage*  or  other  security  for 
the  amount  for  which  a  lien  might  be  claimed. 

The  commencement  of  a  building,  within  the  meaning  of  these 
statutes,  is  the  first  labor  done  on  the  ground  which  is  made  the 
foundation  of  the  building,  and  forms  part  of  the  work  suitable 
and  necessary  for  its  construction.^  It  is  some  work  or  labor  on 
the  ground,  such  as  beginning  to  dig  the  foundation,  which  every 
one  can  see  and  recognize  as  the  commencement  of  a  building ; 
and  the  work  moreover  must  be  done  with  the  intention  thus 
formed  of  continuing  to  completion.^ 

When  a  building  is  changed  or  enlarged,  the  lien  attaches  from 
the  commencement  of  the  alteration  on  the  ground,  and  is  sub- 
ject to  liens  that  had  previously  attached."  As  against  a  mort- 
gage the  lien  of  which  attached  after  such  commencement  of  a 
building  or  of  alterations  and  additions  to  it,^  a  lien  can  be  sup- 
ported for  machinery  and  fixtures  afterwards  furnished,  although 
not  upon  the  ground  at  the  time,  and  the  work  was  not  done 
there,  but  at  a  distance  in  shops.  When  additions  to  an  old 
building  are  in  their  extent  and  value  significant  enough  to  give 

»  Davis  V.  BiMand,  18  Wall.  659  ;  Neil-  rad  v.  Starr,  50  Iowa,  470;  S.  C.  13  West, 

son  I'.  Iowa  Kastern  Ily.  Co.  44  Iowa,  71 ;  Jur.  210;    renuock   v.  Hoover,  5    Rawle 

Equitable  Life  Iub.  Co.  v.  Slye,  45  Iowa,  (Pa.),  291. 

f;i5.  '-  Mutual  Benefit  Life  Ins.  Co.  v.  How- 

•■^  Wisconsin  I'lanin;;  Mill  Co.  v.  Schuda  and,  26  N.  J.  Va{.  389 ;  Brooks  v.  Lester, 

(Wi.s.),  39  N.  W.  liep.  558.  36   Md.  65,  70;  Jean    v.  Wibon,  38  Md. 

3  Foushec  V.  fJri;,'sby,  12  Bush  (Ky.),  288,  296. 

75  ;  Gere  i;.  Cusliiuj,'.  5  lb.  304.  "  Norris's  Appeal,  30  Ta.  St.  122. 

*  Trulliuger  v.  Kof<»e<l,  7  Oreg.  228.  "  Parrish  and  Hazard's  Appeal,  83  Pa. 

6  Brooks  V.  Lester,  36  Md.  65,  70  ;  Con-  St.  111. 

399 


§  479  a.]  BEGISTRATION    AS    AFFECTING   PRIORITY. 

notice  to  purchasers  and  creditors  of  the  change  in  the  character 
of  the  property,  the  additions  so  made,  the  work  and  materials 
furnished  therefor,  and  the  macliinery  placed  therein,  are  subjects 
of  mechanics'  liens  as  new  buildings.^ 

In  computing  the  time  after  the  completion  of  work  done  for 
which  a  mechanic's  lien  is  claimed  for  filing  a  notice  of  the  lien, 
occasional  repairs  made  subsequently  to  the  completion  of  the 
work  cannot  be  added  to  the  work  done  months  before,  so  as  to 
render  the  whole  work  one  continued  performance,  for  which  a 
single  lien  can  be  claimed  within  the  time  limited  by  statute.^ 

A  mechanic's  lien  for  repairing  or  enlarging  a  building  is  not 
paramount  to  an  existing  mortgage  upon  it,  even  where  such  lien 
relates  back  to  tlie  commencement  of  the  work  upon  a  building, 
so  that  when  a  mortgage  covers  a  building  partially  erected,  a  lien 
for  work  done  or  materials  furnished  in  completing  the  building 
would  relate  back  to  the  time  of  the  commencement  of  the  build- 
ing, and  would  take  precedence  of  the  mortgage.^  This  rule  pre- 
vails although  the  building  be  changed  so  that  very  little  of  the 
original  structure  remains ;  as,  for  instance,  where  there  was  a 
mortgage  upon  a  paper-mill  which  was  out  of  repair  and  was 
almost  wholly  removed,  and  a  new  one  was  erected  in  its  place, 
and  this  was  supplied  with  new  machinery.^ 

Mechanics  and  laborers  asserting  a  lien  upon  real  property  for 
their  work,  and  claiming  priority  over  mortgagees  and  others  who 
have  acquired  interest  in  the  property,  must  make  strict  proof  of 
all  that  is  essential  to  the  creation  of  the  lien  ;  such,  for  instance, 
as  proof  of  the  commencement  of  the  work,  of  its  character,  and  of 
its  completion.  The  commencement  of  the  work  must  be  shown, 
for  from  that  date  the  lien  attaches,  if  at  all.  The  character  of 
the  work  must  be  shown,  for  it  is  not  for  all  kinds  of  work  that  a 
lien  is  allowed.  The  completion  of  the  work  must  be  shown,  for 
notice  of  claiming  a  lien  must  be  filed.^  Whether  the  work  relied 
on  as  having  been  done  prior  to  the  mortgage  is  to  be  regarded  as 
a  commencement  of  the  building  is  a  question  of  fact,  to  be  deter- 
mined by  the  evidence.^  The  mortgage  must  be  recorded  before 
the  building  is  commenced  in  order  to  have  priority.' 

1  Panish  and  Hazard's  Appeal,  83  Pa.  *  Equitable  Life  Ins.  Co.  v.  Slye,  45 
St.  111.  Iowa,  615. 

'^  Davis  V.  Alvord,  94  U.  S.  545.  &  Davis  v.  Alvord,  supra. 

3  Getchell  v.  Allen,  34  Iowa,  559  ;  Neil-         6  Kelly  v.  Rosen.'^tock,  45  Md.  389. 
son  V.  Iowa  Eastern  Ry.  Co.  44  Iowa,  71.  ^  Brooks  v.  Lester,  36  Md.  65  ;  Meyer 


400 


V.  Construction  Co.  100  U.  S.  457. 


REGISTRY   ACTS    OF   THE   SEVERAL    STATES.  [§  480. 

Under  several  statutes,  as,  for  instance,  that  existing  prior  to 
1876  in  Iowa,  the  onl}'  manner  of  establishing  the  priority  of  a 
mechanic's  lien  upon  a  building,  over  a  preexisting  incumbrance 
upon  the  land,  was  b}'  a  sale  and  removal  of  the  building;  and 
when  the  nature  of  the  improvement  was  such  that  it  could  not  be 
removed,  the  lien  was  necessarilj'^  postponed  to  the  prior  incum- 
brance upon  the  land.^  The  lien  of  the  mechanic  cannot  exceed 
the  right  of  the  owner  who  contracted  for  the  improvements  upon 
the  land  ;  and  therefore  whei'e  the  owner's  interest  was  an  estate 
in  fee  of  one  undivided  third  part  of  the  propert}^  and  a  life 
estate  in  the  remaining  two  thirds,  the  lien  of  the  mechanic  was 
limited  to  the  same  interests.  The  owner  of  such  a  part  inter- 
est in  the  land  would  not  have  the  power  to  remove  a  building 
erected  by  him  upon  it,  and  a  purchaser  under  a  mechanic's  lien 
would  acquire  no  greater  right  to  remove  it.^  If  the  owner's  in- 
terest in  the  building  were  such  that  he  might  remove  it,  the  right 
of  removal  would  pass  by  sale  under  the  mechanic's  lien  ;  subject, 
however,  to  the  qualification  that  the  right  of  removal  depends 
upon  the  fact  whether  the  building  upon  which  the  materials 
were  furnished  and  the  work  done  is  so  far  an  independent  struc- 
ture as  to  be  capable  of  being  removed  without  material  injury  to 
that  which  would  remain.^  If  the  building  cannot  be  removed 
without  materially  injuring  or  altogether  destroying  its  value  ;  if 
it  be,  for  instance,  a  building  of  brick,  three  stories  high,  with  a 
stone  foundation  ;  or  if  the  interest  of  the  owner  be  such  that  he 
had  no  right  of  removal  as  against  others,  the  lien  of  a  mechanic 
cannot  be  enforced  through  a  removal  of  the  building.* 

A  prior  mortgage,  though  given  to  secure  future  advances,  has 
precedence.''     A  mortgage  for  purchase  money  has  priority.^ 

II.  Registry  Acts  of  the  Several  States. 

480.  In  general.  —  Although  tlie  general  effect  of  the  registry 
acts  of  the  several  states  is  the  same,  there  is  considerable  differ- 
ence of  detail  in  them,  and  no  general  statement  of  their  pro- 
visions would  be  of  any  value.  It  has  been  thought  worth  while 
to  give  a  synopsis  of  the  statutes  of  each  state  upon  this  subject, 

'  Conrad  v.  Slarr,  50  lown,  470 ;  S.  C.  *  Conrad  v.  Starr,  supra. 

1.3  West.  Jut.  210.  6  Lylc  v.  Ducomb,  .5  IJimi.  (Pa.)  r)8r>. 

■^  Jessup  V.  Stone,  1.3  Wis.  4CC ;  Conrad  "  C!»rni)lKll'.s  Appeal,   30    Pa.  St.  247  ; 

V.  Starr,  supra.  Clark  i'.  Butler,  32  N.  J.  Kq.  G64. 

8  O'Brien  r.  Pettis,  42  Iowa,  2'J3. 

vou  I.                        2G  401 


§§  481,  481  «.]       REGISTRATION   AS   AFFECTING    PRIORITY. 

both  on  jiccoimt  of  the  practical  use  of  the  statutes  themselves, 
and  for  the  exphxnation  they  afford  of  the  want  of  harmony  in  the 
adju(hcations  of  different  states  upon  this  subject. 

481.  Alabama.  —  Conveyances  of  unconditional  estates  and 
mortgages,  or  instruments  in  the  nature  of  a  mortgage,  of  real 
property,  to  secure  any  debt  created  at  the  date  thereof,  are  void 
as  to  purchasers  for  a  valuable  consideration,  mortgagees,  and 
judgment  creditors,  having  no  notice  thereof,  unless  recorded 
within  thirty  days  from  their  date.  Other  conveyances  to  secure 
debts  are  void  as  against  subsequent  purchasers  and  incumbran- 
cer's who  acquire  rights  before  the  recording  of  them.  These 
provisions  include  absolute  conveyances  with  a  separate  defea- 
sance.i  They  apply  to  equitable  mortgages.^  The  object  of  the 
statute  being  the  prevention  of  fraud,  the  letter  of  the  statute 
must  often  yield  to  the  spirit ;  thus  it  is  held  that  actual  notice  of 
the  existence  of  a  mortgage  by  a  subsequent  purchaser  or  mort- 
gagee,^ or  by  a  subsequent  judgment  creditor,"^  is  equivalent  to 
registration.  Nor  is  the  record  of  the  mortgage  essential  to  its 
validity  as  against  the  mortgagor;^  or  as  against  his  creditors 
other  than  judgment  creditors.^  The  record  is  in  law  complete 
from  the  delivery  of  the  deed  to  the  recording  officer,  and  there- 
fore a  mistake  by  him  in  copying,  as  to  the  sum  secured  by  the 
mortgage,  cannot  prejudice  the  mortgagee.''^ 

481  a.  Arizona  Territory.  —  All  mortgages  and  deeds  of  trust 
of  lands  are  void  as  to  all  creditors  and  subsequent  purchasers 
unless  acknowledged  and  recorded  in  the  office  of  the  recorder  of 
the  county  in  which  such  real  estate  is  situated  ;  but  as  between 
the  parties  they  are  valid  without  such  record.  Every  deed  duly 
recorded  takes  effect  as  to  all  subsequent  purchasers  for  value, 
without  notice,  and  as  to  all  creditors,  from  the  time  such  instru- 
ment is  delivered  to  the  recorder  for  record.^ 

1  Eev.  Code  1886,  §§  1810-1812;  and  *  "Wallis  v.  Rhea,  10  Ala.  451;  *S.  C. 
see  Coster  y.  Bank  of  Ga.  24  Ala.  37  ;  De  12  Ala.  646;  Jordan  v.  Mead,  12  Ala. 
Vendal   v.   Malone,   25   Ala.   272.     Con-     247. 

strued    as    regards    judgment    creditors,         5  Smith  v.  Branch  Bank  of  Mobile,  21 
Wood  r.  Lake,  62  Ala.  489.,  Ala.   125;    Andrews  v.   Burns,    11    Ala. 

2  O'Neal   V.   Seixas,   4   So.    Rep.   745;     691. 

Pierce  v.  Jackson,  56  Ala.  599.     The  die-  6  Ohio  Life  Ins.  &  Trust  Co.  v.  Led- 

tum  to  the  contrary  in  Bailey  r.  Timber-  yard,  8   Ala.    866;  Daniel   v.   Sorrells,  9 

lake,  74  Ala.  221,  224,  is  erroneous.  Ala.   436;   Center  v.   P.  &  M.  Bank,  22 

^  Wyatt  V.  Stewart,  34  Ala.  716  ;  Boyd  Ala.  743. 

«.  Beck,  29  Ala.  703;  Bearing  v.  Wat-  "  Mims  v.  Mims.  35  Ala.  23. 

kins,  16  Ala.  20.  8  r,  S.  1887,  §§  2601,  2602. 

402 


REGISTRY   ACTS    OF    THE    SEVERAL   STATES.       [§§  482-484. 

482.  Arkansas. —  A  mortgage  is  a  lien  on  the  mortgaged 
property  from  the  time  it  is  filed  for  record  in  the  recorder's  office 
for  the  county  where  the  hind  is  situate,  and  not  before. ^  It  must 
be  proved  or  acknowledged  like  a  deed  for  the  conveyance  of 
real  estate.  A  mortgage  not  filed  for  record  is  void  as  against 
subsequent  purchasers  from  the  mortgagor.^  The  acknowledg- 
ment must  state  that  the  grantor  executed  the  same  for  the  con- 
sideration and  purpose  tliei-ein  mentioned  and  set  forth.^ 

483.  California.  —  Mortgages  are  acknowledged  and  recorded 
in  the  same  manner  as  grants  of  real  estate.  They  are  recorded 
by  the  county  recorder  of  the  county  in  which  the  property  is 
situated,  in  separate  books.  They  are  deemed  to  be  recorded 
when,  being  duly  acknowledged  and  certified,  they  are  deposited 
in  the  recorder's  office  for  record.  Without  such  record  the}^  are 
void  as  against  subsequent  purchasers  in  good  faith  for  a  valuable 
consideration  whose  conversance  is  first  dnl}'^  recorded.  When  a 
grant  purports  to  be  an  absolute  conveyance,  but  is  intended  to 
be  defeasible  on  the  performance  of  certain  conditions,  the  defea- 
sance must  be  recorded  in  order  to  defeat  or  affect  the  absolute 
grant  as  against  any  person  other  than  the  grantee,  his  heirs  or 
devisees,  or  persons  having  actual  notice.* 

A  provision  of  the  Code,  repealed  in  1874,  which  allowed  the 
mortgagee  one  day  for  every  twenty  miles  between  his  residence 
and  the  recording  office  for  recording  his  deed,  was  held  to  be 
subject  to  the  provision  that  the  mortgage  or  conveyance  first 
recorded  had  precedence.^ 

484.  Colorado.  —  Mortgages  are  recorded  in  the  office  of  the 
recorder  of  the  county  where  the  land  is  situate,  and  from  the 

'  Dig.  of  Stat.  1884,  §§  4742-4744.  mortgage  is  void  as  to  all  persons  except 

-  Fry  V.  Martin,  33  Ark.  203 ;  Dodd  v.  the  parties  to  it,  though  they  iiave  actual 

I'arker,  40  Ark.  .536.  knowledge   of    its    exibtence.     Wright  v. 

•'  Dig.   1884,   §  656.     An  acknowledg-  Graham,  42  Ark.  140. 

ment  of  the  execution  of  a  mortgage  for  *  Civil  Code  1885,  §§  1169-1171,  1214, 

"  the   uses  and  jiurposes  "  therein    speci-  2950,  2952. 

tied  in  insufficient  to  authorize  it  to  be  A  mortgage  by  a  married  woman  upon 
recorded.  The  word  "  u.ses"  i.s  not  of  the  her  separate  e.-tate  is  an  instrument  or 
same  or  of  Biinilar  import  as  the  word  conveyance  wiiliiu  the  meaning  of  §§ 
"coiisideration."  Martin  r.  O'Bannon,  ii86,  1189  of  the  Civil  Code  providing 
."..')  Ark.  62.  The  word  "  coiLsideration"  for  taking  the  ackriowjcilginent  of  a  niajj- 
is  essential,  and  a  failure  lo  use  it  renders  ried  woman  by  examinaiion,  without  the 
the  mortgM^'c  void  against  subsequent  pur-  hearing  of  her  husband.  Tolinan  v. 
chasers,  even  with  notice,  but  it  is  good  be-  Smith,  16  Vac.  Hep.  189. 
tween  the  parties.  Conner  v.  Alibott,  35  o  Odd  Fel'ows'  Savings  Bank  r.  Ban- 
Ark.  365.     If   not  BO  acknowledged,  the  ton,  46  Cal.  603. 

403 


§§  485-487.]       REGISTRATION    AS   AFFECTING   PRIORITY. 

time  of  filing  of  tlie  same  for  record  take  effect  as  to  subsequent 
bond  fide  purchasers  and  incumbrancers  not  having  notice.  Con- 
vej'ances  are  deemed  to  be  notice  from  the  time  of  filing  for  rec- 
ord, though  not  acknowledged  or  proven  according  to  law  ;  but 
cannot  be  offered  in  evidence  unless  subsequently  acknowledged 
or  proved  according  to  law.*^ 

485.  Connecticut.  —  No  conveyance  is  effectual  to  hold  lands, 
against  any  other  person  but  the  mortgagor  and  his  heirs,  unless 
recorded  on  the  records  of  the  town  where  the  lands  lie.  A  rec- 
ord of  an  unacknowledged  deed,  or  of  any  instrument  creating 
an  equitable  interest,  is  notice  to  all  the  world  of  an  equitable 
interest.  All  conveyances  of  land  of  which  the  grantor  is  ousted 
by  the  entry  and  possession  of  another,  unless  made  to  the  person 
in  actual  possession,  are  void.^  Possession  by  a  mortgagee  is  not, 
however,  adverse.-^ 

486.  Dakota  Territory.  —  Mortgages  are  recorded  with  the 
register  of  deeds  for  the  county  where  the  land  lies.  The  record 
is  made  in  books  kept  exclusively  for  mortgages.  The  record  is 
constructive  notice  to  all  purchasers  and  incumbrancers  subse- 
quent to  the  recording.  But  an  unrecorded  instrument  is  valid 
between  the  parties  and  as  to  those  who  have  notice  of  it.  Every 
grant  which  appears  by  any  other  writing  to  be  intended  as  a 
mortgage  must  be  recorded  as  such  ;  and  if  such  grant  and  other 
writing  explanatory  of  its  true  character  be  not  recorded  together 
at  the  same  time  and  place,  the  grantee  can  derive  no  benefit 
from  such  record.  When  a  giant  of  real  property  purports  to  be 
an  absolute  conveyance,  but  is  intended  to  be  defeasible  on  the 
performance  of  certain  conditions,  such  grant  is  not  defeated  or 
affected  as  against  any  person  other  than  the  grantor  or  his  heirs 
or  devisees,  or  persons  having  actual  notice,  unless  an  instrument 
of  defeasance,  duly  executed  and  acknowledged,  shall  have  been 
recorded  in  the  office  of  the  register  of  deeds  of  the  county  where 
the  property  is  situated.^ 

487.  Delaware. — Mortgages,  and  conveyances  in  the  nature 
of  mortgages,  have  priority  according  to  the  date  of  record  in  the 
recorder's  office  for  the  county.  If  two  or  more  mortgages  of  the 
same  premises   are  lodged   in  the   office  at  the  same  time,  they 

1  G.  S.  18SG,ch.  18,  §§215-217.  <  Civil  Code    1883,   §§   651,  652,    674, 

2  G.  S.  1888,  §§  2961-2966.  675, 1738-1741. 

3  Sanford  v.  Washburn,  2  Root  (Conn.), 
499. 

404 


REGISTRY  ACTS  OF  THE  SEVERAL  STATES.   [§§  488,  489. 

stand  in  priority  according  to  their  respective  dates.  A  mortgage 
for  purchase  money  recorded  within  sixty  days  after  making  it 
has  precedence  of  an}'  judgment  or  other  lien  of  prior  date.^  A 
deed  not  recorded  within  one  year  after  its  delivery  is  not  valid 
against  a  subsequent  creditor,  mortgagee,  or  purchaser  without 
notice  of  such  deed.^ 

If  there  be  a  conveyance  absolute  on  the  face  of  it,  and  also 
a  defeasance,  or  written  contract  in  the  nature  of  a  defeasance, 
for  a  reconveyance  of  the  premises  or  any  part  of  them,  the  per- 
son to  whom  such  conveyance  is  made  must  cause  to  be  indorsed 
thereon  and  recorded  therewith  a  note  stathig  that  there  is  such 
a  defeasance  or  contract,  and  the  general  purport  of  it,  or  the  re- 
cording of  such  conveyance  is  of  noefifect;  and  such  defeasance 
or  contract  must  be  duly  acknowledged  or  proved,  and  recorded 
in  the  recorder's  office  for  the  county  within  sixty  days  after  the 
day  of  making  the  same,  or  it  will  not  avail  against  a  fair  cred- 
itor, mortgagee,  or  purchaser  for  a  valuable  consideration  from 
the  person  to  whom  the  conveyance  is  made;  unless  it  appear 
that  such  creditor  when  giving  the  credit,  or  such  mortgagee  or 
purchaser  when  advancing  the  consideration,  had  notice  of  such 
defeasance  or  contract.^ 

488.  District  of  Columbia.  —  Conveyances  of  land  are  re- 
corded in  the  office  of  the  recorder  of  deeds.  All  deeds,  except 
deeds  of  trust  and  mortgages,  recorded  within  six  months  after 
delivery,  take  effect  and  are  valid  as  to  all  persons  from  the  time 
they  are  duly  acknowledged  or  proved.  All  deeds  of  trust  and 
mortgages  whenever  delivered  for  record,  and  other  conveyances 
delivered  within  six  months  after  delivery,  take  effect  and  are 
valid,  as  to  all  subsequent  purchasers  for  valuable  consideration 
without  notice,  and  as  to  all  creditors  from  the  time  when  such 
deed  of  trust  or  mortgage,  or  other  conveyance,  shall  have  been 
so  acknowledged  or  proved,  and  delivered  to  the  recorder  for  rec- 
ord, and  from  that  time  only.  Of  two  or  more  deeds  of  the  same 
property  delivered  for  record  on  the  same  day,  that  which  was 
first  sealed  and  delivered  has  preference  in  law.^ 

489.  Florida.  —  No  mortgage  is  gcjod  or  elYectual  in  law  or 
in  erpiity  against  creditors  or  subsequent  purchasers  for  value 
without  notice,  nuh'ss  recorded  in  the  county  in  which  the  lands 
are  situated  ;  and   in   oidi-r  to  be  entitled  to  record,  its  execution 

1  n.  Code  1874,  p.  r,04.  »  R.  Code  1874,  p.  504. 

2  LawH  1887,  cli.  520.  ■»   R.  S.  1874,  pp.  52,  53. 

405 


§§  490,  491.]       REGISTRATION    AS    AFFECTING   PRIORITY. 

by  the  party  making  it  must  be  acknowledged  by  liini,  or  proved 
upon  oath  by  at  least  one  of  the  subscribing  witnesses,  before  the 
officer  authorized  by  law  to  record  the  deed,  or  before  some  judi- 
cial officer  of  the  state.  A  deed  not  recorded  within  six  months 
after  its  execution  is  void  against  subsequent  purchasers.  If  exe- 
cuted by  attorney,  the  power  of  attorney  must  be  proved  and  re- 
corded at  the  time  of  recording  the  mortgage.^ 

490.  Georgia.  —  A  mortgage  must  be  executed  in  the  pres- 
ence of,  and  attested  by  or  proved  before,  a  notary  public  or  jus- 
tice of  any  court  in  this  state,  or  a  clerk  of  the  superior  court, 
and  by  one  other  witness,  and  be  recorded  within  thirty  days 
from  its  date  in  the  county  where  the  land  lies,  in  the  office  of  the 
clerk  of  the  superior  court.  If  not  recorded  within  the  time  lim- 
ited, it  is  valid  against  the  mortgagor,  but  is  postponed  to  all 
other  liens  or  purchases  made  prior  to  the  record  without  notice 
of  the  unrecorded  mortgage.^  A  mortgage  recorded  in  an  im- 
proper office,  or  without  due  attestation,  or  so  defectively  re- 
corded as  not  to  give  notice  to  a  prudent  inquirer,  is  not  notice; 
but  a  mere  formal  mistake  in  the  record  does  not  vitiate  it.  The 
due  record  of  a  mortgage,  though  not  made  within  the  time  pre- 
scribed, is  notice  from  the  time  of  record  to  all  the  world.^  A 
junior  mortgage  does  not  take  precedence  of  an  unrecorded  senior 
mortgage,  unless  the  junior  mortgage  be  recorded  within  the  time 
prescribed  by  law.* 

491.  Idaho  Territory.  —  Mortgages  are  recorded  in  the  office 
of  the  recorder  of  the  county  in  which  the  real  estate  is  situate, 
in  separate  books.  Every  conveyance  is  void  as  against  any  sub- 
sequent purchaser  or  mortgagee  of  the  same  property,  or  any 
part  thereof,  in  good  faith  and  for  a  valuable  consideration,  whose 
conveyance  is  first  duly  recorded.      An  unrecorded  instrument  is 

1  DiS-  of  Laws  1881,  pp.  215-219.  the  mortgan;e,  thou<;h  both  the  judgment 

2  Code  1882,  §§  1955-1959,  2705;  Hard-  creditor  and  the  purchaser  had  actual  no- 
away  v.  Senimes,  24  Ga.  305  ;  Kichards  v.  tice  of  the  defectively  recorded  mortgage. 
Myers,  63  Ga.  762 ;  McGuire  v.  Barker,  Andrews  i'.  Mathews,  59  Ga.  466.  The 
61  Ga.  339.  attestation  of  a  mortgage   to  a  corpora- 

A  judgment  junior  in  date  to  a  mort-  tion  by  an  employee  of  the  corporation, 

gage  illegally  recorded  for  want  of  pro-  together  with  one  other  witness,  is  suffi- 

bate,  but  founded  on  a   debt  antecedent  cient  proof   of  its  execution  to  admit  it 

to  the  date  of  the  mortgage,  has  priority  to  record.     Conley  v.  Campbell  Triutrng 

of  lien  to  the  mortgage,  and  the  purchas-  Press  Co.  3  S.  E.  Rep.  335. 

er,  under  the  execution  issued  upon  such  ^  Code  18S2,  §§  1959,  1960. 

judgment,  acquires  good  title  as  against  *  Myers  v.  Picquet,  61  Ga.  260. 

406 


REGISTRY  ACTS  OF  THE  SEVERAL  STATES.   [§§  492,  493. 

valid  as  between  the  parties  thereto  and  those  who  have  notice 
thereof.! 

492.  Illinois.  —  Mortgages  are  recorded  in  the  county  in 
which  the  real  estate  is  situated ;  but  if  such  county  is  not  organ- 
ized, then  in  the  county  to  which  such  unorganized  county  is  at- 
tached for  judicial  purposes.  They  take  effect  and  are  in  force 
from  and  after  the  time  of  filing  for  record,  and  not  before,  as  to 
all  creditors  and  subsequent  purchasers  without  notice.  Tiiey  are 
notice  from  the  time  of  filing  for  record,  though  not  acknowledged 
or  proven  accoi'ding  to  law ;  but  they  cannot  be  read  in  evidence 
unless  tiieir  execution  be  proved  in  the  manner  required  by  the 
rules  of  evidence  applicable  to  such  writings,  so  as  to  supply  the 
defects  of  such  acknowledgment  or  proof.^ 

493.  Indiana.  —  Mortgages  are  recorded  in  the  recorder's  office 
of  the  county  where  the  lands  are  situated  ;  but  if  not  recorded 
within  forty-five  days  after  their  execution,  they  are  fraudulent 
and  void  as  against  subsequent  purchasers,  lessees,  or  mortgagees 
in  good  faith  and  for  a  valuable  consideration.  When  a  mortgage 
is  in  the  form  of  an  absolute  conversance,  but  is  intended  to  be 
defeasible  by  force  of  a  deed  of  defeasance,  bond,  or  other  instru- 
ment for  that  purpose,  the  original  conveyance  is  not  defeated  or 
affected  as  against  any  person  other  than  the  maker  of  the  de- 
feasance, or  his  heirs  or  devisees,  or  persons  having  actual  notice, 
unless  the  defeasance  is  recorded  within  ninety  days  after  the  date 
of  tlie  deed.-^ 

Under  this  statute,  when  a  mortgage  has  been  executed  to  one 
person  and  subsequently  a  deed  is  executed  to  another,  and  neither 
is  recorded  within  the  prescribed  time,  the  respective  liens  date 
from  tlie  time  of  I'ecord  and  not  from  the  date  of  the  instruments.* 
A  mortgage  recorded  after  the  time  limited  in  the  statute  is  con- 
structive notice  to  all  persons  who  purchase  thereafter.^ 

Between  several  mortgages  executed  by  a  mortgagor  upon  the 
same  land  upon  the  same  day,  to  secure  debts  having  no  priority, 
and  recorded  within  the  time  limited,  though  upon  different  days, 
fractions  of  a  day  will  be  considered,  and  the  mortgage  first  exe- 
cuti'd  in  point  of  time  will  constitute  in  equity  the  prior  lien.^ 

1  li.  S.  1887,  §§  2997-3004.  *  Reasoner  i-.  Edmuii'lson,  5  Iml.  a93. 

■'=  Anijolatcd  Stats.   1885,  ch.  .30,  §§  29-  6  Gilchrist  v.  Gough,  G3  Ind.  57G  ;  .S'.  C. 

32.  19  All).  L.J.  27G;  Wyinan  v.  Russell,  4 

■'  R.    S.    1888,    §§   2931,    2932.     Ah  to  liiiH.  307. 

proof  of  recordint,',  sec  Moore  v.  Glover  "  Wood  v.  Lordier  (Ind  ),  18  N.  E.  Rep. 

(hid.),  16  N.  K.  Rep.  1C3.  407 


§§  494-497.]       REGISTRATION   AS   AFFECTING   PRIORITY. 

494.  Iowa.  —  No  mortgage  is  of  any  validity  against  subse- 
quent purchasers  for  a  valuable  consideration  without  notice,  un- 
less recorded  in  the  office  of  tlie  recorder  of  the  county  in  which 
the  land  lies.  To  be  deemed  lawfully  recorded,  it  must  have  been 
previously  acknowledged  or  proved.^ 

495.  Kansas.  —  Mortgages  proved  or  acknowledged  and  cer- 
tified according  to  law  are  recorded  in  the  office  of  the  register  of 
deeds  of  the  county  in  which  the  real  estate  is  situated.  The  fil- 
ing of  deeds  with  the  register  for  record  is  notice  to  all  persons. 
They  are  not  valid,  except  between  the  parties  and  as  to  persons 
having  actual  notice,  until  they  are  deposited  for  record.  If  exe- 
cuted under  powers  of  attorney,  these  must  be  recorded  at  the 
same  time.^  A  deed  absolute  in  form,  but  intended  to  be  de- 
feasible, is  not  affected  as  against  any  person  other  than  the 
grantee,  or  his  heirs  or  devisees,  or  persons  having  actual  notice, 
unless  the  instrument  of  defeasance  is  recorded  after  due  acknowl- 
edgment.^ 

496.  Kentucky.  —  No  deed  of  trustor  mortgage,  conveying  a 
legal  or  equitable  title  to  real  or  personal  estate,  is  valid  against 
a  purchaser  for  a  valuable  consideration  without  notice,  or  against 
creditors,  until  acknowledged  or  proved  according  to  law,  and 
lodffed  for  record.  The  record  is  made  in  the  clerk's  office  of  the 
county  in  which  the  property,  or  the  greater  part  of  it,  is  situ- 
ated. All  bond  ficle  deeds  of  trust  or  mortgage  take  effect  in  the 
order  in  which  they  are  acknowledged  or  proved  and  lodged  for 
record.*  If  executed  by  an  attorney  under  a  power,  the  record 
of  the  mortgage  is  not  constructive  notice  unless  the  power  of 
attorney  be  also  recorded.^  Although  not  recorded,  a  mortgage 
or  deed  of  trust  prevails  in  equity  against  a  creditor  who  had  no- 
tice of  it  before  he  acquired  a  legal  title  to  the  mortgaged  prop- 
erty.6 

497.  Louisiana.  —  A  mortgage  must  be  recorded  in  the  mort- 
gage book  of  the  parish  where  the  property  is  situated.  If  the 
mortgage  or  privilege  be  a  notarial  or  public  act,  the  same  shall 
be  recorded  ;  if  it  be  an  act  under  private  signature,  note,  or  other, 

34  ;  Gibson  v.  Keyes,  112  Ind.  568  ;  14  N.  3  jb   ch.  68,  §  2. 

E.  Rep  591,  modifying  or  reversing  Cain  ^  G.  S.  1881,  ch.  24,  §§  10-13. 

V.  Hanna,  63  Ind.  408.  ^  Graves  v.  Ward,  2  Duv.  (Ky.)  301. 

1  Code  1873,  and  R.  Code  1880,  §§  1941,  6  Forepaugh  v.  Appold,  17  B.  Mon. 
1942.  (Ky.)  625,  631. 

2  Dassler's  Compiled    Laws    1885,   ch. 
22,  §§  19-24 

408 


REGISTRY  ACTS  OF  THE  SEVERAL  STATES.      [§  498. 

obligation,  or  writing,  it  must  be  proved  up  and  recorded  as  a  pri- 
vate signature  act.  If  the  same  be  not  in  writing,  the  person 
claiming  the  mortgage  or  privilege,  his  agent,  or  some  person  hav- 
ing knowledge  of  the  fact,  must  make  affitlavit  of  all  the  facts  on 
which  it  is  based,  stating  the  amount  and  all  the  necessary  facts, 
which  affidavit  shall  be  recorded  in  the  mortgage  book  as  other 
acts  of  mortgage  or  privilege.^  If  not  publicly  inscribed  on  the 
records,  it  does  not  prejudice  third  persons  ;  but  neither  the  con- 
tracting parties,  nor  their  heirs,  nor  those  who  were  witnesses  to 
the  act  b}'^  which  the  mortgage  was  stipulated,  can  take  advantage 
of  the  non-inscription  of  the  mortgage.  The  registry  preserves 
the  evidence  of  mortgages  during  ten  years,  reckoning  from  the 
day  of  its  date  ;  its  effect  ceases,  even  against  the  contracting  par- 
ties, if  the  inscriptions  have  not  been  renewed  before  the  expira- 
tion of  this  time,  in  the  manner  in  which  they  were  first  made.^ 
The  object  of  the  reinscription  is  to  obviate  the  necessity  of  search- 
ing for  mortgages  more  than  ten  years  back.  To  effect  it,  a  new 
description  of  the  pi'operty  is  necessary  ;  and  a  mere  reference  to 
the  previous  mortgage  is  not  sufficient.^ 

498.  Maine.  —  Mortgages  are  not  effectual  against  any  per- 
son, except  the  grantor,  his  heirs  and  devisees,  and  persons  hav- 
ing actual  notice,  unless  recorded  in  the  registry  of  deeds  for  the 
county  or  district  where   the   lands  lie.     A  deed  purporting  to 

1  Rev.  Laws  1884,  §  2388.  De  la  Ronde,  8  Wall.  292;  Boudurant  v. 

-  Rev.  Civil  Code  1870,  arts.  3.342-3370.  Watson,  103  U.  S.  281. 
A  judicial  mortgage  takes  effect  from  the  Neither  inscription  nor  reinscription  nee- 
date  of  the  recordation  of  the  judgment  essary  as  against  tlie  parties  or  their  heirs, 
in   the    mortgage    book   of    the    parish.  Cucullu  v.  Hernandez,  103  U.  S.  105. 
(Jhaffe  V.  Walker,  1   So.  Rep.  290  ;  Ham-  Priority  as  a  rule  depends  upon  regis- 
ilton  V.  State  Nat.  Bank,  3  So.  Rep.  126.  try. 

As  to  the  necessity  of  a  separate  record  of  Reinscription  must  be  made  within  ten 

mortgages,  see  Perot  v.  Ciiambers,  2  La.  years,  although  previous  to  the  expiration 

.\nn.  800;  Gillespie   v.   Cammack,  3   lb.  of   that   time    the    mortgagor   had   died. 

248  ;    Copley  ".   Diukgrave,   7    lb.    595  ;  Gagneux's  Succession,  4  So.  Rep.  869. 

CordevioJle  v.  Dawson,  26  lb.  534;  Fisher  But  no  reinscription  is  necessary  when 

V.  Tunnard,  25  lb.  179  ;  Verges  y.  Prejcan,  the    mortgaged    property   has   been   sold 

24  lb.  78.  within  ten  years.     Gagneux's  Succession, 

A  reinscription  necessary  after  a  lapse  supra. 

of  ten  years.    See  Barelli  v.  Deiassus,  16  A  new  act  of  mortgage  docs  away  with 

II).  280;  Liddell  v,  Rucker,   13  lb.  569;  the  necessity  of  a  reinscription.     Hart  v. 

iJatey  v.  Woolfolk,  20  lb.  385  ;  Kolm  v.  Caffrey,  2  So.  Rep,  788. 

.McIIatton,  20  lb.  223 ;  Levy  u.  Mentz,  23  Notice    is    not    equivalent    to   registry, 

lb.  261;  Adams  v.   Daunis,   29   lb.   315;  Boyer  y.  Joffrion,  4  So.  Rep.  872. 

Watson  V.  Boudurant,  30  lb.  1  ;  Succes-  "  She])henl  v.  Orleans  Cotton  Press  Co. 

sion    of    Gayle,  30   lb.  351;  Patterson   v.  2La.  Ann.  100;   Hyde  f.  Bennett,  lb.  799  ; 

Poutz  V.  Reggio,  25  lb.  637. 

409 


§  499.]  REGISTRATION   AS   AFFECTING    PRIORITY. 

convey  an  absolute  estate  cannot  be  defeated  by  an  instrument 
intended  as  a  defeasance,  as  against  any  otlier  person  than  the 
maker,  his  heirs  and  devisees,  unless  such  instrument  is  recorded 
in  tlie  registry  where  the  deed  is  recorded.^ 

499.  Maryland. — -A  mortgage  must  be  recorded  within  six 
months  from  its  date  in  the  county  or  city  in  which  the  land  lies. 
When  acknowledged  and  so  recorded  it  takes  effect  as  between 
the  parties  from  its  date  ;  otherwise  it  is  not  valid  for  the  purpose 
of  passing  the  title.^  Of  two  or  more  mortgages  of  the  same 
land,  that  which  is  first  recorded  according  to  law  is  preferred,  if 
made  in  good  faith  and  upon  good  and  valuable  consideration.  If 
executed  under  a  power  of  attorney,  this  must  be  recorded  at  the 
same  time.^ 

A  deed  which  by  any  other  instrument  or  writing  appears  to 
have  been  intended  only  as  a  security  in  the  nature  of  a  mort- 
gage, though  absolute  in  terms,  is  considered  a  mortgage ;  but  the 
person  for  whose  benefit  the  deed  is  made  can  have  no  benefit 
or  advantage  from  the  recording  of  it,  unless  the  instrument  or 
writing  operating  as  a  defeasance,  or  explanatory  of  its  being  de- 
signed to  have  the  effect  only  of  a  mortgage  or  conditional  deed, 
be  also  recorded  with  it.*  Under  this  provision  a  neglect  to 
record  the  defeasance  does  not  annul  and  make  void  the  deed, 
but  the  grantee  loses  thereby  the  benefit  which  the  recording  of 
it  would  have  given  him  over  subsequent  purchasers.  He  derives 
no  benefit  from  the  record.^ 

The  recording  of  a  mortgage  without  the  affidavit  as  to  the 
truth  and  bo7ia  fides  of  the  consideration  required  by  statute  ^  does 
not  operate  as  constructive  notice.'^ 

Assignments  of  mortgages  may  be  recorded  in  the  same  manner 
as  other  conversances,  and  the  record  is  made  constructive  notice.® 
This  act  does  not  affect  equitable  assignments  made  by  a  transfer 
of  the  mortgage  debt.^ 

1  R.  S.  1883,  ch.  73,  §§  8,  9.  after  the  expiration  of  six  months  from 

2  If  a  mortgage  is  not  recorded  within  the  date  of  the  instrument,  by  decree  or 
six  months  from  its  date,  it  is  nevertheless     order  of  court.     PfeafF  v.  Jones,  supi-a. 

an   equitable  lien,  and  has  priority  over  ^  Code  1860,  art.  24,  §§  13-16,25;  R. 

those  who  were  general   creditors   at   its     Code  1878,  art.  44,  §§  16-19,  28,  34. 

date,  but  not  over  subsequent  creditors.  *  R.  Code  1878,  art.  66,  §  42. 

Sixth    Ward   Build.  Ass.  v.  Willson,  41  5  Owens  v.  Miller,  29  Md.  144. 

Md.  506 ;  Pfeaff  v.  Jones,    50   Md.  263 ;  6  See  §  344. 

Dyson  v.  Simmons,  48  lb.  207.  '  Reitf  v.  Eshleman,  52  Md.  582. 

Under  art.  16,  §  23  of  Code  of  1860,  a  ^  Act  1868,  ch.  373. 

valid  record  of  a  mortgage  may  be  made  ^  Byles  v.  Tome,  39  Md.  461. 

410 


REGISTRY   ACTS   OF   THE   SEVERAL   STATES.       [§§  500-502. 

600.  Massachusetts.  —  Mortgages  and  other  conveyances  of 
real  estate  must  be  recorded  in  the  registry  of  deeds  for  the  county 
or  district  where  the  hinds  lie.  The  conveyance  is  not  valid  and 
effectual  against  any  person  other  than  the  grantor  and  his  heirs 
and  devisees,  and  persons  having  actual  notice,  unless  so  recorded.^ 
When  a  deed  purports  to  contain  an  absolute  conveyance  of  any 
estate  in  lands,  but  is  made  or  intended  to  be  made  defeasible  by 
a  deed  of  defeasance,  bond,  or  other  instrument,  for  that  purpose, 
the  original  conveyance  is  not  thereby  defeated  or  affected  as 
against  any  person  other  than  the  maker  of  the  defeasance,  or  his 
heirs  or  devisees,  or  persons  having  actual  notice  thereof,  unless 
the  instrument  of  defeasance  is  recorded  in  the  registry  of  deeds 
for  the  county  or  district  where  the  lands  lie.-  Tiie  instrument 
of  defeasance  has  full  effect  between  the  parties  without  being 
recorded  ."^ 

501.  Michigan.  —  Mortgages  are  recorded  in  the  office  of  the 
register  of  deeds  for  the  county  where  the  land  lies.  They  are 
entered  in  separate  books  kept  for  that  purpose.  If  not  recorded 
they  are  void  against  any  subsequent  purchaser  in  good  faith  and 
for  a  valuable  consideration,  whose  conveyance  shall  be  first  duly 
recorded.  A  deed  absolute  in  terras,  but  intended  to  be  made 
defeasible  by  force  of  a  deed  of  defeasance  or  other  instrument 
for  that  purpose,  is  not  defeated  or  affected  thereby,  as  against 
any  person  other  than  the  maker,  his  heirs  or  devisees,  or  persons 
having  actual  notice,  unless  the  defeasance  is  recorded.^ 

502.  Minnesota.  —  Mortgages  must  be  recorded  in  the  office 
of  the  register  of  deeds  for  the  county  where  the  land  is  situated ; 
and  if  not  so  recorded  are  void  as  against  any  subsequent  pur- 
chaser in  good  faith  and  for  a  valuable  consideration,  whose  con- 
veyance is  first  duly  recorded,  or  as  against  any  attachment  or 
judgment  obtained  at  the  suit  of  any  person  against  the  person  in 
whose  name  the  title  to  the  land  appears  of  record.  When  a  deed 
purports  to  be  an  absolute  conveyance  in  terms,  but  is  made  or 
intended  to  be  made  defeasible  by  force  of  a  deed  of  defeasance 
or  other  instrument  for  that  purpose,  the  original  conveyance  is 
not  defeated   or  affected    as  against  any  person  other  than    the 

1  P.  S.  1882,  cl).  120,  §  4.  Dole  v.  Tluirlow,  12  Mut.   157,   1G3,  per 

•  lb.  §  2J.     It  would  hccm  that  the  in-  Shaw,  C.  J. 

stnimLiit  of  tlefeiisance  need   not  be   ac-  ^  l3ayley  v.  Bailey,  5  Gray,  rjOS,  510. 

kiiowlidfjfd  before  biitif,' recorded.     Stct-  *  Aniiolivled  Slats.  1882,  §§  5G74-5689. 
son  V.  Gulliver,  2  Cubh.  494,  497 ;  but  see 

411 


§§  503-506.]      REGISTRATION  AS  AFFECTING  PRIORITY. 

maker  of  the  defeasance,  or  his  heirs  or  devisees,  or  persons  hav- 
ing actual  notice,  unless  the  instrument  of  defeasance  is  recorded.^ 

503.  Mississippi.  —  Deeds  of  trust  and  mortgages  are  void 
as  to  all  creditors  and  subsequent  purchasers  for  valuable  consid- 
eration without  notice,  unless  they  are  acknowledged  or  proved, 
and  lodged  with  the  clerk  of  the  chancery  court  of  the  county 
in  which  the  lands  are  situate,  to  be  recorded  ;  but  as  between 
the  parties  and  their  heirs,  and  as  to  all  subsequent  purchasers 
with  notice,  or  without  valuable  consideration,  they  are,  never- 
theless, valid  and  binding.  Deeds  of  trust  and  mortgages  take 
effect  and  are  valid  only  from  the  time  they  are  delivered  to  the 
clerk  to  be  recorded. ^ 

All  instruments  conveying  both  real  estate  and  personal  prop- 
erty, as  growing  crops,  must  be  recorded  in  the  regular  deed 
books  of  the  proper  county,  and  also  in  a  chattel  deed  book.^ 

504.  Missouri.  —  Mortgages  must  be  recorded  in  the  office 
of  the  recorder  of  the  countj'^  in  which  the  real  estate  is  situated. 
From  the  time  of  filing  with  the  recorder  for  record,  the  instru- 
ment imparts  notice  to  all  persons  of  its  contents.  Until  so  de- 
posited it  is  not  valid,  except  between  the  parties,  and  as  to  such 
as  have  actual  notice.* 

505.  Montana  Territory.  —  Mortgages  and  other  conveyances 
are  recorded  in  the  office  of  the  recorder  of  the  county  where  the 
real  estate  is  situated,  but  are  valid  and  binding  between  the 
parties  without  such  record.  Every  such  recorded  instrument, 
from  the  time  of  filing  the  same  for  record,  imparts  notice  to  all 
persons  of  its  contents,  and  subsequent  purchasers  and  mort- 
gagees are  deemed  to  purchase  and  take  with  notice.  If  not  so 
recorded,  it  is  void  as  against  any  subsequent  purchaser  in  good 
faith  and  for  a  valuable  consideration,  whose  own  conveyance  is 
first  recorded.^ 

506.  Nebraska.  —  Mortgages    are  recorded  with  the  county 

1  G.  S.  1878,  ch.  40,  §§  21,23.  upon   the    land   prior   to   the   mortgage. 

2  E.  Code    1880,  §§  1209,   1212,   1213.     Taylor  j;.  Miller,  13  How.  287,  292. 

The  statute  has  reference  solely  to  pur-  Under  Code  1880,  §  589,  providing  that, 

chasers  from,  and  creditors  of,  the  gran-  persons  doing  business  in  that  state  shall 

tor,   not   to   remote    purchasers   or   cred-  purchase  a  license,  a  mortgage  given  to 

itors.     Mississippi  Valley  Co.  v.  Chicago,  secure  a  debt  to  a  inercantile  house  which 

St.  L.  &  N.  0.  R.  R.  Co.  58  Miss.  846.  has   not   obtained   such    license   is   void. 

A  judgment  rendered  between  the  time  Dean  v.  Robertson,  1  So.  Rep.  159. 

of  the  execution  of  a  mortgage  and  the  ^  Laws  1876,  p.  100. 

time  of  delivering  it  for  record  is  a  lien  *  1  R.  S.  1879,  ch.  20,  §§  691-694. 


412 


^  Compiled  Stats.  1887,  p.  661. 


REGISTRY   ACTS   OF   THE   SEVERAL   STATES.       [§§  507-509. 

clerks,  who  are  ex-officio  registers  of  deeds,  in  the  county  in  which 
the  real  estate  or  any  part  of  it  is  situated  ;  but  in  case  the 
count}'  is  not  organized,  then  in  the  county  to  which  it  is  attached 
for  judicial  purposes.  Mortgages,  and  absolute  deeds  intended  to 
operate  as  such,  must  be  recorded  in  books  kept  for  the  purpose.^ 
They  are  considered  as  recorded  from  the  time  they  are  delivered 
to  the  register  for  record,  and  take  effect  from  that  time,  and  not 
before,  as  to  all  creditors  and  subsequent  purchasers  in  good  faith 
without  notice  ;  but  as  between  the  parties  they  are  valid  without 
record.'^  A  deed  which  appears  by  any  other  instrument  in  writ- 
ing io  be  intended  only  as  a  security  in  the  nature  of  a  mortgage, 
though  absolute  in  terms,  is  considered  as  a  mortgage  ;  but  the 
person  for  whose  benefit  such  deed  is  made  does  not  derive  any 
advantage  from  the  recording  of  it,  unless  every  writing  operat- 
ing as  a  defeasance  of  the  same,  or  explanatory  of  its  being  de- 
signed to  have  the  effect  only  of  a  mortgage  or  conditional  deed, 
be  also  recorded  thei'ewith  and  at  the  same  time.^ 

507.  Nevada.  —  A  mortgage,  to  operate  as  notice  to  third 
persons,  must  be  recorded  in  the  office  of  the  recorder  of  the 
county  in  which  the  real  estate  is  situated,  but  is  valid  and  bind- 
ing between  the  parties  without  such  record.  From  the  time  of 
filing  for  record,  it  imparts  notice  to  all  persons  of  its  contents. 
Subsequent  purchasers  and  mortgagees  have  constructive  notice 
of  all  properly  recorded  conveyances.'* 

508.  New  Hampshire.  —  Mortgages  and  other  conveyances 
are  recorded  in  the  registry  of  deeds  in  the  county  in  which  the 
lands  lie.  A  deed  may  be  recorded  though  not  acknowledged, 
and  for  sixt}^  days  after  such  recording  it  is  as  effectual  as  if  duly 
acknowledged.-^  Every  conveyance  of  lands,  made  for  the  pur- 
pose of  securing  the  payment  of  money  or  the  performance  of  any 
other  thing  stated  in  the  condition  of  it,  is  a  mortgage;  but  the 
conveyance  cannot  be  defeated,  or  the  estate  incumbered,  by  any 
agreement,  unless  it  is  inserted  in  the  condition  of  the  conveyance, 
and  nuide  part  of  it,  and  the  condition  must  state  the  sum  of 
money  secured,  or  other  thing  to  be  performed.'' 

509.  New  Jersey. — Mortgages  are  recorded  in  the  odice  of 

1  Compiled  Stals.   1885,  ch.   18,  §82;         *  Coinpileil   Laws    1873,   §§  252,  254; 
ch.  73,  §§  15-18,  25  ;  Laws  1887,  ch.  30.        Giellet  v.  Ikilsliorn,  4  Ncv.  526. 
■^  Coiniiikd  .Stuts.  1881,  p.  389.  ^  G.  L.  1878,  ch.  135,  §§  1-7. 

3  Ih.  p.  3'JO.  fl  0.  S.   1867,  ch.  122,  §§   1,  2;    G.  L. 

1878,  ch.  136,  §  2. 

413 


§§  510,  511.]       REGISTRATION    AS   AFFECTING   PRIORITY. 

the  clerk  of  the  court  of  common  pleas  for  the  county  in  which 
the  lands  lie.  If  any  deed  be  expressed  in  absolute  and  uncon- 
ditional terms,  but  it  appears  by  any  other  writing  to  have  been 
intended  by  way  of  a  mortgage,  the  deed  is  considered  and  regis- 
tered as  such  ;  but  the  grantee  is  not  entitled  to  the  benefits  and 
advantages  given  by  means  of  the  record  to  a  mortgagee,  unless 
an  abstract  of  the  writing  operating  as  a  defeasance  of  the  deed, 
or  explanatory  of  the  intention  of  the  parties  that  it  should  have 
the  effect  of  a  mortgage,  be  also  registered  with  it.^ 

A  mortgage  has  no  effect  against  a  subsequent  judgment  cred- 
itor, or  bona  fide  purchaser,  or  mortgagee,  for  a  valuable  consid- 
eration without  notice,  unless  so  recorded  at  or  before  the  time 
of  such  judgment,  or  of  lodging  with  the  clerk  for  record  of  such 
subsequent  mortgage  or  conveyance.  As  between  the  parties  the 
mortgage  is  valid  and  operative  without  recoi'd. 

This  statute  applies  as  against  the  state  itself.  It  makes  no 
reservation  or  exception  in  favor  of  the  state.  Therefore  a  prior 
mortgage  to  the  state,  not  recorded  until  after  tlie  recording  of  a 
subsequent  mortgage  to  one  who  took  it  in  good  faith  without 
notice,  is  postponed  to  the  latter.^ 

510.  New  Mexico  Territory.  —  Deeds  and  mortgages  are  re- 
corded in  tlie  office  of  the  probate  clerk  of  the  county  in  which 
the  real  estate  is  situated.  The  record  is  notice  from  the  time  of 
recording.  The  time  of  recording  is  the  time  of  deposit  for 
record.  No  instrument  not  so  recorded  shall  affect  the  title  or 
rights  of  any  purchaser  or  mortgagee  in  good  faith  without  knowl- 
edge of  the  existence  of  such  unrecorded  instrument.  The  records 
of  deeds  and  mortgages  are  kept  in  separate  books.^ 

511.  New  York.  —  Mortgages  and  other  conveyances  of  real 
estate  are  recorded  in  the  office  of  the  clerk  of  the  county  where 
the  real  estate  is  situated ;  or,  in  New  Yoik  and  some  other 
counties,  in  the  office  of  the  register ;  and  every  such  conveyance 
not  so  recorded  is  void  as  against  a  subsequent  purchaser  in  good 
faith  and  for  a  valuable  consideration,  whose  conveyance  is  first 
duly  recorded.     Separate  books  are  kept  in  which  all  mortgages, 

^  Nixon's  Dig.  I8fi8,  pp.  147,  611 ;  Rev.  Kep.  292.    Subsequently  a  statute  was  en- 

1877,    pp.    705,    706.     And    see   Dcu  v.  acted   requiring    mortgages  of  leasehold 

Wade,  20  N.  J.  L.  291.     The  Mortgiige  estates  to  be    recorded,  and   making  the 

Registry  Act  does  not  apply  to  mortgages  recording  acts  applicable  thereto.     Laws 

of  leasehold  estates.     Bramhall  i'.  lluteh-  1887,  ch.  161. 

inson,  7  Atl.  Rep.   873,  reveraug  -S'.   C.         2  Clemeut  v.  Baitlett,  33  N.  J.  Eq.  43. 
sub.   nam.   Deaue   v.  Hutchinson,    2   Atl.         »  Laws  1887,  ch.  10. 
414 


REGISTRY   ACTS    OF   THE   SEVERAL   STATES.       [§§  512,  513. 

and  all  conveyances  absolute  in  terms  but  intended  as  mortgages, 
are  recorded. 

Every  deed  which  appears  to  have  been  intended  only  as  a  se- 
curit}'^  in  the  nature  of  a  mortgage,  though  absolute  in  terms,  is 
considered  a  mortgage ;  but  a  person  for  whose  benefit  the  deed 
is  made  can  derive  no  advantage  from  the  record  of  it,  unless 
every  writing  operating  as  a  defeasance  of  the  same,  or  explana- 
tory of  its  being  designed  to  have  the  effect  only  of  a  mortgage 
or  conditional  deed,  be  also  recorded  therewith,  and  at  the  same 
time.^ 

612.  North  Carolina.  —  No  deed  of  trust  or  mortgage  of  real 
or  personal  estate  is  valid  at  law  to  pass  any  property  as  against 
creditors  or  purchasers  for  a  valuable  consideration  from  the 
donor,  bargainor,  or  mortgagor,  but  from  the  registration  of  such 
deed  of  trust  or  mortgage  in  the  county  where  the  land  lies.^ 
Under  this  statute,  as  it  stood  till  recently,  no  notice,  however 
formal  and  complete,  could  supply  the  place  of  registration.  By 
a  recent  statute,  however,  it  is  provided  that  no  purchase  shall 
avail  against  an  unrecorded  deed  when  the  person  claiming  or 
holding  under  sucb  deed  is  in  actual  possession,  either  in  person 
or  by  his  tenants,  at  the  time  of  the  execution  of  a  subsequent 
deed,  or  when  the  person  claiming  under  such  subsequent  deed 
had  actual  or  constructive  notice  of  such  unregistered  deed.^  A 
deed  of  trust  or  mortgage  is  of  no  validity  whatever,  either  in  law 
or  equity,  as  against  purchasers  for  value  and  creditors,  until 
duly  registered.  It  takes  effect  only  from  and  after  the  regis- 
tration.^ 

513.  Ohio.  —  Mortfjaeres  are  recorded  in  the  office  of  the  re- 
corder  of  the  county  in  which  the  premises  are  situated,  and 
take  effect  from  the  time  when  the  same  are  delivered  to  the  re- 
corder for  record ;  and  if  two  or  more  are  presented  for  record 
on  the  same  day,  they  take  effect  in  the  order  of  presentation  for 
record.^ 

Under  this  statute  mortgages  take  effect  in  the  order  of  their 

»  3  R.  S.  7ih  ed.  pp.  2215,  2210.  Bank  v.   Lawrence   Mamif.   Co.  3  S.  E. 

2  Laws  1885,  ch.  147.  Kep.  363. 

»  Laws  1885,  ch.  147,  §  1.  5  r,  s_  iggo,  §    41.33;    and    sec   Laws 

*  Kobinson    v.   Willoughhy,    70   N.  C.  1885,  p.  230.     Sec  Stuifrcss   i-.   Bank  of 

358  ;  I'^kming  v.  Biirnin,  2  lied.  Eq.  584  ;  Cleveland,  3  McLean,  140. 

Lepgett /•.  Bullock,  Bush.   L.  283;  King  The  provision  for  recording  mortgages 

c.  Portis,  77    N.    C.  25 ;    Tradera'   Nat.  in    8ci)arate    books    is    tlireciory  merely. 

Smith  >.'.  Sniilli,  13  Ohio  St.  532. 

415 


§§  514,  615.]      REGISTRATION   AS   AFFECTING   PRIORITY. 

deliveiy  for  record,  although  a  junior  mortgagee  has  actual  no- 
tice of  the  existence  of  a  prior  unrecorded  mortgage.  The  stat- 
ute wholly  excludes  the  doctrine  of  notice,  and  makes  priority 
wholly  dependent  upon  the  order  of  record.^  A  purchaser  from 
the  mortgagor  of  lands  incumbered  by  an  unrecorded  mortgage, 
takes  title  free  from  such  incumbrance,  although  he  had  full 
knowledge  of  its  existence  and  that  it  remained  unpaid.^  The 
object  of  the  statute  being  to  furnish  notice  to  persons  other  than 
those  who  are  parties  to  the  instrument,  a  mortgage  is  valid  as 
between  the  parties  without  such  record.^ 

514.  Oregon.  —  Every  conveyance  not  recorded  by  the  county 
clerk  in  the  county  where  the  lands  lie  within  five  days,  is  void 
against  any  subsequent  purchaser,  in  good  faith  and  for  a  valu- 
able consideration,  whose  conveyance  is  first  duly  recorded.  Sep- 
arate books  are  kept  for  the  record  of  mortgages.  When  a  deed 
purports  to  be  an  absolute  conveyance  in  terms,  but  is  made  or 
intended  to  be  made  defeasible  by  force  of  a  deed  of  defeasance 
or  other  instrument  for  that  purpose,  the  original  conveyance  is 
not  thereby  defeated  or  affected  as  against  any  person  other  than 
the  maker  of  the  defeasance,  or  his  heirs  or  devisees,  or  persons 
having  actual  knowledge  of  it,  unless  the  instrument  of  clefea- 
sance  has  been  recorded  in  the  office  for  the  recording  of  deeds 
and  mortgages  of  the  county  where  the  lands  lie.* 

515.  Pennsylvania.  —  It  is  provided  that  no  mortgage,  or 
defeasible  deed  in  the  nature  of  a  mortgage,  shall  be  good  or 
sufficient  to  convey  or  pass  any  freehold,  or  inheritance,  oi  estate 
for  life  or  years,  unless  it  is  recorded  in  the  office  for  recording 
deeds  for  the  county  within  six  months  after  its  date.^  But  it  is 
held  that  an  unrecorded  mortgage  is  not  wholly  inoperative.  It 
is  good  against  the  mortgagor  and  subsequent  incumbrancers  with 
notice ;    and  a  mortgage   for  purchase  money  is  good  against  a 

1  §573;  Mayham  i;.  Coombs,  14  Ohio,  &  Brightly's  Purdon's  Dig.  1883,  pp. 
428  ;  Stansell  v.  Roberts,  13  lb.  148  ;  587,  588.  This  provision  was  first  enacted 
Bercaw  v.  Cockerill,  20  Ohio  St.  163;  in  1715,  for  the  protection  of  subsequent 
Building  Asso.  v.  Clark,  43  Ohio  St.  427.  mortgagees  and  others  from  loss  by  se- 
See  Declaratory  Act  of  March  16,  1838;  cret  pledges  of  property.  The  six  months 
Kemper  v.  Campbell,  44  Ohio  St.  140.  allowed  are  calendar  months.     Brudenell 

2  Building  Asso.?;.  Clark,  supra  ;  Bloom  v.  Vaux,  2  Dall.  302.  By  recent  statute, 
V.  Noggle,  4  Ohio  St.  46.  applicable  to   Philadelphia    alone,    deeds 

3  Sidle  V.  Maxwell,  4  Ohio  St.  236;  and  other  conveyances  are  valid  as  against 
Eiley  i-.  Rice,  40  Ohio  St.  441 ;  Building  subsequent  purchasers  only  from  the  date 
Asso.  y.  Clark,  st/jora.  of  record.     Purdon's  Ann.  Dig.  p.  2110, 

*  Annotated  Laws  1887,  §§  3024-3029.     §  5. 

416 


REGISTRY    ACTS   OF   THE   SEVERAL   STATES.  [§   516. 

judgment  creditor  with  actual  notice  before  his  debt  was  con- 
tracted.^  If  the  mortgage  remain  unrecorded  at  the  time  of  the 
death  of  the  mortgagor,  though  good  against  him  while  he  lived, 
it  is  not  good  against  his  creditors  after  his  decease,  but  must  then 
come  in  with  his  general  debts.^ 

With  the  exception  of  mortgages  for  purchase  money,  no  mort- 
gage is  a  lien  until  left  for  record :  but  when  recorded,  the  pri- 
ority of  lien  is  according  to  the  priority  of  record. ^  It  is  the  duty 
of  the  recorder  to  indorse  the  time  upon  the  mortgage  when  left 
for  record,  and  to  number  it ;  and  if  two  or  more  deeds  are  left 
on  the  same  day,  they  have  priority  according  to  the  time  they 
were  left  at  the  office  for  record.^ 

A  mortgage  for  purchase  money,  if  recorded  within  sixty  days 
from  its  execution,  has  priority.^  Of  two  mortgages  for  purchase 
money  recorded  within  the  sixty  days,  that  which  is  first  recorded 
has  priority.^ 

No  defeasance  to  any  deed  of  real  estate,  regular  and  absolute 
upon  its  face,  shall  have  the  effect  of  reducing  it  to  a  mortgage, 
unless  the  said  defeasance  is  made  at  the  time  the  deed  is  made 
and  is  in  writing,  signed,  sealed,  acknowledged,  and  delivered  by 
the  grantee  in  the  deed  to  the  grantor,  and  is  recorded  in  the 
office  for  the  recording  of  deeds  and  mortgages  in  the  county 
wherein  the  said  lands  are  situated  within  sixty  days  from  t^ie 
execution  thereof ;  and  such  defeasances  shall  be  recorded  and 
indexed  as  mortgages  by  the  recorder.'' 

516.  Rhode  Island. — All  deeds  of  trust,  mortgages,  and  other 
conveyances  of  real  estate,  are  void  unless  acknowledged  and  re- 
corded in  the  office  of  the  town  clerk  of  the  town  where  the  lands 
lie.  As  between  the  parties  and  their  heirs  they  are,  however, 
valid  and  binding  without  record.^  A  bond  of  defeasance,  or  other 
instrument  which  may  cause  any  deed  to  operate  as  a  mortgage, 
must  be  recorded ;  otherwise  the  deed  does  not  operate  as  a  mort- 

1  Nice's  Appeal,  54  Pa.  St.  200;  Mtl-  *  Brooke's  Appeal,  s»;*ra. 

Ion's  Appeal,  32  Pa.    St.   121;  Biittou's  ^  I}ri<;htly's    Purdon's     Dig.    p.    588; 

Appeal,  45  Pa.  St.  172;  Speer  i-.  Evans,  Bratton's  Ajipeal,  8  Pa.  St.  164;  Parke 

47  Pa.  St.  141  ;  Lahr's  Appeal,  90  Pa.  St.  v.  Neeley,  90  Pa.  St.  52. 

507.  "  Dungan  v.  Am.  L.  Ins.  &  Trust  Co. 

•^  Brightly's     Purdon's     Dig.    p.    588 ;  52  Pa.  St.  25.3- 

Nice's  Appeal,  supra;    Adums's  Appeal,  '  Laws  1881,  p.  84;  Sankcy  v.  Ilawley, 

1  Penn.  447.  13  Atl.  Kep.  208. 

»  Brooke's  Appeal,    G4     Pa.    St.    127  ;  «  P.  S.  1882,  ch.  173,  §4. 
Foster's  Appeal,  3  Pa.  St.  79  ;  Brightly's 
Dig.  1872,  p.  478. 

VOL.  I.                     27  417 


§§  517,  518.]      REGISTRATION   AS   AFFECTING   PRIORITY. 

gage  against  any  person  who  may  bond  fide  and  without  notice  of 
such  incumbrance  purchase  the  real  estate  conveyed  by  such  deed 
of  the  person  to  whom  the  same  was  made ;  and  the  person  enti- 
tled to  the  defeasance  is  barred  of  all  right  of  redemption  against 
such  second  purchaser. ^ 

517.  South  Carolina.  —  All  deeds  of  trust,  or  instruments  in 
writing  conveying  real  estate,  and  creating  a  trust  or  trusts  in 
regard  to  such  property,  or  charging  or  incumbering  the  same  ; 
all  mortgages,  or  instruments  in  writing  in  the  nature  of  a  mort- 
gage, of  any  property  ;  all  statutory  liens  on  buildings  and  lands 
for  labor  furnished  or  performed  on  them  ;  and  generally  all  in- 
struments in  writing  now  required  by  law  to  be  recorded,  —  are 
valid,  so  as  to  affect  from  the  time  of  such  delivery  or  execution 
the  rights  of  subsequent  creditors  or  purchasers  for  valuable  con- 
sideration without  notice,  only  when  recorded  within  forty  days 
from  the  time  of  such  delivery  or  execution  in  the  office  of  reg- 
ister of  mesne  conveyances  of  the  county  where  the  property 
affected  thereby  is  situated  ;  but  the  above  mentioned  deeds  or 
instruments  in  writing,  if  recorded  subsequently  to  the  expiration 
of  said  period  of  forty  days,  are  valid,  to  affect  the  rights  of  sub- 
sequent creditors  and  purchasers  for  valuable  consideration  with- 
out notice,  only  from  the  date  of  such  record.^ 

518.  Tennessee.  —  Mortgages  and  other  conveyances  of  real 
estate  are  registered  in  the  county  where  the  land  lies,  unless  it 
lies  partly  in  two  counties,  when  it  may  be  registered  in  either; 
but  if  it  consists  of  separate  tracts,  the  deed  must  be  registered  in 
each  of  the  counties  where  any  of  the  tracts  lie.  The  deed  has 
effect  between  the  parties  to  it,  their  heirs  and  representatives, 
without  registration  ;  but  as  to  other  persons  not  having  actual 
notice,  it  has  effect  only  from  the  noting  for  registration  on  the 
books  of  the  register.  Priority  of  registration  determines  prior- 
ity of  right.     A  conveyance  not  recorded  is  void  as  to  existing  or 

1  P.  S.  1882,  ch.  176,  §§  1,  2.  tablished  a  lien  upon  the  property.    South 

2  P.  S.  1882,  §  1776.  Proceedings  in  Carolina  Loan,  &c.  Co.  v.  McPherson,  2 
the  probate  court,  and  an  order  directing     S.  E.  Rep.  267. 

a  sale  and  requiring  a  mortgage  for  the  Prior  to  January  1,  1877,  a  valid  record 

purchase  money,  do   not  constitute   con-  could  not  be  made  after  the  time  limited, 

struetive  notice  of  an  unrecorded  mort-  Bloom  v.  Sims,  3  S.  E.  Rep.  45. 

gage  taken  in   pursuance  of  such  order.  A  judgment  obtained  after  the  execu- 

Piester  v.  Piester,  22  S.  C.  139.  tion  of  a  mortgage,  upon  a  debt  contracted 

A  mortgage  recorded  after  the  time  pre-  before  its  execution,  cannot  be  considered 

scribed  takes  priority  over  the  claims  of  a  subsequent  debt.     Carraway  v.  Carra- 

all  creditors  who  have  not  previously  es-  wav,  5  S.  E.  Rep.  157. 

418 


REGISTRY   ACTS   OF   THE   SEVERAL   STATES.       [§§  519-523. 

subsequent  creditors  of,  or  bond  fide  purchasers  from,  the  makers 
without  notice.^ 

519.  Texas.  —  Mortgages  and  deeds  of  trust  are  recorded 
within  the  rfjounty  where  the  lands  are  situated,  in  the  office  of 
the  clerk  of  the  county  court.  They  take  effect  and  are  valid  as 
to  all  subsequent  purchasers  for  a  valuable  consideration  without 
notice,  and  as  to  all  creditors,  from  the  time  when  so  duly  re- 
corded ;  but  as  between  the  parties  and  their  heirs,  and  as  to  pur- 
chasers with  notice,  or  without  valuable  consideration,  they  are 
valid  and  binding  without  being  recorded.^ 

Mortgages,  deeds  of  trust,  and  other  instruments  intended  to 
create  a  lien  are  recorded  in  separate  books  kept  for  the  purpose.^ 

520.  Utah  Territory.  —  Mortgages  and  other  conveyances  of 
land  are  recorded  in  the  office  of  the  county  recorder  for  the 
county  where  the  lands  are  situate.  They  must  be  attested  by 
at  least  one  witness,  and  must  be  duly  proved  or  acknowledged.^ 

521.  Vermont.  —  Mortgages  and  other  conveyances,  of  real 
property  are  recorded  in  the  clerk's  office  of  the  town  in  which 
the  lands  lie.  Unless  so  recorded,  they  are  not  good  or  effectual 
in  law  to  hold  the  lands  against  any  other  person  but  the  grantor 
and  his  heirs  only.  When  a  deed  is  made  by  virtue  of  a  power 
of  attorney  this  must  also  be  recorded,  or  the  deed  is  without 
effect  and  is  inadmissible  in  evidence.^ 

522.  Virginia.  —  Deeds  of  trust  and  mortgages  are  void  as 
to  creditors  and  subsequent  purchasers  for  valuable  consideration 
without  notice,  until  and  except  from  the  time  that  they  are  duly 
admitted  to  record  in  the  county  or  corporation  wherein  the  prop- 
erty may  be.  Deeds  other  than  mortgages  and  deeds  of  trust, 
when  recorded  within  twenty  days  from  the  day  of  acknowledg- 
ment, are  as  valid  as  to  creditors  and  subsequent  purchasers  as  if 
recorded  on  the  day  of  such  acknowledgment.^ 

523.  Washington  Territory.  —  Deeds  and  mortgages  are  re- 
corded in  the  office  of  the  auditor  of  the  county  where  the  land 
is  situated,  and  are  valid  as  against  bond  fide  purchasers  from  the 

1  Code  1884,  §§2837,  2843,  2887-2890.  *  Compiled   Laws    1876,   p.   254.     See 

2  R.   S.   1879,   arts.  4332-4334;   Cava-     Nesl  in  «.  Wells,  428. 

naugh  t'.  Peterson,  47  Tex.  197.  6  Rev.  Laws  1880,  oh.  97,  §§  1927-1935. 

"  R.  S.  1879,  art.  4304.  6  Code    1887,     ch.    109,    §§  2465-2467. 

But  different  liens,  such  as  a  mortgage  A  recorded  deed  of  trust  or  mortgage  is 

and  a  mechanic's   lien,  need    not   be  re-  notice  to  a  subsequent  purchaser.    McCor- 

corded  in  diflTerent  books.     Quinn  v.  Lo-  mack  v.  James,  36  Fed.  Rep.  14. 
gan,  4  S.  W.  Rep.  247. 

419 


§§  524-526.]       REGISTRATION    AS   AFFECTING   PRIORITY. 

date  of  the  filing  of  them  for  record  ;  and  when  so  filed  or  re- 
corded are  notice  to  all  the  world. ^ 

524.  West  Virginia.  —  Deeds  of  trust  and  mortgages  are 
void  as  to  creditors  and  subsequent  purchasers  for  a  valuable  con- 
sideration without  notice,  until  and  except  from  the  time  they  are 
duly  admitted  to  record  in  the  county  where  the  property  is  situ- 
ated. If  two  or  more  writings  embracing  the  same  property  are 
admitted  to  record  in  same  county  on  the  same  day,  that  which 
was  first  admitted  to  record  has  priority .^ 

525.  Wisconsin.  —  Every  conveyance  not  recorded  in  the 
office  of  the  register  of  deeds  for  the  county  in  which  the  land 
lies  is  void  as  against  any  subsequent  purchaser,  in  good  faith  and 
for  a  valuable  consideration,  whose  conveyance  shall  first  be  duly 
recorded.^  When  a  deed  purports  to  be  an  absolute  conveyance 
in  terms,  but  is  made  or  intended  to  be  made  defeasible  by  force 
of  a  deed  of  defeasance  or  other  instrument  for  that  purpose,  the 
original  conveyance  is  not  thereby  defeated  or  affected  as  against 
any  person  other  than  the  maker  of  the  defeasance,  or  his  heirs 
or  devisees,  or  persons  having  actual  notice  thereof,  unless  the  in- 
strument of  defeasance  shall  also  have  been  duly  recorded.* 

526.  Wyoming  Territory.  —  A  mortgage  or  other  convey- 
ance must  be  recorded  in  the  oflice  of  the  register  of  deeds  of 
the  county  where  the  land  lies,  within  three  months  of  the  date 
of  the  instrument.  The  instrument,  when  recorded,  is  notice  to, 
and  takes  precedence  of,  any  subsequent  purchaser  or  purchasers, 
from  the  time  of  delivering  the  instrument  at  the  office  of  the 
register  of  deeds  for  record. 

A  conveyance  not  recorded  is  void  as  against  any  subsequent 
purchaser,  in  good  faith  for  a  valuable  consideration,  whose  con- 
veyance is  first  recorded. 

When  a  deed  purports  to  be  an  absolute  conveyance  in  terms, 
but  is  made  or  intended  to  be  made  defeasible  by  force  of  a  deed 
of  defeasance,  or  other  instrument  for  that  purpose,  the  original 
conveyance  is  not  thereby  defeated  or  affected  as  against  any 
person  other  than  the  maker  of  the  defeasance,  or  his  heirs  or 
devisees,  or  persons  liaving  actual  notice  thereof,  unless  the  in- 
strument of  defeasance  has  been  recorded  in  the  office  of  the 
register  of  deeds  for  the  county  where  the  lands  lie.^ 

1  Code  1881,  §  2314.  *  lb.  §  2243. 

2  Code  1887,  ch.  75,  §§  5,  8.  5  r.  s.  1887,  §§  15-21. 
8  R.  S.  1878,  p.  641,  §  2241. 

420 


REQUISITES  AS  TO  EXECUTION  AND  ACKNOWLEDGMENT.      [§§  527,  528. 

III.   Requisites  as  to  Execution  and  Acknowledgment. 

527.  Generally.  —  The  first  requisite  to  the  valid  record  of 
any  instrument  is  that  it  shall  be  executed  according  to  law.  If 
defectively  executed,  it  is  not  generally  entitled  to  be  recorded  ; 
but  even  if  it  is  recorded  it  is  not  constructive  notice,  so  as  to 
vest  in  the  grantee  or  mortgagee  any  interest  in  the  premises  as 
against  subsequent  purchasers  in  good  faith  without  notice.^  Thus 
a  mortgage  executed  and  recorded  with  the  name  of  the  grantee 
omitted  does  not  impart  constructive  notice  of  the  existence  of 
the  mortgage.2  As  between  the  parties,  as  already  noticed,  equity 
will  give  the  instrument  effect  according  to  the  intention  of  the 
parties.^  If  a  mortgage  defectively  executed  be  afterwards  re- 
formed, it  will  not  affect  the  lien  of  one  who  has  in  the  mean 
time  purchased  in  good  faith,  and,  according  to  some  authorities, 
will  not  affect  a  lien  obtained  in  the  mean  time  by  an  attach- 
ment, or  judgment,  or  a  levy  of  execution. 

Inasmuch  as  the  registration  of  a  mortgage  is  solely  for  the 
benefit  and  protection  of  the  mortgagee,  and  rests  wholly  in  his 
election,  he  cannot,  in  the  absence  of  an  agreement  expi'ess  or 
implied  to  the  contrary,  hold  the  mortgagor  liable  for  the  registra- 
tion fees.* 

528.  The  description  of  the  property  upon  which  the  mort- 
gage is  an  incumbrance  must  be  such  as  reasonably  to  enable  sub- 
sequent purchaserst  o  identify  the  land  ;  otherwise  the  record  of 
the  mortgage  is  not  notice  of  any  incumbrance  upon  it.^  If  a 
subsequent  mortgagee  or  purchaser  has  notice  of  a  mistake  in  the 
description  of  a  prior  mortgage,  as,  for  instance,  that  the  lot  was 
described  as  number  "eighteen,"  insteiid  of  "eight,"  the  correct 
number,  such  mortgagee  or  purchaser  will  take  subject  to  the  prior 
mortgage,  in  the  same  way  that  he  would  had  the  description  been 

*  Thus,  in  Louisiana,  to  create  a  con-  ^  Van  Tliorniley  v.  Peters,  26  Ohio  St. 

ventiunal  monisuj^a,  two  thinf^s  are  essen-  471. 

tiai,  iiatnely,  there  must  he   an  intention  *  Simon  v.  Sewell,  64  Ala.  241. 

by  tlie  parties  to  create  a  niort^^a^e ;  and  ^  §§65,  66;  Harrows  v.  Ban^^hman,  9 

to  j.'ive  eflTL-ct  to  that  intention  it  must  be  Mich.  213;  Ilodf^ers  v.  Kavanaiij^h,  24  111. 

expressed  witii  sudieient  clearness  to  serve  583  ;  Kggleston  v.  Watson,  53  Miss.  339  ; 

as  notice  to  third  persons  when  the  instru-  Port  v.  Knibrce,  54  Iowa,  14;  Ripley  v. 

ment  is  recorded.    Benjamin's  Succession,  Harris,  3  Biss.  199;  Carter  v.  Hawkins, 

2  So.  Rep.  187.     See,  also,  Howe  v.  Pow-  62  Tex.  393;  Goodhar  v.  Dunn,  61  Miss. 

ell.  4  So.  Rep.  4.')0.  618  ;  Peters  v.  Ham,  62  Iowa,  656. 

2  Disque  V.  Wriulit,  49   Iowa,  53K  ;  S. 
C.  13  West.  Jur.  34,  158. 

421 


§  529.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

correctly  given  ;  ^  and  the  subsequent  mortgagee  has  constructive 
notice  of  the  mortgage  as  it  was  intended  to  be  given,  when  the 
premises  are  well  defined  and  well  known  to  the  parties,  and  a 
notice  on  the  margin  of  a  prior  defective  mortgage  referred  to  a 
prior  deed  in  which  the  land  was  correctly  described.^  Tlie  mort- 
gagee cannot  enforce  his  mortgage  upon  the  land  actually  de- 
scribed, when  he  knows  that  by  mistake  this  particular  land  was 
described  in  place  of  another  lot  intended  to  be  described.^ 

A  mortgage  described  certain  lots  by  a  town  plat  which  was 
not  recorded,  but  a  plat  was  subsequently  recorded  upon  which 
the  same  lots  were  described  by  different  numbers.  It  was  held 
that  the  absence  from  the  record  of  the  town  plat  at  the  time 
of  recording  the  mortgage  was  not  enough  to  put  the  purchaser 
upon  inquiry,  and  make  him  chargeable  with  these  facts;  and  that 
therefore  he  was  not  affected  with  constructive  notice  of  the  mort- 
gage.^ 

529.  Apparent  error  in  description.  —  When  a  description 
in  a  mortgage  is  erroneous,  and  it  is  apparent  what  the  error  is, 
the  record  is  constructive  notice  of  the  mortgage  upon  the  lot  in- 
tended to  be  described.^  And  so  the  record  of  a  deed,  describing 
the  premises  by  an  impossible  sectional  number,  is  sufficient  to 
put  a  purchaser  from  the  same  grantor  upon  inquiry,  and  may 
charge  liim  with  notice  of  the  grant  actually  made  or  intended  to 
be  made.*^  Parol  evidence  is  admissible  to  identify  the  land  in- 
tended when  there  is  an  ambiguity  or  uncertainty  in  the  descrip- 
tion.''^ 

1  Warburton    v.    Lauman,    2    Greene  Thus  a  mortgage  of  "a  certain  tract  of 

(Iowa),  420;  Cox  v.  Esteb,  81  Mo.  393;  land,  being  the  same  premises  conveyed  to 

Hoopeston  Building  Asso.  v.  Green,  16  111.  me  by  a  deed  referred  to,"  the  mortgagor 

App.   204 ;  Duncan   v.   Miller,  64  Iowa,  then  owning  the  entire  tract,  though  only 

223  ;  Peters  v.  Ham,  62  Iowa,  6.56.  an  undivided  half  of  it  was  conveyed  by 

'•^  Bent  V.  Coleman,  89  111.  364  ;  5.  C.  the  deed  referred  to,  is  a  mortgage  of  the 

7  Reporter,  366.  whole  laud,  and  not  merely  of  an  undi- 

8  Nurthrup  v.  Hottenstein  (Kans.),  16  vided  half  of  it,  in  the  absence  of  evidence 

Pac.  Rep.  44.5.  of  any  intention  to  limit  the  conveyance  in 

The  clause  creating  the  lien  prevails  as  this  way.     Morse  v.  Morse,  58  N.  H.  391. 

to  the  interest  conveyed.     Thus  a  raort-  *  Stewart  v.  Huff,  19  Iowa,  557. 

gage  of  an  undivided  fourth  part  of  cer-  &  Anderson  v.  Baughman,  7  Mich.  69  ; 

tain  lands  is  not  enlarged  by  a  recital  in  Tousley  v.  Tousley,  5  Oliio  St.  78;  Peo- 

the   description   as  being  one  undivided  pie  v.  Storms,  97  N.  Y.  364. 

half  part.  6  Merrick  v.  Wallace,  19  111.  486,  498  ; 

On  the  other  hand,  the  interest  conveyed  Carter  v.  Hawkins,  62  Tex.  393. 

by  a  mortgage  is  not  diminished  by  an  "  Tranum  v.  Wilkinson   (Ala.),  1    So. 

incidental  recital  as  to  the  source  of  title.  Rep.  201. 

422 


REQUISITES  AS  TO  EXECUTION  AND  ACKNOWLEDGMENT.       [§§  530,  531. 

A  purchaser  who  is  able  from  his  knowledge  of  the  property 
to  interpret  an  erroneous  description,  and  give  it  the  meaning  in- 
tended, is  charged  with  notice  from  the  record  of  it.^ 

But  although  a  mistake  in  description  be  such  that  the  mort- 
gage lien  would  be  invalidated  as  against  a  subsequent  purchaser, 
yet  it  has  been  held  that  a  subsequent  judgment  lien  will  not  for 
this  reason  become  a  paramount  lien  upon  the  land  intended  to 
be  described.^  Even  where  a  parcel  of  land  which  the  parties 
intended  to  include  in  the  mortgage  was  wholly  omitted  in  the 
description,  the  deed  may  be  reformed  in  chancery,  and  the 
omitted  tract  included  in  the  mortgage  free  from  any  judgment 
lien  which  has  in  the  mean  time  attached  to  the  debtor's  real 
estate.'^ 

530.  Signing.  —  The  record  of  a  mortgage  without  the  sig- 
nature of  the  mortgagor  is  not  constructive  notice,  though  the 
mortgage  was  in  fact  signed,  but  the  signature  was  omitted  by 
mistake  from  the  record.'*  A  signature  is  binding  if  made  at  the 
proper  time  and  duly  acknowledged,  whether  sigued  by  the  per- 
son owning  the  name,  or  by  some  one  else  with  his  consent.^ 

If  the  name  of  the  mortgagee  be  by  mistake  written  in  the 
blank  for  the  mortgagor,  and  the  name  of  the  mortgagor  in  that 
left  for  the  mortgagee,  but  is  signed  by  the  right  part}^  and  pur- 
ports to  secure  a  debt  from  the  party  signing  to  the  other,  and  is 
acknowledged  by  the  party  signing,  the  mistake  in  the  transpo- 
sition of  the  names  of  the  parties  being  palpable,  its  record  will 
be  notice  to  subsequent  purchasers  from  the  mortgagor  of  the  mis- 
take.« 

531.  Requirement  of  seal.  —  A  mortgage,  like  other  convey- 
ances, must  generally  be  executed  under  seal  to  entitle  it  to  be 
recorded."  In  several  states  the  use  of  a  seal  has  been  wholly 
dispensed  with  by  statute.  In  others  a  scroll  is  given  the  same 
effect  as  a  seal.  But  where  the  use  of  a  seal  or  of  its  equivalent 
is  required,  an  instrument  purporting  to  be  a  mortgage,  but  not 

'  Erickson   v.    Rafferty,    79    111.    209;  ^  joj^nson  i;.  Van  Velsor,  43  Mich  208. 

Carter  v.  Hawkins,  02  Tex.  39.3.  «  Beaver  v.  Slanker,  94  III.  175,  17C. 

•^  Welton    V.   Tiz/.ard,    15    Iowa,  493;  '  See  §  81  ;    Hebron  v.  Centre  Harbor, 

.Swarts  )!.  Stees,  2  Ivans.  236  ;  Gillespie  y.  11  N.  H.  571;  Bowers  r.   0}ster,  3  Pa. 

Moon,  2  Johns.  (N.  Y.)  Ch.  584,  per  Kent,  239;  In  re  St.  Helen   Mill   Co.  3  Sawyer, 

Chancellor;    White  v.  WiLson,  6  Blaekf.  88.     And  seo  Woods  v.  Wallace,  22  Pa. 

'Ind.)448.  St.   171;    Iluiilies   v.   Tone,  1    Mo.  389; 

'  While  V.  Wilson,  supra  ;  §  99.  Moore  i;.  Madden,  7  Ark.  530. 

*  Sec  §  81 ;  Shepherd  v.  Burkhaltcr,  13 

Ga.  443.  423 


§§  532,  533.]      REGISTRATION   AS   AFFECTING   PRIORITY. 

executed  under  seal,  is  not  entitled  to  be  recorded ;  and  if  it  be 
copied  into  the  records,  it  does  not  impart  notice  to  subsequent 
purchasers  or  incumbrancers.^  Such  an  instrument,  however, 
will  operate  as  an  equitable  mortgage,  and  will  prevail  against  a 
subsequent  agreement  to  give  a  mortgage.^ 

If  the  instrument  was  sealed  at  the  time  of  its  execution,  the 
subsequent  detachment  of  the  seal  does  not  invalidate  it,  unless 
it  be  proved  that  the  seal  was  detached  before  the  instrument 
reached  the  clerk's  office  for  record ;  and  the  burden  of  such  proof 
is  upon  the  party  who  attacks  the  validity  of  the  instrument.^ 

532,  Requirement  of  witnesses.  —  The  record  of  a  mort- 
gage not  executed  in  compliance  with  a  statute  requiring  that  it 
shall  be  attested  by  two  witnesses  is  not  constructive  notice,* 
though  the  defect  be  not  apparent  on  the  face  of  the  instrument, 
one  of  the  witnesses  being  the  grantor's  wife,^  Upon  the  same 
principle  the  record  of  a  mortgage  acknowledged  before  one  jus- 
tice of  the  peace,  when  a  statute  required  it  to  be  made  before 
two  justices,  does  not  operate  as  notice.^  But  a  mortgage  at- 
tested by  one  witness  under  such  a  statute  is  good  in  equity  be- 
tween the  parties,^  and  as  against  all  others,  whether  purchasers 
or  creditors,  who  had  actual  notice  of  the  existence  of  the  mort- 
gage.^ When  a  statute  provides  that  a  deed,  to  be  recordable, 
shall  be  attested  by  two  witnesses,  and  a  mortgage  so  witnessed 
was  by  mistake  recorded  without  any  copy  of  the  attestation,  it 
was  held  that  the  registry  was  not  constructive  notice.  The 
recording  of  the  instrument  not  being  in  compliance  with  the 
law,  the  registration  is  a  mere  nullity ;  and  a  subsequent  pur- 
chaser is  affected  only  by  such  actual  notice  as  would  amount  to 
a  fraud.^ 

533.  Acknowledgment  or  proof  a    prerequisite.  —  The  re- 

1  Racouillat  I'.  Sansevain,  32  Cal.  376 ;  110;  Hodgson  v.  Butts,  3  Cranch,  140; 
Racouillat  v.  Rene,  32  Cal.  450.  Frostburg  Mnt.  Build.  Asso.  v.  Brace,  51 

2  Portwood  i>.  Outton,  3  B.  Mon.  (Ky.)  Md.  508;    Potter   v.    Strausky,  48   Wis. 
247.  235. 

3  Van  Eiswick  i'.  Goodhue,  50  Md.  57.  ^  Carter  v.  Champion,  8  Conn.  549. 

*  See  §  82;    Thompson  v.  Morgan,  6  e  Dufphey  v.  Frenaye,  5  St.  &  P.  (Ala.) 

Minn.  292;  Harper  y.  Barsh,  10  Rich.  (S.  215;    and   see   Munn   i-.   Lewis,  2   Port. 

C.)  Eq.  149  ;  New  York  Life  Ins.  &  Trust  (Ala.)  24. 

Co.  V.  Staats,  21  Barb.  (N.  Y.)  570;  Van  ^  Moore  v.  Thomas,  1  Oreg.  201  ;  Has- 

Thorniley   v.   Peters,   26   Ohio   St.   471 ;  tings  v.  Cutler,  24  N.  H.  481. 

Gardner  v.  Moore,  51    Ga.  268;   Ross  v.  ^  Sanborn  v.  Robinson,  54  N.  H.  239; 

Worthington,    11    Minn.   438;    White  v.  Hastings  i;.  Cutler,  sup-a. 

Denman,  16  Ohio,  59;  S.  C.  1   Ohio  St.  ^  Pringle  v.  Dunn,  37  Wis.  449. 
424 


REQUISITES   AS   TO   EXECUTION   AND   ACKNOWLEDGMENT.       [§  533. 

cording  acts  generally  prescribe  certain  formalities  in  the  execu- 
tion of  a  deed  which  must  be  complied  with  to  entitle  it  to  be  re- 
corded. An  acknowledgment  or  proof  of  the  deed  before  some 
oflScer  is  an  essential  prei'equisite.  Without  an  acknowledgment, 
or  with  one  that  is  defective,  the  record  of  the  deed  is  unauthor- 
ized and  is  not  constructive  notice.^  It  has  been  held,  however, 
that  where  an  acknowledgment  is  in  due  form,  the  only  defect  in 
it  being  a  latent  one,  as,  for  instance,  being  taken  by  the  officer 
out  of  his  jurisdiction,  the  record  of  the  mortgage  is  notice  to  sub- 
sequent purchasers  in  favor  of  one  holding  an  assignment  of  the 
mortgage  duly  recorded.^  The  purpose  of  this  requirement  is  to 
insure  the  authenticity  of  the  instrument  before  admitting  it  of 
record.  The  certificate  must  be  made  and  attested  substantially 
in  the  form  given  by  statute  ;  or,  where  no  special  form  is  pre- 
scribed, then  in  accordance  substantially  with  the  provisions  of 
the  statute  respecting  it ;  but  it  need  not  be  in  the  exact  words 
of  the  form  or  of  the  statu te.^  But  in  aid  of  the  certificate  refer- 
ence may  be  had  ^  to  the  instrument  itself,  or  to  the  certificate  of 
the  recorder,  as,  for  instance,  to  fix  the  date  of  acknowledgment, 
in  compliance  with  a  statute  providing  that  the  certificate  of  ac- 
knowledgment shall  contain  the  time  when  it  is  taken.^  When  a 
statute  requires  the  acknowledgment  of  a  married  woman  to  be 
taken  separate  and  apart  from  her  husband,  the  record  is  no  no- 
tice of  a  lien  on  her  estate  unless  the  acknowledgment  is  so 
taken. ^ 

If  the  acknowledgment  be  by  an  agent,  the  certificate  should 
show  with  reasonable  clearness  that  the  acknowledgment  was 
made  on  behalf  of  the  constituent,  or  as  being  his  deed.'^  A  mort- 
gage recorded  without  having  been  acknowledged  creates  no  valid 
lien  as  against  creditors  and  subsequent  purchasers,  whether  they 

1  See  §  83 ;   Blood  v.  Blood,  23  Pick.  2  Heilbrun  v.  Hammond,   13  Hun  (N. 

(Majis.)  80;  Wood  v.    Cochrane,  39    Vt.  Y.),  474. 

544;  Frost  v.  Beekman,  1  Johns.  (N.  Y.)  »  Alvis  v.  Morrison,  63  111.  181  ;  Mer- 

Ch.  288;  Work  v.  Harper,  24  Miss.  517;  iam  v.  Harsen,  2  Barb.  (N.  Y.)  Ch.  232; 

Dufphey  v.  Frenaye,  5   St.    &  P.  (Ala.)  Duval  i;.  Covenhoven,   4  Wend.  (N.  Y.) 

215;  Parrct  v.  Shauhhut,  5   Minn.  323;  561  ;  Allen  v.  Lenoir,  53  Miss.  321. 

Jacoway    u.  Gauit,  20  Ark.   190;    White  *  Carpenter;;.  Dexter,  8  Wall.  513. 

V.    Denman,  1   Ohio  St.    110;    Bishop  v.  6  Kelly  y.  Roseu.stoek,  45  Md.  389. 

Schneider,  46    Mo.  472;    Jones   v.  Berk-  o  Armstrong?  u.  Ross,  20  N.  J.  Eq.   109. 

shire,  15  Iowa.  248;  T«.dd  v.  Outlaw,  79  ^  McDaniels  v.  Flower  Brook    Manuf. 

N.    C.    235;  Sitler  v.  McComas,  66  Md.  Co.     22    Vt.     274;     MeAdow    v.    Black 

135  ;  and  sec  White  &Tu<lor'H  Lead.  Cas.  (Mont.),  13  Pac.  Hep.  377. 
in  Eq    4th  Am.  ed.  vol.  2d,  pt.  6,  p.  206  ; 

Irwin  V.  Welch,  10  Neb.  479.  425 


§§  534-536.]       REGISTRATION   AS   AFFECTING   PRIORITY. 

have  actual  notice  of  the  mortgage  or  not ;  but  it  is  good  as 
between  the  parties,  and  on  breach  of  the  condition  of  payment 
may  be  enforced  against  the  mortgagor,  and  on  his  death  against 
his  administrator,  in  preference  to  his  general  creditors.^ 

534.  The  officer  must  be  duly  appointed  and  qualified. 
The  registration  of  a  mortgage,  acknowledged  or  proved  before 
an  officer  who  has  not  been  duly  appointed  or  qualified,  has  no 
effect  in  rendering  it  operative  against  subsequent  purchasers.^ 
It  is  equally  necessary  that  the  officer  should  act  within  the  lim- 
its of  his  jurisdiction.^  A  judge,  or  commissioner,  or  other  officer 
empowered  to  take  an  acknowledgment,  cannot  act  out  of  the 
state  for  which  he  was  appointed.* 

When,  however,  acknowledgments  made  before  an  officer  not 
authorized  to  act  are  by  statute  declared  to  be  good  and  effectual, 
in  the  same  way  that  they  would  have  been  had  they  been  taken 
and  certified  by  an  officer  properly  qualified,  one  purchasing  after 
such  statute  has  gone  into  effect  is  bound  to  take  notice  of  the 
conveyance,  though  until  that  time  the  record  would  be  notice  to 
no  one.*^ 

535.  The  taking  of  an  acknowledgment  is  a  ministerial 
act;  therefore  it  may  be  done  by  one  who  is  so  related  to  the 
parties  as  to  be  disqualified  as  a  judge  or  juror.^  It  has  been  held 
that  a  married  woman  may  acknowledge  a  mortgage  of  her  sep- 
arate estate  before  her  husband,  he  being  a  justice  of  the  peace." 
But  a  trustee  in  a  deed  of  trust  cannot  take  a  valid  acknowledg- 
ment of  it.^ 

536.  In  like  manner,  when  a  statute  requires  that  a  cer- 
tificate of  the  official  character  of  the  officer  before  whom  the 
acknowledgment  was  made  shall  accompany  the  certificate  of  ac- 

1  Haskill  «.  Sevier,  25  Ark.  152;  Main     not  nec&ssarily  invalid.     Beckel  i;.  Pfetti- 
f.  Alexander,  9  Ark.  112.  crew,  6  Ohio  St.  247;  Fuhrraan  v.  Lou- 

2  Suddereth  v.  Smyth,  13  Ired.  (N.  C.)     don,  13  S.  &  R.  (Pa.)  386. 

L.  452;  Worshani  v.  Freeman,  34   Ark.  ^  Journeay  v.  Gibson,  56  Pa.  St.  57. 

55.  6  Lynch  v.  Livingston,   6  N.    Y.   422; 

3  Jackson   v.   Golden,  4  Cow.   (N.  Y.)  Truman  v.   Lore,  14   Ohio  St.  144;  Wil- 
266.  liamson  v.  Carskadden,  36   Ohio  St.  664. 

*  Jackson  v.   Humphrey,   1  Johns.  (N.  In  other  cases  it  is  declared  that  the  officer 

Y.)  498.     A  certiticate  of  acknowledgment  acts  judicially.     Homoepathic  Mut.L.  Ins. 

in  which  the   officer  describes  himself  as  Co.  v.  Marshall,  32  N.  J.  Eq.    103;  Wil- 

"a  justice  of    the  peace  within   and  for  Haras  ?;.  Baker,  71  Pa.  St.  476;  Heeter  v. 

said  county,"  no  county  being  named,  ex-  Glasgow,  79  Pa.  St.  79. 

cept  that  in  the  body  of  the  deed,  where  "<  Kimball  v.  John-on,  14  Wis.  674. 

both  the  grantor  and   grantee  resided,  is  »  Darst  v.  Gale,  83  111.  136. 

426 


REQUISITES  AS  TO  EXECUTION  AND  ACKNOWLEDGMENT.      [§§  537,  538. 

knowledgment,  the  filing  of  the  mortgage  for  record  without  the 
latter  certificate  does  not  constitute  a  record  of  it.  If,  however, 
this  certificate  is  subsequently  obtained  and  recorded  in  the  reg- 
istry whei-e  the  deed  is  recorded,  the  mortgage  will  be  treated  as 
recorded  from  the  date  of  the  filing  of  this  certificate.^ 

537.  Upon  the  same  principle,  also,  wrhen  a  statute  requires 
that  the  officer  shall  certify  that  he  is  personally  acquainted 
with  the  party  making  the  acknowledgment,  the  omission  so  to 
do  renders  null  the  acknowledgment  and  the  record.^  The  re- 
quirement must  be  substantially  complied  with.^  If  the  officer 
taking  the  acknowledgment  certifies  that  he  knows  the  parties 
by  whom  the  instrument  purports  to  be  executed,  when  in  fact 
he  did  not,  his  certificate,  though  primd  facie  valid,  upon  proof  of 
this  fact,  is  a  nullity,  both  as  entitling  the  paper  to  be  recorded 
and  as  affording  any  proof  of  its  execution,  though  in  fact  the 
instrument  was  acknowledged  by  the  persons  who  executed  it.* 
As  between  the  parties  themselves  the  mortgage  would,  of  course, 
be  valid  upon  proof  of  its  execution  and  delivery. 

A  certificate  of  acknowledgment  which  simply  describes  the 
persons  acknowledging  as  "grantors  of  the  within  indenture," 
without  stating  that  they  were  known  to  the  officer  to  be  the 
same  persons  who  are  described  in  and  who  executed  it,  as  pre- 
scribed by  the  statute,  is  insufficient  to  entitle  the  deed  to  be  re- 
corded.^ 

538.  The  certificate  of  acknowledgment  is  not  conclusive ; 
but  wiien  it  is  correct  in  form,  and  is  apparently  executed  by  one 
authorized  to  act  in  the  matter,  and  within  his  jurisdiction,  it  is 
sufficient  to  admit  the  deed  to  record,  and  is  primd  facie  good.^ 

'  Rcasoner  i'.  Edmundson,  5  lad.  393;  *  Watson  v.  Campbell,  28  Baib.  (N.  Y.) 

Kly  V.  Wilcox,  20  Wis.  523.  421.     "This  case,"  says   Mr.  Justice  In- 

*  Kelsey  u.  Dutilap,  7  Cal.  160;  Peyton  graham,   "shows    the    impropriety   of   a 

t'.  Peacock,    1  Humph.  (Tenn.)   13.5.     In  commissioner   of    deeds,   in    such   an   ac- 

this  case,  althougli  the  improper  registra-  knowledgment,  certifying  that  lie  knows 

tion  was  not  insisted  upon  by  the  answer,  the  parties,  witliout  any  other  knowledge 

the  court  upon  the  exhibition  of  the  deed  than  a  mere  introduction,  or  seeing  the 

took  notice  of  the  defect.    See,  also,  John-  signature  written.     He  thereby  endangers 

son   V.   Walton,   1    Snced    (Tenn.),   258;  the  security,  and   exposes   himself  to  lia- 

Bone   V.   Greenlee,    1    Cold.    (Tenn.)  29;  bility  for  damages  arising  therefrom." 

Thurman  v.  Cameron,  24  Wend.  (N.  Y.)  ^  Fryer  v.  Rockefeller,  63  N.  Y.  268. 

87;   Livingston    v.  Kettelle,    I    Gil.  (III.)  «  Holbrook  y.  Worcester  Bank,  2  Curtis, 

•  16.  244;  Jackson  v.  8choonmaker,  4  .Johns. 

»  Hitter  v.  Worth.  58  N.  Y.  627;  West  (N.  Y.)  161  ;  Morris  v.  Keyes,  1   Ildl  (N. 

Point  Iron  Co.  v.  lieymert,  45  N.  Y.  703;  Y.),  540;  People  v.  Snyder,  41  N.  Y,  397. 
Troup  V.  Ilaight,  Ilopk.  (N.  Y.)  239. 

427 


§  538.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

It  may  be  shown  that  the  officer  who  made  the  certificate  was  not 
in  fact  authorized  to  act,  or  had  become  incompetent,  or  that  he 
acted  outside  his  jurisdiction.^  It  may  be  shown  that  the  deed 
was  never  in  fact  executed  or  delivered  ;  ^  or  that  the  deed  ^yas 
void  when  acknowledged  by  reason  of  its  containing  material 
blanks.^  The  presumption  of  regularity  must,  however,  be  first 
overcome.*  The  officer  is  prima  facie  such  as  he  is  described  to 
be,  de  facto  and  de  jure.  He  is  like  an  officer  authorized  to  take 
testimony  under  a  special  commission.  His  return  must  stand 
until  it  is  impeached  by  collateral  proof.  Until  this  is  done  his 
return  is  proof  in  itself  of  his  official  character,  of  his  signature, 
and  of  his  acting  within  his  jurisdiction.^  The  fact  that  he  does 
not  recollect  the  transaction  does  not  affect  his  certificate.^ 

A  mistake  in  the  certificate  of  acknowledgment,  whereby  the 
grantee  instead  of  the  grantor  appeared  to  be  the  person  who 
made  the  acknowledgment,  cannot  be  corrected  in  a  court  of 
equity,  so  as  to  give  the  record  of  the  deed  legal  effect  from  the 
beginning,  because  it  cannot  be  determined  from  the  face  of  the 
instrument  whether  the  error  consisted  in  inserting  the  wrong 
name,  or  in  taking  the  acknowledgment  of  the  wrong  man,''  A 
mistake  in  the  date  of  an  acknowledgment  may  be  shown  and  the 
true  date  established.^  A  mistake  arising  from  a  technical  omis- 
sion  in  the  certificate  may  be  corrected.^ 

As  to  the  statements  of  fact  contained  in  a  certificate  of  ac- 
knowledgment which  is  regular  in  form,  such,  for  instance,  as  the 
fact  that  the  grantor  appeared  and  acknowledged  the  execution 
of  the  instrument,  they  can  only  be  impeached  for  fraud.  Evi- 
dence which  is  merely  in  contradiction  of  the  facts  certified  to 
will  not  be  received.i*^     Under  the  statutes  of  some  states  for  the 

1  Lynch  v.  Livingston,  6  N.  Y.  422.  8  Hoit  v.  Russell,  56  N.  H.  559. 

2  Jackson  v.  Perkins,  2  Wend.  (N.  Y.)         9  Edmunds  v.  Leavell  (Ky.),   3   S.  W. 
308;  Howell  v.  McCric  (Kaus.),  14  Pac.     Rep.  134. 

Rep.  257.  I'J  Williamson  v.  Carskadden,  36  Ohio 

3  Drury  v.  Foster,  1  Dill.  460.  St.  664  ;  Russell  v.  Theological  Union,  73 
*  Johnson  i;.  Van  Velsor,  43  Mich.  208;     111.  337;  Johnston  v.  Wallace,  53   Miss. 

Houriienne   v.    Schnoor,   33    Mich.    274;  331,   338;  Paxton    v.   Marshall,   18  Fed. 

Cameron  v.  Culkins,  44  Mich.  531.  Rep.  361,365,  note.     In  some  states,  how- 

^  Tliurman  v.  Cameron,  24  Wend.  (N.  ever,  a  certificate  of  acknowledgment   is 

Y.)    87,   and    cases    cited;    Canandarqua  regarded  only  as  prima  facie  evidence  of 

Academy  v.  McKechnie,  19  Hun  (N.  Y.),  the  matters  therein  stated,  and  it  may  be 

62.  overthrown  without  showing  fraud.    Wan- 

6  Tooker  v.  Sloan,  30  N.  J.  Eq.  394.  nell  v.  Kem,  57  Mo.  478  ;  Steffin  v.  Bauer, 

^  Wood  V.  Cochrane.  39  Vt.  544.  70  Mo.  399.    But  the  proof,  to  have  this 

428 


REQUISITES   AS   TO   EXECUTION   AND   ACKNOWLEDGMENT.      [§  538. 

special  protection  of  the  homestead  right,  it  is  required  that  the 
wife  should  acknowledge  before  the  officer  that  she  had  released 
the  homestead  right.^  If,  for  instance,  the  certificate  shows  that 
a  married  woman  was  examined  separate  and  apart  from  her  hus- 
band, and  voluntarily  relinquished  her  rights  of  dower  and  home- 
stead in  the  lands,  it  cannot  be  impeached  by  evidence  that  there 
was  no  private  examination ;  that  she  did  not  acknowledge  the 
deed  as  her  act  and  deed ;  that  the  contents  of  the  deed  were  not 
made  known  to  her ;  or  that  she  did  not  release  her  homestead 
right.  There  must  first  be  some  allegation  and  proof  of  fraud  or 
imposition  practised  upon  her ;  or  some  fraudulent  combination 
between  the  parties  interested  and  the  officer  taking  the  acknowl- 
edgraent.2  There  would  be  no  certainty  in  titles  if  the  officer's 
certificate  could  be  contradicted  by  any  other  evidence.  The  law 
directs  him  to  make  his  certificate  in  writing,  and  when  he  has 
made  it  the  world  is  to  look  to  that  and  to  nothing  else.^  Parol 
evidence  can  only  be  admitted  to  show  fraud  or  duress  connected 
with  the  acknowledgment;  not  to  contradict  the  officer's  certifi- 
cate.4 

But  it  is  held  that  the  certificate  of  a  magistrate  to  the  deed  of 
a  married  woman  that  she  was  of  full  age  is  not  conclusive,  and 

effect,  must  be  clear,  cogent,  and  convin-  Mississippi  :  Johnston  v.  Wallace,  53  Miss, 

cing.     Bohan  v.  Casey,  5  Mo.  App.  101 ;  331.    Ohio:  Baldwin  v.  Snowdeu,  11  Ohio 

Insurance    Co.  i-.  Nelson,  103  U.  S.  544,  St.   203.       Oregon:    Moore  v.    Fuller,  6 

548;    Young  i'.   Duvall,    109  U.  S.  573;  Orcg.  272.    Pennsylvania :  Heeter  y.  Glas- 

Mather  v.  Jarel,  33  Fed.  Eep.  366.  gow,  79  Pa.  St.  79 ;  Jamison  v.  Jamison, 

1  As  in  Illinois,  both  under  Act  of  1857  3  Whart.  457  ;   Singer  Manufacturing  Co. 

and  that  of  1869.     Warner  v.  Crosby,  89  v.  Rook,  84  Pa.  St.  442;  Oiipenheiiner  v. 

111.  320;  S.  C.  11  Chicago  L.  N.  224.     In  Wright,  106  Pa.  St.  569 ;  Lewars  i'.  Wea- 

Indiana,  under  Acts  1879,  p.  129.  ver,  15  Atl.  Kep.  514.     Texas  :  Hartley  v. 

-  Insurance  Company  v.  Nelson,  103  U.  Frosh,  6  Texas,  208;  Williams  v.  Pouns, 

S.  544.    Alabama:  Coleman  r.  Smith,  55  48   Tex.    141.     Wisconsin:    Lefebvrc   v. 

Ala.  368;    Miller  v.   Marx,   55  Ala.  322.  Dutruit,  51  Wis.  326. 

Indiana:  M'Neely  v.  Rucker, 6Blackf.  391.  ^  pgr  Tilghman,  C.  J.,  in  Jourdan  v. 

Illinois:  Graham  r.  Anderson,  42  111.  514  ;  Jourdan,  9  S.  &  R.  (Pa.)  268.     And  see 

Mcpherson  v.  Sanborn,  88  111.  150;  Mon-  Grabam  v.  Anderson,  supra. 

roe  V.  Poorman,  62  111.  523 ;  Kerr  v.  Rus-  4  Hceter  v.    Glasgow,   supra ;  Jamison 

sell,  69  111.   666;    Crane  v.  Crane,  81   III.  v.   Jamison,   supra;   Ilomoeopatliic  Mat. 

165;  Lowell  i».  Wren,  80  111.  238;  Russell  L.   Ins.   Co.  v.   MarshaU,   32   N.   J.   Eq, 

V.  Baptist  Thfologiial  Union,  73  HI.  337;  103. 

Blackraan  v.   Ilav%ks,  s9  III.   512;    .S".  C.  In  a  note  to  this  case  by  flic  reporter 

8  Cent.  L.  J.    196.     Maryland:   Kidgely  the  decisions  of   the  various  slates  upon 

V.   Howard,  3    Harris  &   Mclhiiry,  ;5L'l  ;  the  question  whether  the  oflieer's  ccrtifi- 

Bissett  V.  Bis^ett,  1   lb.  211.     Michigan:  cate  is  conclusively  or  only  prhnd  facie 

Johnson  v.   Van  Velsor,   43   Mich.    208.  correct  are  fully  cited. 

429 


§  539.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

that  she  cannot  ratify  it  after  coming  of  age  except  by  acknowl- 
edgment separate  and  apart  from  her  husband.^ 

The  exception  that  the  magistrate's  certificate  is  not  conclusive 
of  the  facts  stated  in  it  when  fraud  is  shown,  does  not,  however, 
extend  to  the  case  of  one  who  has  in  good  faith  purchased  with- 
out notice  of  the  fraud  ;  he  is  protected  by  the  record  notwith- 
standing the  fraud.2  If  he  has  actual  knowledge  of  fraud  or 
duress  in  obtaining  a  wife's  acknowledgment  to  a  deed,  or  knowl- 
edge of  such  circumstances  as  would  naturally  lead  him  to  in- 
quiry, he  is  deprived  of  the  protection  accorded  to  an  innocent 
and  bond  fide  holder.  Even  less  than  actual  duress  will  avoid  a 
wife's  acknowledgment  of  a  mortgage  in  the  hands  of  an  assignee 
who  ought  to  have  inquired  for  defences  and  did  not.  It  is  enough 
if  it  be  shown  that  she  did  it  under  moral  constraint,  as,  for  in- 
stance, by  threats,  persecution,  and  harshness  on  the  part  of  her 
husband.  These  facts  being  known  to  the  mortgagee,  his  assignee 
is  affected  by  them  in  case  he  is  not  entitled  to  the  protection 
accorded  to  one  who  takes  negotiable  paper  for  value  before  ma- 
turity. He  should  inquire  of  the  mortgagors  whether  the  mort- 
gage is  open  to  any  defence.^ 

A  substantial  compliance  with  the  requirements  of  such  a  stat- 
ute is  sufficient.* 

539.  Delivery  is  another  incident  necessary  to  giving  effect  to 
the  mortgage  even  as  between  the  parties  to  it.^  Although  the 
deed  be  recorded,  if  it  has  not  been  delivered,  or  the  delivery  was 
unauthorized,  a  subsequent  conveyance  by  the  mortgagor,  or  a 
subsequent  judgment  against  him,  will  take  precedence.® 

The  fact  of  the  acknowledgment  of  the  deed  at  a  certain  date 
is  not  by  itself  evidence  that  the  mortgage  was  delivered  at  that 
time,  or  was  ever  delivered,'''  though  this  has  been  said  to  be  pre- 
sumptive evidence.^     The  record   of  the   mortgage  is  said  to  be 

1  Williams  v.  Baker,  71   Pa.  St.   476;     Peay,  23  Ark.  439 ;  Maynard  v.  Maynard, 
Ledger  Building  Asso.  v.  Cook,  7  Report-     10  Mass.  456.     See  §  84. 

er,  409;  5.  C.  19  Alb.  L.  J.  281.  6  Woodbury    v.   Fisher,   20   Ind.    387; 

2  Heeter  v.  Glasgow,  79   Pa.    St.    79 ;  Goodsell  v.  Stinson,  7  Blackf.  (Ind.)  437.  . 
Hall  V.  Patterson,  51  Pa.  St.  289.  ''  Freeman  v.  Sebroeder,  43  Barb.  (N. 

3  McCandless  v.  Engle,  51  Pa.  St.  309.  Y.)  618;  5.  C.  29  How.  Pr.  263;  Jackson 
Michener  v.   Cavender,  38  lb.  334,  337  ;  v.  Richards,  6  Cow.  (N.  Y.)  617. 
Twitchell  i;.  McMurtrie,  77  lb.  383.  «  "vVyckoff   v.   Remsen,    11    Paige   (N. 

*  Hornbeck  v.  Mut.  Building  Asso.  88  Y.),  564;  Portz  v.  Schantz  (Wis.),  36  N. 

Pa.  St.  64.  W.  Rep.  249 ;  Pereau  v.  Frederick  (Iowa), 

s  Goodwin  v.  Owen,  55  Ind.  243 ;  Hoad-  22  N.  W.  Rep.  235. 
ley  V.  Hadley,  48  Ind.  452;   Freeman  v. 

430 


REQUISITES    AS   TO   EXECUTION   AND   ACKNOWLEDGMENT.       [§  540. 

evidence  of  delivery  in  a  greater  degree,  but  it  is  not  conclusive 
of  a  delivery.  It  has  sometimes  been  spoken  of  as  a  jjrimd  facie 
evidence  of  delivery .^  It  may  be  evidence  for  the  jury  to  con- 
sider.2 

But  registration  itself  does  not  operate  as  a  delivery ;  nor  does 
it  supersede  the  necessity  of  proof  of  a  delivery .^  A  delivery  of 
the  mortgage  to  the  register  for  record  may  be  an  effectual  deliv- 
ery to  the  mortgagee,  where  such  delivery  is  made  at  the  request 
of  the  mortgagee,^  or  the  register  had  authority  from  him  to  re- 
ceive it  and  keep  it. 

Delivery  to  a  mortgagee  who  is  called  by  a  wrong  name  in  the 
mortgage  identifies  the  person  intended  to  be  secured,  and  vests 
the  title  in  him.^ 

A  mortgage  may  be  delivered  by  the  mortgagor's  agent.  Thus 
a  notai'y,  with  whom  a  note  and  mortgage  are  left  by  the  mort- 
gagor, after  acknowledging  the  mortgage  before  him,  will  be  pre- 
sumed to  have  authority  to  deliver  them,  in  the  absence  of  instruc- 
tions to  the  contrary  ;  and  a  delivery  by  him  to  the  mortgagee  is 
a  sufficient  deliverj\'^ 

Of  course,  a  delivery  to  an  agent  of  the  mortgagee  is  a  deliv- 
ery to  the  mortgagee  himself ;  as,  for  instance,  a  delivery  to  the 
secretary  of  a  railroad  company  is  sufficient.''  A  delivery  of  a 
mortgage  made  by  a  partner  upon  the  dissolution  of  the  firm  to 
secure  a  note  of  the  firm,  which  he  has  assumed,  to  the  other 
partner,  who  is  indemnified  by  the  mortgage,  is  sufficient.^ 

Payment  of  the  consideration  of  a  mortgage  may  be  a  prerequi- 
site to  creating  a  valid  lien.  Thus,  if  one  has  notice  of  a  prior 
unrecorded  mortgage  before  he  pays  over  money  he  has  under- 
taken to  loan  upon  a  mortgage,  the  fact  that  he  has  recorded  his 
own  mortgage  before  receiving  such  notice  does  not  make  his 
mortgage  the  prior  lien.^ 

540.  Delivery  after  recording.  —  Although  a  mortgage  is  of 

»  Kille  V.  Ege,  79  Pa.  St.  15;  Jackson  C.  (N.  Y.)  177;  Thayer  v.  Stark,  6  Cush 

V.  Perkins,  2  Wend.  (N.  Y.)  308.  (Mass.)  II,  14. 

'^Jordan     v.     Farnsworth,     15     Gray         '  Fisher  i».  Milmine,  94  111.  328  ;  Beaver 

(Mass.),  517.  V.  Slanker,  94  III.  175. 

»  Ilawkcs    >'.     Pike,    105    Mass.    5C0 ;         6  Adams  v.  Adams  (Iowa),  30  N.  W- 

Parker  v.  Hill,  8  Met.  (Mass.)  447;  Fo-  Rep.  795. 

ley   V.   Howard,  8  Iowa,  50;    Iloufes   v.         "<  Patterson  u.  Ball,  19  Wis.  243;  Tru- 

Schultze,  2  Bradw.  (111.)    196  ;   S.  C.  96  man  v.  McCollum,  20  lb.  360. 
111.  335.  »  Conwcll  v.  McCowan,  81  III.  285. 

«  Duscnbury  i;.  Ilulbert,  2  Thomp.  &         »  Schultzc  v.  Iloufes,  96  HI.  335. 

431 


§  540.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

no  effect  until  there  has  been  a  delivery  of  it  to  the  mortgagee, 
yet  if  it  is  made  for  a  good  consideration,  as,  for  instance,  an  ex- 
isting debt,  and  is  filed  for  record  without  delivery,  a  subsequent 
acceptance  of  the  deed  by  the  mortgagee  has  been  held  to  ratify 
the  making  and  recording  of  it,  and  to  give  it  legal  effect  from 
the  time  of  filing,  as  against  intermediate  incumbrances.^  When, 
for  instance,  one  in  debt  to  a  bank  executed  a  mortgage  to  it, 
and  without  delivering  it  sent  it  to  the  record  office  to  be  re- 
corded, and  then  sent  word  to  the  officers  of  the  bank  of  the  exe- 
cution of  the  mortgage,  and  that  they  could  get  it  of  the  recorder, 
and  they  replied  that  "they  were  glad  it  was  done,"  this  was  held 
a  sufficient  delivery  of  the  deed  to  the  bank  to  pass  the  title  as 
against  one  to  whom  the  mortgagor  made  and  delivered  another 
mortgage  of  the  same  property  two  days  afterwards,  but  after 
such  notification  to  the  bank  and  reply .^  There  are  cases  which 
hold  that  a  delivery  may  be  made  to  a  stranger  in  behalf  of  the 
mortgagee,  and  without  his  authority,  and  upon  his  subsequent 
acceptance  of  the  mortgage  the  title  is  regarded  as  having  vested 
in  him  from  the  time  of  such  delivery.  Such  was  held  to  be  the 
case  where  one  in  failing  circumstances  made  a  mortgage  to  a 
creditor  who  resided  out  of  the  state,  without  the  knowledge  of 
his  creditor,  and  delivered  it  to  his  own  attorney  for  the  benefit 
of  the  creditor,  with  the  request  that  the  attorney  should  cause 
it  to  be  recorded  and  handed  to  the  creditor.  The  mortoraore  was 
accordingly  recorded,  and  afterwards  received  and  accepted  by 
the  mortgagee  ;  but  after  the  delivery  of  it  to  the  attorney  and 
the  recording  of  it,  and  before  the  attorney  had  delivered  it  to  the 
mortgagee,  the  property  was  attached  by  another  creditor  of  the 
mortgagor's.  It  was  held  that  the  mortgaged  estate  immediately 
vested  in  the  mortgagee,  whose  title  was  therefore  superior  to  that 
of  the  attaching  creditor.^  It  has  been  held,  moreover,  that  it 
may  be  presumed  that  a  mortgagee,  in  whose  favor  a  mortgage 
has  been  executed  and  placed  on  record,  will  assent  to  it  on  being 
notified  of  its  existence ;  and  therefore,  although  it  be  made  and 
recorded  without  his  knowledge,  and  the  land  is  afterwards  at- 
tached by  creditors  of  the  mortgagor  before  the  mortgagee  has 

1  Carnall  v.  Duval,  22  Ark.  136.  cases  cited.     This  is  doubtful  law.     See 

2  Farmers'  &  Mechauics'  Bank  v.  Uru-  Johnson  v.  Farley,  45  N.  H.  505  ;  Jones 
ry,  38  Vt.  426.  on  Chattel  Mortgages,  §§  104-113. 

3  Merrills  v.  Swift,  18  Conn.  257,  and 

432 


REQUISITES   AS    TO   EXECUTION   AND    ACKNOWLEDGMENT.       [§  541. 

notice  of  the  mortgage,  which  he  afterwards  assents  to  and  rati- 
fies, he  may  hold  the  mortgage  lien  against  such  attachments.^ 

There  may  be  some  slight  presumption  of  delivery  arising  from 
the  record  of  a  deed ;  but  when  this  is  overcome,  the  burden  is 
upon  the  party  claiming  title  under  it  to  show  an  actual  delivery 
before  a  levy  upon  tlie  land  by  attachment  or  execution.^ 

541.  When  a  subsequent  delivery  becomes  operative.  — 
Although  a  deed  be  inoperative  at  the  time  it  is  recorded,  as 
when  it  is  recorded  before  deliver)'-,  or  is  recorded  as  a  deed  when 
intended  as  a  mortgage,  and  the  statutes  of  the  state  where  it  is 
executed  require  that  it  shall  be  recorded  in  such  case  in  separate 
mortgage  books,  upon  a  subsequent  delivery  in  the  one  case,  and 
in  the  other  upon  a  purchase  of  the  equity  of  redemption  by  the 
mortgagee,  the  record  then  becomes  fully  operative.^  The  deliv- 
ery of  the  deed,  or  the  purchase  of  the  equity  of  redemption,  is 
equivalent  to  a  delivery  of  the  deed  for  record  at  that  time,  in 
the  same  way  as  when  a  deed  is  recorded  in  anticipation  of  the 
completion  of  a  sale.  The  mortgage  is  effectual  only  from  the 
time  of  such  delivery,  and  any  one  who  has  in  the  mean  time  be- 
fore the  delivery  obtained  a  lien  upon  the  property  has  a  prefer- 
ence over  such  mortgagee.  His  assent  to  the  mortgage  makes 
the  mortgage  valid,  and  the  record  of  it  notice  only  from  that 
time.*  Where,  for  instance,  a  mortgage  was  recorded  on  the  13th 
day  of  May,  1870,  and  was  held  by  the  mortgagor  ready  for  de- 
livery when  he  should  obtain  a  loan,  and  was  not  delivered  until 
the  7th  day  of  the  following  month,  the  latter  date  was  held  to 
be  the  date  of  its  registry,  as  against  one  who  in  the  mean  time 
had  acquired  a  mechanic's  lien  upon  the  propert3^ 

But  if  the  mortgage  be  executed  and  acknowledged,  and  put 
upon  record  by  the  mortgagor,  in  pursuance  of  a  prior  contract 
for  a  loan  upon  ir,  which  is  afterwards  made  in  pursuance  of  the 
contract,  and  the  mortgage  is  then  delivered  upon  the  payment  of 
the  money,  it  has  priority  in  equity  over  liens  of  mechanics  and 
material-men,  for  work  and  materials  furnished  after  the  mort- 
gage is  recorded,  for  a  building  which  the  mortgagor  commenced 

1  Ensworth  v.  King,  50  Mu.  477.  This  Barb.  (N.  Y.)  505;  Jackson  v.  Richards, 
case  should  not  be  relied  upon  in  any  other  6  Cow.  (N.  Y.)  G17;  Hood  v.  Brown,  2 
btate.  Ohio,  2C6 ;  Mut.  Benefit  Life  Ins.  Co.  v. 

2  Harmon  w.  Myer,  55  Wis.  85.  Uowand,  26    N.   J.    Eq.   389;    Iloiifes  v. 

3  See  §§85-87;  Warner  i-.  Winslow,  I  Scliultzc,  11  Chicago  L.  N.  75;  S.  C.  2 
Sandf.  (N.  Y.)  Ch.  4.m  Bradw.  (111.)  190. 

*  FoHtcr   V.   Btard.sley    Scythe   Co.   47 
VOL.1.  28  433 


§§  542,  543,]  .    REGISTRATION    AS   AFFECTING   PRIORITY. 

to  erect  upon  the  premises  after  the  recording  of  the  mortgage 
and  before  its  delivery,  the  mortgagee  having  no  knowledge  of 
this  fact.  In  such  case  the  mortgage  upon  delivery  has  relation 
to  the  agreement  for  the  loan,  and  the  registry  takes  effect  and 
becomes  operative  as  constructive  notice  before  the  delivery,  and 
from  the  time  the  mortgage  veas  left  for  record.^ 

IV.  Requisites  as  to  the   Time  and  Manner  of  Recordirig. 

542.  The  record  is  notice  from  the  time  of  filing  the  deed 
for  record.  It  is  sometimes  provided  by  statute  that  a  mortgage 
or  other  deed  shall  be'deemed  to  be  recorded  when  it  is  filed  for 
record,  or  noted  in  an  entry  book  by  the  recorder  as  received. 
But  aside  from  any  statutory  provision,  the  judicial  interpreta- 
tion of  the  effect  of  the  filing  is  the  same.^  The  mortgage  record 
dates  from  the  moment  it  is  left  for  record,  and  is  indorsed  by  the 
recorder  and  entered  upon  the  index  or  entry  book,  although  it  is 
not  actually  spread  upon  the  record  for  months,  or  any  length  of 
time  afterwards.'^  The  entry  in  the  entry  book  is  constructive 
notice  until  the  deed  is  spread  in  full  upon  the  record.*  It  may 
be  kept  in  the  office  and  referred  to  until  it  is  transcribed.  When 
it  is  spread  upon  the  record,  however,  it  is  notice  of  only  what 
appears  upon  the  record.  A  presumption  in  favor  of  the  record 
w^ill  prevail  against  the  testimony  of  a  subsequent  purchaser  or 
mortgagee  that  at  the  time  of  filing  his  deed  for  record  no  incum- 
brance upon  the  property  appeared  of  record.^ 

The  record  is  not  defective  for  the  reason  that  a  portion  of  it 
was  printed  instead  of  being  written  with  pen  and  ink.^ 

543.  As  to  the  time  when  a  mortgage  deed  was  left  for  rec- 

1  Jacobus  V.  Mutual  Benefit  Life  Ins.  ^  Wood's  Appeal,  82  Pa.  St.  116;  Kiser 
Co.  27  N.  J.  Eq.  604.  The  doctrine  of  v.  Heuston,  38  111.  252 ;  Franklin  v.  Can- 
relation  is  fully  considered  in  this  case,  non,  1  Root  (Conn.),  500;  Throckmorton 
See,  also,  Pratt  v.  Potter,  21  Barb.  (N.  Y.)  v.  Price,  28  Tex.  605;  Brooke's  Appeal, 
589;  Judd  v.  Seekins,  62  N.  Y.  266;  S.  C.  supra;  Musser  v.  Hyde,  2  W.  &  S.  (Pa.) 
3  T.  &  C.  266.  See  contra,  Houfes  v.  314;  Bank  of  Ky.  v.  Haggin,  1  A.  K. 
Schultze,  11  Chicago  L.  N.  75;  S.  C.  2  Marsh.  (Ky.)  306;  Sinclair  v.  Slawson, 
Bradw.  (111.)  196.  44   Mich.    123.      In    Georgia,  under  the 

2  Brooke's  Appeal,  64  Pa.  St.  127;  Code,  §§  267,  1957,  a  mortgage  is  not  re- 
Kessler  v.  State,  24  Ind.  313;  Magee  v.  corded  until  it  is  actually  spread  upon  the 
Beatty,  8  Ohio,  396;  Brown  v.  Kirkman,  record.  Benson  v.  Callaway,  4  S.  E.  Rep. 
1  Ohio  St.  116;  Fosdick  v.  Barr,   3  lb.  851. 

471 ;  Bloom  ;;.  Noggle,  4  lb.  45;  Tousley  *  Sinclair  v.  Slawson,  supra. 

r.  Tousley,  5  lb.  78;  Bercaw  v.  Cockerill,  ^  Vandercook  v.  Baker,  48  Iowa,  199. 

20  lb.  163;  Leslie  v.  Hinson  (Ala.),  3  So.  «  Maxwell  v.  Hartmann,  50  Wis.  660. 
Rep.  443.     See  §§  550,  551. 

434 


REQUISITES   AS   TO   TIME   AND    MANNER   OF   RECORDING.       [§  543. 

ord,  the  certificate  of  the  register  is  conclusive  as  between  the 
mortgagee  and  a  creditor  who  has  attached  the  mortgaged  land 
subseqently  to  the  time  stated  in  the  certificate.^  If  the  mort- 
gage be  left  at  the  registry  in  the  absence  of  the  recorder,  and  it 
is  received  and  filed  by  a  clerk  in  charge  of  the  ofl&ce,  the  filing 
is  sufficient,  though  the  clerk  has  no  authority  to  perform  the 
duties  of  the  register.  It  is  the  duty  of  the  recording  officer  to 
enter  and  number  the  mortgage,  and  the  rights  of  the  mortgagee 
cannot  be  impaired  by  his  omission  to  do  so.^  The  certificate  is 
not,  however,  conclusive  of  anything  beyond  the  time  of  the  re- 
ceipt of  the  instrument  for  record,  as,  for  instance,  it  is  not  con- 
clusive that  it  is  duly  recorded.^ 

If  a  mortgage  be  left  with  a  register  with  directions  that  it 
should  not  be  placed  on  record  until  further  directions  should  be 
given,  and  the  register's  clerk  records  it  without  such  directions 
ever  having  been  given,  there  is  no  effectual  recording  of  it.  In 
such  case,  if  directions  should  be  subsequently  received  to  record 
the  mortgage,  the  record  should  be  made  as  of  the  time  when 
such  instructions  are  received,  and  not  as  of  the  time  when  the 
deed  was  left,  nor  of  the  time  when  it  was  recorded  without  au- 
thority.'' 

When  the  time  of  receiving  a  mortgage  for  record  as  entered  in 
the  index  book  shows  upon  its  face  that  it  was  not  made  at  the 
time  of  such  reception,  the  presumption  of  the  correctness  of  the 
register's  entry  is  lost.'^  The  filing  of  a  mortgage  for  record  af- 
fords no  notice  if  the  deed  be  withdrawn  before  it  is  recorded.^ 

As  between  two  mortgagees,  whose  mortgages  are  executed,  and 
recorded  on  the  same  day,  parol  evidence  is  admissible  to  show 
which  was  first  deposited  for  record.'^  To  ascertain  which  is  prior, 
the  fractional  parts  of  a  day  are  considered.^  In  case  no  entry  is 
made  upon  the  record  of  the  time  of  the  recording  of  the  mort- 
gage, when  the  law  of  a  state  required  no  such  entry,  and  it  ap- 
pears from  the  record   to  have  been  recorded  at  an   early   day, 

1  Tracy  u.  Jenks,  15  Pick.  (Mass.)  405;  *  Brighara    v.   Brown,    44    Mich.    59: 

Adams  v.  Pratt,  109  Maa.s.  59;  Fuller  v.  Bowen  v.  Fassett,37  Ark.  507  ;  Ycrger  v. 

Cunninj'ham,    105   Mass.   442;    Ames    r.  Barz,  56  Iowa,  77. 

Phelps,  18  Pick.  (Mass.)  314.  6  n^y  v.  Hill,  24  Wis.  235. 

-  Dodge    r.    Potter,   18   Barb.    (N.  Y.)  •■'  Worcester  Nat.  Bank.  «;.  Chceney,  su- 

193.  pra. 

3  New  York  Life  Ins.  Co.  r.  White,  17  "  Spaulding   v.    Scanland,   6   B.   Mon. 

N.  Y.  469;   Thorp  v.   Merrill,  21    Minn.  (Ky.)   353;    Boone   v.    Tclles,  2   Bradw. 

336  ;  Worcester  Nat.  Bank  i;.    Cheeney,  (111.)  539. 

87  III.  002.  «  Lemon  v.  Staats,  1  Cow.  (N.  Y.)  592. 

435 


§§  644,  545.]      REGISTRATION    AS   AFFECTING   PRIORITY. 

it  will  be  presumed  that  the  record  was  made   within   the  time 
required  by  law  after  the  execution  of  it.^ 

544.  It  will  be  observed  that  the  recording  acts  of  some  states, 
as,  for  instance,  of  Georgia,  Indiana,  Maryland,  Pennsylvania, 
and  Wyoming  Territory,  provide  that  a  mortgage  shall  be 
recorded  within  a  specified  time  after  the  execution  of  it. 
The  effect  of  this  provision  is  not  to  invalidate  the  mortgage  as 
between  the  parties  if  not  recorded  within  the  time  specified.  It 
is  admissible  in  evidence,  and  is  an  equitable  lien,  although  not 
so  recorded.^  The  failure  to  comply  with  this  requirement  only 
goes  to  the  effect  of  the  mortgage  as  to  subsequent  purchasers. 
As  to  those  whose  conveyances  are  registered  before  it  the  mort- 
gage is  ineffectual.^  Of  two  mortgages  of  equal  equity,  recorded 
within  the  time  limited  after  execution,  that  which  is  first  re- 
corded has  priority.* 

545.  A  mortgage  may  be  recorded  after  the  death  of  the 
mortgagor,  if  he  has  in  his  lifetime  made  delivery  of  it.  His 
general  creditors  cannot  for  that  reason  claim  that  the  mortgage 
was  inoperative  as  against  them.^  The  recording  of  a  deed  is  no 
part  of  its  execution.  Neither  does  a  lien  attach  to  the  real  estate 
of  a  debtor  in  favor  of  his  general  creditors  immediately  upon 
his  death,  as  against  the  specific  lien  of  the  mortgage  which  was 
good  against  the  mortgagor.  His  heirs  take  the  estate  upon  his 
decease  subject  to  the  incumbrance ;  and  the  lien  of  the  general 
creditors,  which  is  merely  a  right  to  have  the  real  estate  in  the 
hands  of  the  heirs  applied  for  their  benefit  upon  a  deficiency  of 
the  personal  assets,  attaches  to  it  in  the  same  condition.^  In  like 
manner  a  mortgage  executed  and  delivered  before  a  general  as- 
signment of  the  mortgagor  for  the  benefit  of  his  creditors,  or 
before  his  bankruptcy,  if  valid  in  other  respects  is  valid  against 
the  assignment  or  the  bankruptcy,  though  not  recorded  until  af- 
terwards.'^ 

1  Hall  V.  Tunnell,  1  Houst.  (Del.)  320.  *  Dungan   v.   Am.   Life  Ins.   &  Trust 

2  Sixth  Ward  Building  Asso.  v.  Will-  Co.  52  Pa.  St.  253  ;  Den  v.  Roberts,  4  N. 
son,  41   Md.  506  ;   Den  v.   Watkins,  6  N.     J.  L.  (I  South.)  315. 

J.  L.  (1  Halst.)  445  ;  Ashe  v.  Livingston,  ^  qi\[  y.  Piuney,  12  Ohio  St.  38 ;  Has- 

2  Bay  (S.  C),  80;  Penman  v.  Hart,  lb.  kell  v.  Bissell,  11  Conn.  174. 

251 ;'  Ash  v.  Ash,  1   lb.  304;    Rootes  v.  «  Gill  v.  Pinney,  12  Ohio  St.  38. 

HoUiday,  6  Munf.  (Va.)  251 ;    Plume  v.  "^  Mellon's    Appeal,   32    Pa.    St.    121 ; 

Bone,  13  K  J.  L.  (I  Green)  63;  Charter  Wyckoff  v.  Remsen,  11    Paige    (N.   Y.), 

V.  Graham,  56  111.  19.  564. 

3  Cowan  V.  Green,  2   Hawks   (N.   C), 
384. 

436 


REQUISITES   AS   TO   TIME    AND   MANNER   OF   RECORDING.      [§§  546,  547. 

546.  When  it  is  provided  that  mortgages  shall  be  re- 
corded in  books  kept  for  that  purpose  separate  from  other 
instruments,  a  mortgage  recorded  as  a  deed  is  not  effectual  as 
against  subsequent  bond  fide  purchasers  or  mortgagees ;  even  if 
the  mortgage  be  in  form  an  absolute  deed,  but  intended  as  secu- 
rity for  a  loan  of  money.^  If  a  mortgage  is  not  recorded  in  the 
mortgage  books,  it  cannot  be  found  by  means  of  the  index  to 
those  books,  and  therefore  is  not  regarded  as  properly  recorded. ^ 
Such  a  deed  is  of  course  valid  as  between  the  parties,^  and  though 
the  record  is  a  nullity,  it  becomes  operative  in  case  the  mortgagee 
afterwards  acquires  the  equity  of  redemption.^  A  subsequent 
purchaser  or  mortgagee,  who  has  actual  notice  of  a  mortgage 
whicli  is  improperly  recorded  as  an  absolute  conveyance,  of  course 
takes  a  title  subject  to  such  mortgage,  just  as  he  would  if  the 
mortgage  were  not  recorded  at  all.  A  statute  which  is  merely 
directory  to  the  recorder  in  this  respect  would  not  invalidate  a 
record  of  the  mortgage  not  made  in  the  record  books  specially 
used  for  mortgages.^ 

Of  course  the  mortgage,  whether  in  regular  form  or  by  way  of 
an  absolute  deed,  is  valid  between  the  parties,  although  the  stat- 
ute requirement  that  it  be  recorded  as  a  mortgage  be  not  com- 
plied witli.'' 

547.  It  is  sometimes  provided  by  statute  that  a  power  of 
attorney,  under  which  a  mortgage  is  executed,  shall  be  re- 
corded with  the  deed,  which  owes  its  existence  to  the  power,  and 
when  this  is  the  case  the  record  of  the  deed  without  the  power 
has  no  legal  effect."  But,  aside  from  this  requirement,  it  is  not 
necessary  that  a  power  should  be  recorded  with  the  mortgage,  or 
that  it  should  be  recorded  at  all,  in  order  that  the  mortgage  deed 
when  recorded  should  be  notice  to  all  the  world.^ 

The  record  of  a  power  of  attorney,  when  the  law  does  not  re- 

'   Warner  v.  Winslow,  I   Sandf.  (N.  Y.)         2  Luch's  Appeal,  44  Pa.  St.  .519. 
Ch.  4.30 ;  Brown  v.  Dean,  .3  Wend.  (N.Y.)         3  James  v.  Morcy,  6  Johns.  (N.  Y.)  Cli. 

208;    White  v.  Moore.  1    Paige    (N.   Y.),  417. 

551  ;     Grimstone   v.   Carter,   3    lb.   421  ;         *  Warner  r.  Winslow,  1   Sandf.  (N.  Y.) 

James  i-.  Morey,  2  Cow.  (N.  Y.)  246;  6'.  Ch.   430;     Grellet   c.   Ileilshorn,   4   Nev. 

C.  6  Johns.  (N.  Y.)    Ch.   417;    Cliite  v.  526;  Parsons  i;.  Lunt,  34  N.  J.  Eq.  G7. 
Uobison,   2  John.s.    (N.   Y.)  595;    Dey  v.         ^  Smith  r.  Smith,  13  Ohio  St.  532. 
Dunham,    2    Johns.    (N.     Y.)    Ch.     182;         «  James  i-.  .Morey,  2  Cow.  (N.  Y.)  246  ; 

Cordcviolle  r.  Dawson,  20  La    Ann.  534;  Swcpson  v.  Bank, 9  Lea  (Tenu.)  713. 
Calder  v.  Cliapman,  52  Pa.   St.  359,  302,         ">  Carnal!  v.  Duval,  22  Ark.  136. 
and  cases  cited.  »  Wilson  r.  Troup,  2  Cow,  (N.  Y.)  195 

437 


§  548.]  REGISTRATION   AS   AFFECTING  PRIORITY. 

quire  it  to  be  recorded,  does  not  amount  to  constructive  notice.^ 
The  law  does  not  intend  that  to  be  known  for  the  existence  of 
which  there  is  no  legal  necessity .^ 

548.  Record  of  separate  defeasance.  —  When  an  absolute 
deed  is  given  in  the  way  of  security,  with  written  defeasance 
back,  the  rights  of  the  mortgagee  are  in  general  fully  protected 
without  any  record  of  the  defeasance.  The  deed  is  sufficient 
notice  of  his  interest.^  In  fact  it  is  notice  of  a  greater  interest 
than  he  actually  has.  But  this  does  not  matter  except  in  those 
states  in  which  the  recording  of  the  defeasance  is  expressly  re- 
quired as  a  condition  upon  which  the  mortgagee  shall  derive  any 
benefit  from  the  record  of  the  deed,  as  in  California,  Dakota  Ter- 
ritory, Delaware,  Maryland,  Nebraska,  New  Jersey,  and  New 
York."*  When  the  defeasance  is  not  recorded,  the  obvious  effect 
of  the  record  of  the  deed  alone  is  to  make  the  grantee  the  appar- 
ent absolute  owner  of  the  estate,  and  the  person  who  holds  the 
defeasance  may  be  barred  of  all  right  of  redemption  by  a  sale  by 
the  mortgagee  to  one  who  buys  in  good  faith  and  without  notice 
of  such  defeasance.  A  judgment  creditor  of  the  grantor  in  such 
case  cannot  claim  that  the  conveyance  is  of  the  character  of  an 
unrecorded  mortgage,  so  as  to  render  the  property  subject  to  his 
judgment.'' 

In  Connecticut,  however,  unless  the  defeasance  is  recorded  with 
the  deed,  the  instruments  being  intended  to  operate  as  a  mort- 
gage, a  creditor  of  the  grantor  may  attach  the  property  as  his, 
for  the  transaction  is  regarded  as  invalid  as  against  the  grantor's 
creditors.^ 

^  Williams   v.   Birbeck,    Hoff.    (N.    Y.)  rights  against  a  subsequent  incumbrancer. 

359.  It  is  good  for  nothing  as  a  conveyance, 

-  James  I'.  Morey,  2  Cow.  (N.  Y.)  246,  because  it  is,  in  fact,  not  a  conveyance; 

296.  and  it  is  equally  worthless  as  a  mortgage, 

^  §  253 ;    Clemons   v.   Elder,    9    Iowa,  because  it  does  not  appear  by  the  record 

272  ;  Young  v.   Thompson,    2  Kans.  83  ;  to  be  a  mortgage." 

Newberry   v.    Bulkley,    5    Day    (Conn.),         ^  Mobile  Bank  v.  Tishomingo  Savings 

38-t;  but  see  Friedley  v.  Hamilton,  17  S.  Inst.  62  Miss.  250. 

&  R.  (Pa.)  70;  Jaques  v.  Weeks,  7  Watts         ^  Ives  v.  Stone,  51  Conn.  446.     Carpen- 

(Pa.),  261,  287.  ter,  J.,  delivering  the  opinion  of  the  court, 

*  See  §§480-526.     The  same  rule  is  ju-  after  reviewing  the  Connecticut  decisions 

dicially  established  in  Pennsylvania.     "  A  which  require  the  debt  secured  to  be  fully 

mortgage,"   says   Mr.  Justice   Black,   in  and    accurately   described,   said :     "  This 

Hendrickson's     Appeal,    "  when    in    the  transaction,   the    defeasance   being   unre- 

shape  of   an  absolute  conveyance,  with  a  corded,  is   contrary   to  the  spirit  of   all 

separate  defeasance,  the  former  being  re-  these  decisions.     The  record,  so  far  from 

corded,  the  latter  not,  gives  the  holder  no  disclosing  the    true    state    of   the    title, 

438 


REQUISITES   AS   TO    TIME   AND   MANNER   OF   RECORDING.       [§  549. 

As  to  third  persons  the  absolute  conveyance  is  not  defeated  or 
affected  unless  the  defeasance  is  also  recorded  ;  and  an  express 
declaration  to  this  effect  has  been  made  by  statute  in  several 
states,  as  in  Delaware,  Indiana,  Kansas,  Maine,  Massachusetts, 
^lichigan,  Minnesota,  Oregon,  Rhode  Island,  Wisconsin,  and 
Wyoming  Territorj' ;  and  in  New  Hampshire  it  is  provided  that 
the  convej'ance  shall  not  be  defeated  or  the  estate  incumbered 
unless  the  defeasance  is  contained  in  the  condition  of  the  mort- 
gage. The  object  of  the  latter  statute  is  to  protect  innocent  pur- 
chasers from  the  mortgagee,  who  has  apparently  an  indefeasible 
title  ;  while  the  provision  whereby  the  record  of  the  defeasance 
is  enforced,  in  the  states  before  named,  is  made  for  the  protec- 
tion of  the  mortgagor. 

These  requirements  of  statute  have  no  application  when  the 
conveyance  to  which  the  defeasance  relates  does  not  purport  upon 
its  face  to  be  absolute  and  unconditional.^  While  a  purchaser  in 
good  faith  and  without  notice  from  a  mortgagee,  by  an  absolute 
conveyance  obtains  a  title  not  subject  to  redemption,  yet  if  the 
purchaser  has  notice  of  the  original  transaction,  he  takes  only  the 
mortgagee's  title  ;  and  if  there,  are  successive  mutations,  but  al- 
ways coupled  with  such  notice,  the  original  conveyance  continues 
as  a  mortgage.^  The  fact  that  the  grantor  remains  in  possession 
of  the  pi'operty  has  been  held  sufficient  to  charge  the  purchaser 
with  such  notice.^ 

549.  A  purchaser  may  rely  upon  the  legal  title  as  it  ap- 
pears of  record.  These  provisions  of  statute  are  only  the  enact- 
ment of  a  principle  that  is  necessarily  deduced  from  the  general 
provisions  of  the  registry  system,  and  which  had  already  been 
established    by   judicial    construction."^      "  It    is    regarded,"    says 

.shows  it  to  be  an  absolute  deed  instead  of  tion  can  be  sustained  as  a  valid  mortgage 

a  mortgage  ;  it  represents  the  grantee  as  against  creditors,  it  will  not  only  destroy 

tlie  owner  of  the  property,   whereas   the  all  the  benefits  of  the  recording  system  as 

grantor  owns  it  subject  to   the  grantee's  respects   mortgages,  but  will  enable  the 

debt,  and  the  equity  of  redemption  is  con-  parties,  by  a  change  in   the  form  of  the 

cealed  and  placed  ajtparently  beyond  the  mortgage,  to  convert  the  system  itself  into 

reach  of  creditors,  while  a  secret  trust  ex-  an  instrument  of  fraud." 

ists  in  favor  of  the  grantor.     So  far  from  i  Russell  i^.   Waite,  Walk.  (Mich.)  31  ; 

describing  the  debt  with  reasonable  cer-  Noyes  r.  Sturdivant,  18  Me.  104. 

tairity,  the  record  is  entirely  silent  on  the  '^  Brown  v.  Gaffney,  28  111.  149  ;  Shaver 

subject,  and  places  it  within  the  power  of  v.  Woodward,  lb.  277  ;  Hall  i;.   Savill,  3 

the   partie.<),  by  collusion,  if  they  arc  so  Greene  (Iowa),  37  ;  Williams  u.  Thorn,  11 

disposed,  to  set  up  any  claim,  and  for  any  Paige  (N.  Y.),  459. 

amount,  as  a  substitute  for  the  one  really  •'  Munn  v.  Falcon,  2,5  Tex.  271,  274. 

intended  to   be  secured.     If  this  transac-  ■•  See  §  339  ;  Ncwhall  r.  Hurt,  7   Tick. 

439 


§  550.]  REGISTRATION   AS    AFFECTING   PRIORITY. 

Chief  Justice  Redfield,  "as  more  in  conformity  to  just  principles 
of  equity  and  fair  dealing,  that  the  estate  of  the  cestui  que  trust 
should  be  extinguished  by  the  deed  of  the  trustee,  than  that  the 
equal  equity  of  the  purchaser  should  be  defeated,  and  thus  the 
free  and  fair  transmission  of  estates  be  embarrassed  and  placed 
under  a  cloud  of  suspicion  and  doubt.  The  equities  of  the  parties 
being  equal,  the  legal  estate  is  allowed  to  prevail,  and  a  rule  of 
policy  is  at  the  same  time  subserved  by  leaving  the  transmission 
of  titles  unembarrassed  as  far  as  practicable,  thus  inspiring  con- 
fidence, rather  than  distrust,  in  the  transmission  of  titles  to  real 
estate." ^ 

When  the  mortgage  is  by  a  deed  absolute  in  form,  and  the  de- 
feasance is  not  recorded,  the  grantee  can  of  course  convey  a  good 
title  to  a  bond  fide  purchaser.^  The  position  of  the  parties  is 
quite  the  same  when  the  holder  of  a  mortgage  dul}'^  recorded  has 
taken  a  conveyance  of  the  equity  of  redemption,  and  has  then 
assigned  the  mortgage  to  one  who  does  not  record  the  assignment, 
and  has  then  conveyed  the  fee  to  another.  Apparently  the  mort- 
gagee, at  the  time  of  his  conveyance  in  fee,  had  the  complete  title 
by  merger  of  the  mortgage  in  the  fee,  just  as  the  mortgagee  by  an 
absolute  deed  has  it;  and  the  pi'ior  assignment  of  the  mortgage 
by  an  assignment  not  recorded  amounts  to  the  defeasance  not 
being  recorded.-^ 

As  elsewhere  noticed,  in  some  states  neither  an  attaching  cred- 
itor nor  a  judgment  creditor  is  regarded  as  a  purchaser,  and  there- 
fore he  acquires  by  his  attachment  or  judgment  no  lien  upon  the 
land  in  the  hands  of  the  mortgagee  holding  the  title  absolutely, 
as  against  the  equitable  cestui  que  trusty  or  grantor  equitably  en- 
titled to  the  equity  of  redemption."^ 

V.    Errors  in  the  Record. 

550.   If  the  record  of  a  mortgage  be  defective  for  any  cause, 

according   to   one  class   of  decisions    depending  somewhat  upon 

statutory  provisions,  it  does  not  amount  to  constructive  notice.^ 

(Mass.)    157;    Newhall    v.   Pierce,   5  lb.  ^  Bailey  v.  Myrick,  50  Me.  171;  Pico 

450;    Harrison  v.  Phillips   Academy,   12  r.  Gallardo,  52  Cal.  206 ;  Tufts  w.  Tapley, 

Mass.  456;  Mills  v.  Comstock,  5  Johns.  129  Mass.  380. 

(N.   Y.)    Ch.   214  ;  Whittick   v.   Kane,  1  3  Mills  v.  Comstock,  supra.    See  Purely 

Paige  (N.  Y.),   202;  Stoddard  v.  Rotton,  v.  Huntington,  42  N.  Y.  334;    S.  C.  46 

5  Bosw.  (N.  Y.)  378 ;  Columbia  Bank  v.  Barb.  389,  reversed. 

Jacobs,  10  Mich.  349.  <  Hart  v.  Farmers'  &  Meclianics'  Bank, 

^  Hart  V.  Farmers'  &  Mechanics'  Bank,  supra. 

33  Vt.  252.  5  N.  Y.  Life  Ins.  Co.  v.  White,  17  N. 
440 


ERRORS  IN   THE  RECORD.  [§  551. 

Every  requirement  of  statute  in  relation  to  the  execution  and 
acknowledgment  or  proof  of  the  mortgage  must  be  complied  with 
in  order  to  gain  priority  by  the  record  of  it.^  Moreover,  the  deed 
as  it  stands  must  be  spread  upon  the  record  correctly.  Persons 
interested  in  a  title  have  a  right  to  resort  to  the  records  to  find 
out  the  contents  of  a  deed,  and  can  be  considered  as  having  notice 
of  it  only  as  it  appears  of  record.  The  rule  that  the  deed  is  notice 
from  the  time  it  is  left  for  record  is  subject  to  the  qualification 
that  it  is  correctly  transcribed.  When  the  record  itself  is  defec- 
tive, it  is  notice  of  only  what  appears  upon  it.  If,  for  instance, 
a  mortgage  for  three  thousand  dollars  be,  by  mistake  of  the  re- 
corder, registered  as  for  three  hundred  dollars,  or  a  mortgage  for 
four  hundred  dollars  be  registered  as  two  hundred  dollars,  it  is 
notice  to  subsequent  bond  fide  purchasers  of  a  lien  of  only  that 
amount.^  And  so  if  a  mortgage  for  five  thousand  dollars  be  re- 
corded as  for  five  hundred  dollars,  although  indexed  as  a  mort- 
gage for  five  thousand  dollars,  it  is  a  lien  as  against  a  bond  fide 
subsequent  mortgage  only  for  the  smaller  amount ;  and  the  knowl- 
ledge  of  such  subsequent  mortgagee  that  the  mortgage  was  in- 
dexed as  a  mortgage  for  the  larger  amount  is  not  sufficient  to 
charge  him  with  knowledge  of  the  true  amount.^  And  if  a  ma- 
terial part  of  the  description  be  omitted  from  the  record,  this  is 
not  constructive  notice.^  It  is  no  part  of  the  purchaser's  duty  to 
search  the  original  papers  to  find  out  whether  the  recorder  has 
correctly  spread  their  contents  upon  the  record.  The  obligation 
of  giving  notice  rests  upon  the  party  holding  the  title.  If  the 
recorder  occasions  a  loss  on  his  part  by  incorrectly  transcribing 
the  deed,  he  may  recover  damages  of  the  recorder  for  such  loss.^ 

551.  Third  persons  are  not  required  to  go  beyond  the  regis- 
try to  ascertain  whether  the  title  is  good.  If  there  is  any  error 
or  omission  in  the  registry  of  a  mortgage,  the  mortgagee  must 
suffer  for  it  rather  than  others  who  afterwards  consult  the  records 
and  find  no  incumbrance  by  mortgage  upon  the  estate.     He  may 

Y.  4C9  ;  Frost  v.  Beekman,  1  Johns.  (N.  Wood,  20  Ohio,  261,  where  a  mistake  was 

Y.)    Ch.   288;   .S'.  C,   18  .Johns.   (N.  Y.)  made  in  the  grantor's  name;  Stevens  v. 

.')44  ;  .Johns  v.  Scott,  5  Md.  81;  Ileister  Bachelder,  28  Me.  218;  Hill  u.  MeNichol, 

i;.  I'^ortner,   2    Binn.  (I'.a.)  40;  Bishop  v.  76  Me.  314. 

Schnei.ler,  46  Mo.  472.  =i  Gilchrist  i'.  Gou(;h,  CT  Ind.  .')7G  ;  5.  C. 

'  Thompson    v.    Mack,    Ilarr.    (Mich.)  19  Alb.  Ti.  J.  276. 

I. '50  ;  Weed  v.  I.yon,  lb.  363.  i  Disque  v.  VVri;jjlit,  49  lowii,  .MS  ;  S.  V. 

-  Frost  V.    Beekmiin,   supra;    I'eck   i;.  13  West.  Jur.  34,  15S. 

-Malliims,  10  N.  Y.  ."iOO  ;  Terrell  v.  Andrew  ^  Terrell  v.  Andrew  County,  supra. 
County,    44    Mo.  309.      Sec  Jenninf^s   v. 

441 


§§  552,  553.]      REGISTRATION   AS   AFFECTING  PRIORITY. 

in  some  cases  have  recourse  against  the  recorder  for  damages 
occasioned  by  his  errors  or  omissions  in  recording  ;  but  otherwise 
the  loss  so  occasioned  must  fall  upon  him.^ 

552.  But  ■when  by  statute  the  deed  is  made  operative  as  a 
record  from  the  time  it  is  filed  for  record,  it  follows  that  any 
error  in  transcribing  the  deed,  as,  for  instance,  in  the  date  of  the 
deed  or  of  the  acknowledgment,^  or  in  the  sum  secured  by  it, 
does  not  prejudice  the  mortgagee.^  The  mortgagee  is  then  re- 
garded as  having  discharged  his  entire  duty  when  he  has  deliv- 
ered his  mortgage,  properly  executed  and  acknowledged,  to  the 
recording  officer,  and  as  being  in  the  same  attitude  as  if  the  deed 
were  at  that  moment  correctly  spread  upon  the  record  book.  No 
subsequent  mistake  can  deprive  the  deed  of  its  operation  as  a  re- 
corded instrument.  The  omission  of  the  name  of  the  mortgagee 
from  the  record,  after  it  had  been  properly  entered  in  the  entry 
book,  does  not  defeat  the  mortgage  as  to  subsequent  purchasers.* 
A  mistake  of  the  officer  in  transcribing  the  mortgage,  by  which 
it  is  made  to  appear  to  be  a  security  for  a  smaller  amount  than 
is  actually  provided  for  by  it,  does  not  impair  the  mortgage  as  a 
security  for  the  amount  for  which  it  was  actually  given,  although 
subsequent  purchasers  and  creditors  relying  upon  the  record  have 
taken  the  incumbrance  to  be  only  the  amount  there  disclosed. 
The  lien  of  the  mortsase  begins  when  it  is  left  for  record  and 
entered  in  a  proper  entry  book,  required  to  be  kept  for  the  pur- 
pose of  showing  what  deeds  or  mortgages  are  left  for  record.  The 
mortgagee  is  under  no  obligation  to  supervise  the  work  of  the  re- 
corder, and  see  that  he  spreads  the  deed  upon  record,  or  that  he 
puts  it  upon  the  index. ^ 

553.  The  index  is  no  part  of  the  record,  and  a  mistake  in  it 
does  not  invalidate  the  notice  afforded  by  a  record  otherwise  prop- 

1  Taylor  v.  Hotchkiss,  2  La.  Ann.  917.  Merrick  v.  Wallace,  19  111.  486,  497  ;  Polk 

'  Wood's  Appeal,  82  Pa.  St.  116 ;  S.  C.  v.  Cosgrove,  4  Biss.  437  ;  Riggs  v.  Boy  Ian, 

16  Ajn.  Law  Reg.  255;  Brooke's  Appeal,  lb.  445. 

64  Pa.  St.  127 ;  Musser  v.  Hyde,  2  W.  &  So,  also,  in  Ohio,  where  the  statute  pro- 

S.  (Pa.)  314.  vides  that  a  deed  "shall  take  effect  and' 

3  Mims  V.  Mims,  35  Ala.  23  ;  Dubose  have  preference  from  the  time  the  same 

V.  Young,  10  Ala.  365  ;  Simonson  v.  Fali-  is  delivered  to  the  recorder."     Tousley  v. 

hee,  25  Hun  (N.Y.),  570  ;  Bedford  v.  Tup-  Tousley,  5  Ohio  St.  78. 

per,  30  Hun  (N.  Y.),  174.  So  in  Michigan  :  Sinclair  v.  Slawson, 

A  similar  view  was  taken  under  a  stat-  44  Mich.  123. 

uteof  Illinois,  providing  that  deeds  "  shall  •*  Sinclair  v.  Slawson,  supra. 

take  effect  and  be  in  force  from  and  after  ^  Wood's  Appeal,  supra;  Payne  v.  Pa- 

the  time  of  filing  the  same  for  record."  vey,  29  La.  Ann.  116. 

442 


ERRORS   IN   THE   RECORD. 


[§  553. 


erly  made.^  Although  the  mortgage  be  omitted  from  the  index, 
it  is  just  as  much  an  incumbrance  upon  the  land,  and  notice  of  it, 
from  the  time  it  was  left  for  record  or  transcribed,  affects  all  sub- 
sequent purchasers.^  The  general  policy  of  the  recording  acts  is 
to  make  the  filing  of  a  deed,  duly  executed  and  acknowledged, 
with  the  proper  recording  officer,  constructive  notice  from  that 
time  ;  and  although  it  be  provided  that  the  register  shall  make 
an  index  for  the  purpose  of  affording  a  correct  and  easy  reference 
to  the  books  of  record  in  his  office,  the  index  is  designed,  not  for 
the  protection  of  the  party  recording  his  conveyance,  but  for  the 
convenience  of  those  searching  the  records  ;  and  instead  of  being 
a  part  of  the  record,  it  only  shows  the  way  to  the  record.  It  is 
in  no  way  necessary  that  a  conveyance  shall  be  indexed,  as  well 
as  recorded,  in  order  to  make  it  a  valid  notice.^ 


1  Green  v.  Garrington,  16  Ohio  St.  548  ; 
Chatham  v.  Bradford,  50  Ga.  327 ;  Lin- 
coln Building  &  Saving  Asso.  v.  Hass,  10 
Neb.  581  ;  Gilchrist  v.  Gough,  63  Ind.  576  ; 
Barrett  v.  Prentiss,  57  Vt.  297.  Nichol  v. 
Henry,  89  Ind.  54  ;  Mutual  L.  Ins.  Co. 
V.  Dake,  87  N.  Y.  257. 

-  Curtis  V.  Lyman,  24  Vt.  338 ;  Board 
of  Commissioners  v.  Babcock,  5  Oreg. 
472 ;  Throckmorton  v.  Price,  28  Tex.  60.5. 

3  Mutual  Life  Ins.  Co.  v.  Dake,  1  Abb. 
(N.  Y.)  N.  C.  381.  Mr.  Justice  Smith, 
delivering  the  opinion  of  the  court,  said  : 
"It  is  not  a  little  surprising  to  find  that 
a  question  so  likely  to  come  up  frequently 
lias  not  arisen  in  any  reported  case  in 
this  state.  I  suppose  the  usual  practice  in 
searching  the  records  in  the  clerk's  ofiice 
is  to  consult  the  index,  and  to  rely  upon 
it.  That  is  obviously  the  most  convenient 
way  ;  and  if  the  index  is  full  and  accurate, 
it  saves  the  necessity  of  going  through  the 
records  themselves.  But  if  the  index  is 
imperfect  and  misleads  the  searcher,  as 
appears  to  have  been  the  case  here,  who 
is  to  suffer,  —  the  party  who  duly  tran- 
scribed his  mortgage  in  the  record  book, 
or  the  party  who,  relying  on  the  index, 
omitted  to  look  at  the  record  ?  The  ques- 
tion is  to  be  answered  by  determining 
whether  the  index  is  an  essentinl  part  of 
the  record,  —  tiiat  is  to  say,  whether  it  is 
necessary  to  the  complelencsH  and  efTi- 
cicncy  of  the  record  uh  a  notice  to  after 
purchasers."  After  examining  the  statutes 


and  reaching  the  conclusion  that  the  index 
is  no  part  of  the  record,  he  continues :  "  In 
reacliing  this  conclusion,  I  have  not  over- 
looked the  practical  inconveniences  that 
may  result  from  it  in  searching  records. 
But  the  duty  of  the  court  is  only  to  declare 
the  law  as  the  legislature  has  laid  it  down. 
Arguments  ab  inconvenienti  may  sometimes 
throw  light  upon  the  construction  of  am- 
biguous or  doubtful  words  ;  but  where, 
as,  here,  the  language  of  the  law  makes  it 
plain,  they  are  out  of  place.  Inconven- 
iences in  practice  will  result  whichever  way 
the  question  shall  be  decided.  The  power 
to  remedy  them  is  in  the  legislature,  and 
not  in  the  courts.  Even  as  the  law  now 
stands,  the  party  injured  by  the  omission 
of  the  clerk  is  not  without  remedy,  for  ho 
has  his  action  against  the  clerk."  See 
this  case  commented  upon  and  approved, 
4  Cent.  L.  J.  340. 

The  same  rule  was  ap])lied  under  anal- 
ogous statutes  in  New  York  relating  to 
the  filing  of  chattel  mortgages.  Dodge  v. 
Potter,  18  Barb.  (N.  Y.)  193  ;  Dikeman  v. 
Puckhafer,  1  Abb.  (N.  Y.)  Pr.  N.  S.  32. 
These  cases  hold  that  the  mortgagee,  by 
filing  and  depositing  his  mortgage  with 
the  clerk,  did  all  that  he  could  do,  and  all 
that  he  was  recjuired  to  do,  in  order  to 
perfect  his  claim,  and  that  the  omi.ssion  of 
the  mortgage  from  the  index,  being  with- 
out bis  fault  or  knowledge,  did  not  preju- 
dice him. 

443 


§§  554,  555.]      REGISTRATION   AS   AFFECTING   PRIORITY. 

When  a  grantee  has  delivered  his  deed  to  the  recorder,  notice 
of  its  contents  is  imparted  from  that  time,  if  it  is  correctly  spread 
upon  the  record.  He  has  done  all  the  law  requires  of  him  for 
his  protection.  The  purpose  of  the  index  is  only  to  point  to  the 
record,  but  constitutes  no  part  of  it.^ 

In  Pennsylvania,  however,  under  statutes  not  materially  dif- 
ferent from  those  in  New  York,  the  reasoning  of  Mr.  Chief  Jus- 
tice Woodward  in  a  late  case  was,  that  the  mortgage  not  duly 
indexed  was  not  constructive  notice  to  thii'd  persons  ;  that,  as  a 
guide  to  inquirers,  the  index  is  an  indispensable  part  of  the  re- 
cording ;  and  that  without  it  the  record  affects  no  party  with 
notice.^  In  this  case  the  purchaser  had  actual  notice  of  the  ex- 
istence of  the  mortgage,  and  therefore  could  not  complain  of  the 
want  of  record  ;  and  in  that  view  what  was  said  by  the  court  as 
to  the  sufficiency  of  the  record  was  not  material  to  the  result. 

554.  Damages  for  errors  in  the  index.  —  Under  this  rule 
one  who  in  good  faith  has  taken  a  subsequent  deed  or  mortgage 
of  the  property,  on  the  faith  of  finding  no  incumbrance  upon  the 
index,  might  probably  have  a  remedy  for  damages  against  the 
register,  whose  duty  it  was  under  the  law  to  make  the  index.^ 
In  Missouri  a  statute  provides  that  a  recorder  who  neglects  or 
refuses  to  keep  an  index  to  the  books  of  record  shall  pay  to  the 
party  aggrieved  double  the  damages  which  may  be  occasioned 
thereby  ;  but  the  court  has  suggested  that  before  a  purchaser  can 
recover  for  the  failure  of  the  recorder  to  index  a  prior  mortgage 
upon  the  property,  he  must  show  that  the  damage  arose  from  the 
recorder's  neglect,  and  not  from  other  causes;  as,  for  instance,  his 
own  reliance  upon  false  outside  representations  as  to  the  title 
without  an  examination  of  the  index,  or  from  his  mistaken  re- 
liance upon  the  covenants  of  the  grantor.^ 

555.  Error  in  descriptive  index.  —  A  recital  in  a  mortgage 
for  purchase  money,  that  the  premises  are  the  same  conveyed  to 
the  mortgagor  by  the  mortgagee  by  deed  of  even  date  is  gener- 
ally sufficient  notice  of  the  mortgage  when  recorded,  although 
by  mistake  the  lot  described  is  an  entirely  different  lot.  Yet  in 
Iowa,  where  the  laws  require  a  descriptive  index  to  be  kept,  this 
recital  is  held  to  be  an  insufficient  notice  of  the  conveyance  of  the 
lot  referred  to  in  the  recital,  inasmuch  as  the  lot  described  would 

1  Bishop  V.  Schneider,  46  Mo.  472.  3  Mut.  Life  Ins.  Co.  v.  Bake,  Abb.  (N. 

2  Speer  v.  Evans,  47  Pa.   St.  141.     See     Y.)  N.  C.  381,  per  Smith,  J. 
Schell  V.  Stein,  76  Pa.  St.  398.  *  Bishop  v.  Schneider,  stipra. 

444 


ERRORS   IN   THE   RECORD.  [§  556. 

appear  in  the  index,  and  not  the  lot  referred  to  in  the  recitah^ 
In  that  state  the  descriptive  index  is  an  important  part  of  the 
notice  afforded  by  the  record,  though  it  is  not  necessary  that  the 
descriptive  part  of  the  index  should  contain  more  than  a  reference 
to  the  record ;  and  where  a  description  by  plan  or  survey  is  im- 
practicable, a  reference  to  "  certain  lots  of  land,"  ^  or  "  see  rec- 
ord," ^  has  been  held  sufficient.  But  where  the  mortgage  covered 
two  lots  of  land,  but  the  description  of  one  of  them  only  was  en- 
tered in  the  descriptive  column  of  the  index,  it  was  held  that  the 
record  did  not  impart  constructive  notice  of  the  lot  not  described, 
and  that  the  consequences  of  the  recorder's  error  should  fall  upon 
the  mortgagee  rather  than  upon  subsequent  purchasers.*  The 
record,  though  complete  in  every  other  respect,  except  that  it  is 
not  properly  indexed,  does  not  operate  as  constructive  notice.^ 

Yet,  while  an  index  is  insufficient  if  it  would  mislead  an  in- 
quirer by  giving  a  totally  wrong  description,  a  mistake  in  the  in- 
dex reference  to  the  page  of  the  book  where  the  instrument  is 
recorded,  the  names  of  the  grantor  and  the  grantee  being  cor- 
rectly given,  does  not  prevent  its  operating  as  constructive  notice 
of  the  acts  which  would  be  disclosed  by  an  examination  of  the 
record.  The  record  book  and  the  index  book  are  not  considered 
detached  and  independent  books,  but  are  related  and  connected, 
and  a  party  is  affected  with  notice  of  the  contents  of  the  record, 
when  an  ordinarily  diligent  search  will  bring  him  to  a  knowledge 
of  such  contents.  To  a  competent  examiner  of  the  records,  find- 
ing the  name  of  one  entered  upon  the  index  as  having  made  a 
mortgage,  it  would  occur  that  it  was  much  more  likely  that  the 
recorder  should  make  an  error  in  entering  the  page  of  the  rec- 
ord than  that  he  should  mistake  the  name  of  the  mortgagor,  or 
should  enter  his  name  at  all  if  he  had  not  recorded  the  deed.^ 

556.  A  mortgage  defectively  recorded  an  equitable  lien.  — 
But  although  a  mortgage  be  defectively  recorded,  or  not  recorded 
at  all,  so  that  it  has  no  effect  as  against  subsequent  purchasers 
in  good  faith,  yet  it  is  a  good  equitable  lien,  and  is  superior  to  the 
claims  of  creditors  under  subsequent  judgments;  and  is  superior 
to  the  claims  of  general  creditors  who  were  such  at  the  date  of 

'  Scoles  V.  Wilsey,  II  Iowa,  2G1  ;  Whal-  ''  Owynii  v.  TiiriuT,  IS   lowji,  1  ;   Howe 

ley   V.   .Small,  25   Iowa,    184;    Calvin   t-.  c.  Thayer,  4'J  Iowa,  154. 

Howmaii,  10  Iowa,  52'J.  o  Bariicy  v.  Little,  15  Iowa,  527.     See 

^  IJostwick  V.  Powers,  12  Iowa,  45G.  commcntH  upon  this  and  other  Iowa  eases. 


"  White  V.  Hampton,  l.'l  Iowa,  259.  4  Cent.  L.  J.  387. 

*  Noyes  v.  Ilorr,  l.'j  Iowa,  570. 


445 


§  557.]  REGISTRATION    AS   AFFECTING   PRIORITY. 

the  mortgage ;  ^  and  is  superior  to  a  subsequent  voluntary  assign- 
ment by  the  mortgagor  for  the  benefit  of  creditors.^  In  like 
manner  a  mortgage  defectively  executed,  as,  for  instance,  attested 
by  only  one  witness  when  two  are  required,  is  a  good  equitable 
mortgage.^  According  to  the  authorities  in  some  states,  however, 
a  mortgage  defectively  recorded,  or  not  recorded  at  all,  gives  no 
priority  to  the  mortgagee  over  any  other  creditor.*  As  against 
third  parties  having  notice  of  such  mortgage,  it  is  also  a  good 
specific  lien  which  will  be  enforced  against  them  in  equity.^ 

Such  equitable  mortgages  have  been  held  to  be  superior  to  the 
claims  of  the  mortgagor's  general  creditors.  This  was  the  rule 
in  South  Carolina  before  the  Act  of  1843,  now  embodied  in  the 
Revised  Statutes  of  that  state.  A  legal  mortgage  not  recorded, 
or  an  equitable  mortgage  incapable  of  record,  was  preferred  to  a 
subsequent  creditor  without  notice.  The  consequence  of  impart- 
ing validity  to  unrecorded  mortgages  is  said  to  have  wrought 
much  injury  by  impairing  confidence  in  titles,  and  thereby  depre- 
ciating the  value  of  real  estate.  The  act  above  referred  to  placed 
subsequent  creditors  and  purchasers  upon  the  same  footing.^ 

VI.    The  Effect  of  a  Record  duly  7nade. 

557.  The  record  of  a  mortgage  is  constructive  notice  of  its 
contents  to  all  subsequent  purchasers  and  mortgagees."  As  to 
them  the  mortgage  takes  effect,  not  because  of  its  prior  execution, 
but  by  reason  of  its  prior  record.  The  mortgage  is  in  the  line  of 
their  title,  and  by  the  record  they  become  bound  by  it  as  much 

1  Lake  v.  Doud,  10  Ohio,  415;   Bank  is  not  a  single  modern  writer,  whose  opin- 

of  Muskingum  v.  Carpenter,  7  Ohio,  21;  ion  carries  weight,  who  does   not  regret 

otherwise,  however,  under  later  cases  in  that  the  courts  ever  favored  the  introduc- 

Ohio:  White  v.  Denman,  1  Ohio  St.  110;  tion  of  secret  liens." 

Bloom  V.  Noggle,  4  Ohio  St.  45;  Sixth         ^  Humphreys  v.  Newman,  51   Me.  40; 

Ward  Build.  Asso.  No.  5  v.  Willson,  41  Hall  v.  McDuff,   24  Me.  311;    Bolles  v. 

Md.  506;  and  see  Price  v.  McDonald,  1  Chauncey,  8  Conn.  389;  Peters  v.  Good- 

Md.  403;     Phillips   v.   Pearson,  27    Md.  rich,  3   Conn.   146;  Dennis  v.  Burritt,  6 

242;    Bibb  v.  Baker,  17  B.  Mon.   (Ky.)  Cal.  670 ;  McCabe  v.  Grey,  20  Cal.  509; 

292.  Clabaugh   v.  Byerly,   7  Gill  (Md.),  354; 

-  Nice's  Appeal,  .54  Pa.  St.  200.  Souder  v.  Morrow,  33  Pa.  St.  83;  Johnson 

3  Abbott  V.  Godfrey,  1  Mich.  178.  v.   Stagg,  2  Johns.  (N.  Y.)  510;  Parkist 

*  Henderson     v.     McGhee,     6     Heisk.  v.  Alexander,   1  Johns.   (N.  Y.)  Ch.  394 ; 

(Tenn.)  55.  Buchanan  v.  International  Bank,  78  111. 

s  Racouillat  v.  Sansevain,  32  Cal.  376;  500;   Barbour   v.   Nichols,   3   R.  I.    187; 

Russum  V.  Wanser,  53  Md.  92 ;  Dyson  v.  Doyle  ;;.  Stevens,  4  Mich.  87 ;  Ogden  v. 

Simmons,  48  Md.  207.  Walters,  12  Kans.  282;  Banton  v.  Shorey, 

«  Boyce  v.  Shiver,  3  S.  C.  515.    "  There  77  Me.  48. 

446 


EFFECT    OF   A   RECORD   DULY   MADE.  [§  557. 

as  the  mortgagor  himself.^  It  is  notice  only  to  subsequent  pur- 
chasers and  incumbrancers,  and  not  to  those  who  have  prior  rights, 
or  even  to  those  whose  rights  are  contemporaneous  with  those  of 
the  mortgagor,  as,  for  instance,  to  his  co-tenants  ;  therefore  a 
mortgage  by  one  tenant  in  common,  though  duly  recorded,  is 
no  notice  to  his  co-tenant  of  its  existence,  or  of  the  claim  of  the 
mortgagor  to  the  exclusive  ownership  of  the  land.^ 

When  a  mortgage  is  recorded  prior  to  another  conveyance  from 
the  mortgagor,  it  does  not  matter  that  this  conveyance  was  made 
in  pursuance  of  a  contract  entered  into  after  the  execution  of  the 
mortgage,  and  before  the  record  of  it,  if  nothing  had  been  done 
towards  carrying  the  contract  into  execution  at  the  time  of  the 
filing  of  the  mortgage  for  record.^  From  that  time  it  is  construc- 
tive notice  to  all  who  may  afterwards  acquire  any  interest  in  the 
same  property. 

A  mortgage  duly  recorded  is  notice  not  only  of  the  existence  of 
the  mortgage,  but  of  all  its  contents.*  It  is  notice,  too,  of  the 
covenants  contained  in  it.^  It  is  notice  that  trustees  in  a  trust 
deed  should  have  an  estate  in  fee  simple  in  order  to  execute  its 
provisions ;  and  therefore  that  an  estate  in  fee  passes  although 
words  of  inheritance  have  been  inadvertently  omitted.^  Although 
the  debt  be  not  fully  described,  the  record  is  notice  of  all  that  is 
said  about  it,  and  a  purchaser  is  bound  by  the  statements  made, 
and  by  the  information  he  is  put  upon  the  inquiry  to  find  out.'^ 
It  is  notice  of  the  statements  in  it  regarding  the  debt,  whether 
the  description  be  fully  set  out,  or  consists  of  references  to  other 
instruments.^  It  is  notice  not  only  to  purchasers,  but  to  subse- 
quent creditors  as  well.  They  cannot  complain  that  the  transac- 
tion is  fraudulent,  unless  they  can  show  that  the  object  of  the 
.conveyance  was  to  avoid  subsequent  indebtedness.^ 

The  record  of  a  mortgage  containing  a  power  of  sale  puts  sub- 
sequent purchasers  upon  inquiry  whether  any  proceedings  have 
Ijeen  had  thereunder ;  so  that  if  there  has  been  a  sale  under  the 

1  Tripe  V.  Marcy,  39  N.  II.  43'J  ;  Gran-  '''  Morris  i'.  Wadswoitli,  17   Wend.  (N. 

din  I'.  Anderson,   15  (Mo  St.  28G ;  and  Y.)  103. 

!-ee  Leiby  v.  Wolf,  10  Ohio,  83;  North  v.  ''  Randolph  i'.  N.  J.  West  Line   K.  K. 

Kuowltoii  (Minn.),  23  Fed.  Uep.  163.  Co.  28  N.  .1.  Eq.  49. 

-  Leach  v.  Beattie,  33  Vt.  195.  "^  Youngs  i'.  Wilson,  27  N.  Y.  351,  re- 

3  Kyle  V.  Thompson,  1 1  Ohio  St.  616.  versing  24  Barb.  (N.  Y.)  510. 

*  Thomson  >:  Wilcox,  7  Lans.  (N.  Y.)  «  Dimon  v.  Dunn,  15  N.  Y.  498. 

.■J7C.  '■'  Hickman  v.  Peniii,  6  Coldw.  (Tcnn.) 

135. 

447 


§  558.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

power,  although  the  deed  has  not  been  recorded,  a  subsequent 
purchaser  from  the  mortgagor,  instead  of  acquiring  an  equity  of 
redemption,  may  find  that  this  has  been  cut  off  by  sale  under  the 
power.i  The  deed  executing  the  power  of  sale  relates  back  to 
the  execution  of  the  mortgage  ;  and  when  the  mortgage  is  re- 
corded, it  is  not  necessary  to  record  the  deed  under  the  power 
in  order  to  protect  the  grantee  against  attaching  creditors  of  the 
mortgagor. 2 

558.  Priority  once  gained  cannot  be  lost.  The  registry  of 
a  mortgage  is  equivalent  to  a  notice  of  it  to  all  persons  who  may 
subsequently  become  interested  in  the  property,  and  fully  protects 
the  mortgagee's  rights.  A  mortgage  having  once  obtained  pri- 
ority by  record  does  not  lose  its  place  by  being  held  by  any  one 
under  an  unrecorded  assignment.^  And  although  the  mortgagee 
had  notice  of  a  prior  unrecorded  mortgage,  or  thei-e  are  equities 
such  that  his  own  mortgage  is  in  his  hands  subject  to  them,  yet 
if  he  assigns  his  mortgage  for  a  valuable  consideration  to  one 
who  has  no  notice  of  the  earlier  mortgage  or  of  such  equities,  the 
assignee  is  entitled  to  hold  the  mortgage  as  a  prior  lien  upon  the 
land,  solely  upon  the  ground  that  it  was  first  recorded.* 

Having  recorded  his  mortgage,  the  mortgagee  is  not  bound  to 
give  personal  notice  of  his  mortgage  to  one  who  purchases  of  the 
mortgagor;  and  a  delay  for  ten  years,  or  for  any  other  period 
less  than  the  statute  period  of  limitation,  to  make  any  claim  of 
the  purchaser  under  the  mortgage,  does  not  impair  his  rights 
under  the  mortgage  either  at  law  or  in  equity ;  and  the  fact  that 
the  mortgagor  has  in  the  mean  time  become  insolvent  does  not 
prejudice  his  claim  upon  the  property.^ 

A  mortgage  being  duly  recorded,  the  subsequent  dealings  of 
the  mortgagor  and  others  claiming  under  him  have  no  effect  what^ 
ever  upon  it.  If,  for  instance,  the  mortgagor  subsequently  sells 
the  land  and  reserves  a  right  of  way,  this  right  remains  subject  to 
the  title  of  the  mortgagee,  and  a  sale  under  a  mortgage  destroys 
this,  as  well  as  the  title  to  the  remainder  of  the  land.^ 

1  Heaton  v.  Prather,  84  111.  330.  Peele,  Clarke  (N.  Y.),  .563  ;    Johnson  v. 

-  Farrar  v.  Payne,  73  111.  82.  Stagg,  2  Johns.  (N.  Y.)  510. 

s  Biinckerhoff  v.  Lansing,  4  Johns.  (N.  *  Corning  v.  Murray,  3  Barb.  {N.  Y.) 

Y.)  Ch.  65;  Jackson  v.  Dubois,  4  Johns.  652. 

(N.   Y.)   216;    Parkist   v.    Alexander,    I  &  Dick   v.   Balch,   8   Pet.   30;    Bice  v. 

Johns.    (N.    Y.)   Ch.   394 ;     Campbell  v.  Dewey,  54  Barb.  (N.  Y.)  455 ;   Mason  v. 

Vedder,  3  Keyes  (N.  Y.),  174;  S.    C.  1  Philbrook,  69  Me.  57. 

Abb.   Dec.   295 ;    and    see    Douglass    v.  6  King  v.  McCulIy,  38  Pa.  St.  76. 
448 


EFFECT   OF   A   RECORD  DULY  MADE.  [§  559. 

In  accordance  with  these  principles,  it  follows  that  a  junior 
mortgage  duly  recorded,  without  notice  of  a  prior  uni-ecorded 
mortgage,  has  precedence  of  it ;  ^  in  other  words,  the  mortgages 
take  precedence  in  the  order  of  the  record.  This  precedence  fol- 
lows them  through  any  subsequent  transfers,  or  through  any  pro- 
ceedings to  enforce  the  liens.  When  the  mortgage  first  recorded 
is  foreclosed,  a  purchaser  at  the  foreclosure  sale  obtains  a  com- 
plete and  absolute  title.  But  a  purchaser  at  a  foreclosure  sale, 
under  the  mortgage  recorded  next  in  order  of  time,  obtains  only 
an  equity  of  redemption  of  the  prior  mortgage.^ 

559.  The  destruction  of  the  record  of  a  deed  in  no  manner 
affects  the  constructive  notice  afforded  by  its  having  been  re- 
corded.-^ If  the  mortgage  itself  has  been  preserved,  the  record- 
er's certificate  of  its  having  been  duly  recorded  is  of  the  highest 
class  of  evidence.^  So,  also,  the  index  book  in  which  the  deed  is 
described,  and  its  record  certified  in  the  proper  book,  are  good 
evidence  of  the  fact  that  the  deed  was  recorded.^  Other  evidence 
may  show  that  the  deed  was  filed  for  record ;  and  when  this  is 
the  case,  the  testimony  of  an  attorney  of  a  purchaser,  that  he  ex- 
amined an  abstract  of  the  title  to  the  property,  which  purported 
to  be  a  full  and  complete  abstract,  and  did  not  find  a  prior  deed 
of  trust  upon  the  premises,  is  not  sufficient  to  show  that  there 
was  no  record  of  it,  as  it  does  not  follow  that  the  abstract  was 
what  it  purported  to  be.** 

Where  the  registry  office  and  its  records  have  been  destroyed 
by  fire,  evidence  of  the  execution  of  a  mortgage  and  of  its  loss, 
with  slight  circumstances  in  regard  to  the  recording  of  it,  have 
been  held  enough  to  sustain  a  presumption  that  it  was  recorded, 
as  against  a  prior  mortgagee  who  claims  prioi'ity  on  the  ground 
that  such  mortgage  was  never  recorded.'^ 

1  Taylor  v.   Thomas,  5  N.   J.   Eq.  (1  28;    Gilbert  v.  Averill,  15  Barb.  (N.  Y.) 

Ilalst.)  331;  Grant   v.  Bissett,   1   Caincs  20;  Buchanan  v.  Intertiational  Bank,  78 

(N.  Y.)  Cas.   112;    Pomet  v.  Scrauton,  1  111.  500. 

Walk.  (Miss.)  40G;  Harrington  v.  Allen,  '•'  Steele  v.  Boone,  75  111.  457;    Gam- 

48  Miss.  492;  Routh  v.  Spencer,  38  Ind.  nion  v.  Hodges,  73   111.    140;    Ilcaton  v. 

.393;  I'eychand  v.  Citizens'  Bank,  21   La.  I'rathcr,  84  111.  330;  Curyea  i-.  Berry,  84 

Ann.  2fi2;  Harang  v.  Plattsinier,  lb.  420;  III.  600;  Anncntrout  v.  Gibbons, .30  Gratt. 

Burns  v.   Berry,  42  Mich.   176;    Cook  v.  (Va.)  032. 

Stone,  03  Iowa,  352  ;  Ramsey  r.  Jones,  41  *  Alvis  v.  Morrison,  03  111.  181. 

Ohio  St.  685.  6  Alvis  v.  Morrison,  sujira. 

-  Tice  V.  Annin,  2  Johns.   (X.  Y.)  Ch.  o  Steele  v.  Boone,  su/ira. 

125;    Mathews   v.    Aikin,    1    X.    Y.   595;  ^  Alston  f.  Alston,  4  S.  C.  110. 
Vanderkeinjj  v.  Shelton,  11  I'uige  (N.  Y.), 

vol..  I.              2!)  449 


§  560.]  REGISTRATION    AS   AFFECTING  PRIORITY. 

A  mortgagee,  in  order  to  protect  his  rights  under  his  mortgage, 
need  not,  unless  he  choose,  incur  the  trouble  and  expense  of  re- 
storing the  record  under  an  act  providing  for  the  restoration  of 
burnt  records.  He  may  foreclose  his  mortgage,  although  in  the 
mean  time  the  mortgagor  has  sold  and  conveyed  the  mortgaged 
premises  to  one  who  had  no  knowledge  of  the  existence  of  the 
mortgage,  and  who  took  possession  and  retained  it  several  years 
with  the  knowledge  of  the  mortgagee,  who  did  not  file  his  bill  to 
foreclose  his  mortgage  for  six  years  afterwards.^  A  restoration 
of  the  record  may  be  had,  if  desired,  upon  proof  of  proceedings 
for  foreclosure  of  a  mortgage,  in  a  court  of  general  jurisdiction,  a 
decree  of  sale,  a  sale  under  it,  and  its  approval  by  the  court,  and 
the  delivery  of  a  certificate  of  purchase  ;  and  the  court  will  there- 
upon order  the  execution  of  a  deed  to  the  purchaser,  and  a  sur- 
render of  possession  to  him.^ 

560.  Any  one  purchasing  land  in  good  faith,  without  notice 
of  an  unrecorded  mortgage,  takes  it  discharged  of  the  lien ;  ^ 
and  he  can  convey  a  good  title  to  it,  although  the  mortgage  is 
recorded  before  he  conveys  and  his  vendee  has  notice  of  it.*  Hav- 
ing no  actual  notice  of  the  mortgage,  the  purchaser  is  not  bound 
to  look  beyond  the  line  of  title  in  his  grantor ;  and  finding  that 
he  acquired  a  good  title  he  is  not  bound  to  look  further ;  he  ac- 
quires all  the  right  and  title  that  his  grantor  acquired.  His 
grantor  being  entitled  to  protection  against  a  prior  unrecorded 
mortgage,  he  is  entitled  to  the  same  protection,  notwithstanding 
the  notice  he  himself  had  of  such  mortgage,  and  although  he  is 
not  a  purchaser  for  a  valuable  consideration.^ 

Not  only  is  a  purchaser  without  notice  of  a  prior  unrecorded 
mortgage,  or  of  other  equitable  claim  to  the  property,  entitled  to 
protection,  even  though  he  takes  the  title  from  one  who  had  ac- 

1  Shannon  v.  Hall,  72  111.  354;  Hall  v.  89  N.  Y.  641  ;  Neslin  v.  Wells,  104  U.  S. 
Shannon,  85  111.  473.  428. 

2  Curyea  v.  Berry,  84  111.  600.  See,  as  *  Jackson  v.  McChesnej-,  7  Cow.  (N.  Y.) 
to  effect  of  decree  reestablishing  a  record  360;  Jackson  i'.  Van  Valkenburgh,  8  Cow. 
under  a  statute,  Hunt  r.  Innis,  2  Woods,  (N.  Y.)  260 ;  Bush  v.  Lathrop,  22  N.  Y. 
103.  535,  549;  Jackson  v.  Given,  8  Johns.  (N. 

3  Huebsch  v.  Scheel,  81  111.  281;  Hoi-  Y.)  137;  Cook  v.  Travis,  20  X.  Y.  400; 
brook  V.  Dickenson,  56  111.497;  Hodgen  Tarbell  v.  West,  86  N.  Y.  280;  Losey  r. 
V.  Guttery,  58  HI.  431 ;  Ohio  Life  Ins.  &  Simpson,  11  N.  J.  Eq.  246. 

Trust  Co.  V.  Ledyard,  8  Ala.  866  ;  Burke  5  Wood  v.  Chapiu,  13  N.  Y.  509 ;  Web- 

V.  Allen,  3   Yeates  (Pa.),  351 ;  Burns  v.  ster  v.  Van  Steenbergh,  46  Barb.  (N.  Y.) 

Berry,  42  Mich.  176;  Riley  v.  Hoyt,  29  211 ;  Crane  v.  Turner,  7  Hun  (N.  Y.),  357  ; 

Hun  (N.  Y.),  114;  Westbrook  v.  Gleason,  Clark  v.  Mackin,  30  Hun  (N.  Y.),  411. 
450 


EFFECT    OF   A    RECORD   DULY   MADE.       [§§  561,  562. 

tnal  notice  of  such  claim,  but  also  a  purchaser  with  notice  from 
one  who  was  entitled  to  protection  as  a  bond  fide  purchaser  with- 
out notice  is  himself  entitled  to  protection  against  the  previous 
equitable  claim  upon  the  estate ;  for  otherwise  a  bond  fide  pur- 
chaser might  be  deprived  of  the  power  of  selling  his  property  for 
its  full  value.  This  protection  extends  to  all  persons  claiming 
through  the  mortgage,  whether  they  had  notice  at  the  time  of 
the  purchase  or  not.^ 

561.  If  one  having  no  title  to  land  conveys  it  in  mortgage 
with  covenants  of  warranty,  and  this  is  duly  recorded,  and 
afterwards  the  mortgagor  acquires  title  to  the  land,  the  estoppel 
by  which  he  is  bound  under  the  covenants  is  turned  iuto  a  good 
estate  in  interest  in  the  mortgagee,  so  that  by  operation  of  law 
the  title  is  considered  as  vested  in  him  in  the  same  manner  as  if 
it  had  been  conveyed  to  the  mortgagor  before  he  executed  the 
mortgage.  The  mortgagor  is  estopped  to  say  he  was  not  then 
seised.  Then,  if  the  mortgagor  executes  another  mortgage,  and 
this  and  the  deed  by  which  the  mortgagor  acquired  his  title  are 
both  recorded  together,  which  mortgagee  has  the  better  title  ? 
The  estoppel  binds  not  only  the  mortgagor  and  his  heirs,  but  his 
assigns  as  well.  A  second  mortgagee  is  therefore  estopped  to 
aver  that  the  grantor  was  not  seised  at  the  time  of  his  making 
the  first  mortgage,  and  that  mortgage  being  first  recorded  must 
have  priority.^ 

But  if  a  mortgagor  has  title  af  the  time  of  executing  two  mort- 
gages, the  fact  that  one  contains  covenants  of  warranty  does  not 
give  it  priority  over  the  other  which  contains  no  such  covenants, 
if  the  latter  be  first  filed  for  record.^ 

562.  After  the  mortgage  is  made  and  recorded,  the  record 
of  any  deeds  subsequently  made  by  the  mortgagor  is  not 
notice  to  the  mortgagee  ;  *  and  if  he  has  no  actual  knowledge 

1  Varick  v.  Briggs,  6  Paige  (N.  Y.),  Pike  r.  Galvin,  29  Me.  183.  Ohio:  Pliilly 
323;  Cook  v.  Travis,  22  Barb.  (N.  Y.)  v.  Sanders,  11  Ohio  St.  490.  Vermont: 
338  ;  .S'.  C.  20  N.  Y.  400.  Jarvis  v.  Aikens,  2.5  Vt.  635.     See,  how- 

2  §§  472,  679,  682,  825,  1483,  1656,  ever,  While  &  Tudor's  Lead.  Cases  in 
1671.     Massachusetts:    Wliite  v.  Patten,  Eq.  4th  Am.  cd.  vol.  2,  pt.  1,  p.  212. 

24  Pick.  .'324  ;  Somes  v.  Skinner,  3  Pick.         ^  Vandcrcook  v.  Baker,  48  Iowa,  199. 
:>2.     New  York :  Tefft  v.  Muiison,  57  N.         *  §  723.     Arkansas  :    Biruie    v.   Main, 

Y.  97;    Farmers'   Loan  &   Trust   Co.  v.  29  Ark.  591.     Massachusetts:  George  v. 

Maithy,  8  Paige,  301;  Doyle  v.  Peerless  Wood,  9  Allen,  80.     Michigan:  James  i'. 

Petroleum  Co.  44  Barb.  239.     New  Hamp-  Brown,  11   Mich.  25;  Cooper  i>.  Bigly,  13 

shire:  Wark  v.  Willard,   13   N.  IL  389;  Mich.  403.     Illinois:    Doolittlo  v.  Cook, 

KimbalU.  Blai!>dcll,  5  N.  II.  533.    Maine:  75    111.354;    llcaton   v.  Prathcr,  84    111. 

451 


§  562.]  REGISTRATION   AS   AFFECTING   PRIORITY. 

of  any  such  subsequent  deed,  he  may,  without  receiving  anything 
upon  the  mortgage  debt,  release  any  portion  of  the  mortgaged 
property  to  the  mortgagor  without  impairing  his  security  upon 
the  remainder  for  the  whole  mortgage  debt ;  although,  if  he  had 
notice  of  a  sale  of  any  part  of  the  remaining  land,  he  might  be 
obliged  to  abate  a  proportionate  part  of  the  mortgage  debt  in 
order  to  protect  the  purchaser.  The  equity  which  entitles  a  sub- 
sequent mortgage  incumbrancer  to  the  benefit  of  such  a  release 
arises  only  when  the  first  mortgagee  gives  it  with  knowledge  at 
the  time  of  the  existence  of  the  subsequent  incumbrance.  If  the 
subsequent  incumbrance  be  a  mechanic's  lien,  the  mere  fact  that 
the  building  was  commenced  after  the  mortgage  was  given,  and 
that  the  mortgagee  knew  this,  is  not  sufficient  to  charge  him  with 
knowledge  of  the  lien.^ 

Whatever  may  be  the  equities  of  the  subsequent  mortgagee,  a 
prior  mortgagee  is  not  bound  by  them  unless  he  has  actual  no- 
tice, or  such  notice  as  should  put  him  upon  inquiry .^  There  can 
be  no  retrospective  effect  to  the  record.  A  mortgagee,  having 
recorded  his  deed,  secures  the  protection  of  the  registry  laws, 
and  he  is  not  required  to  search  the  record  from  time  to  time  to 
see  whether  other  conveyances  have  been  put  upon  the  record. 
While  the  law  requires  every  man  to  deal  with  his  own  so  as  not 
to  injure  another,  it  imposes  a  greater  obligation  on  the  second 
mortgagee  to  take  care  of  his  own  interests  than  upon  the  first 
mortgagee  to  take  care  of  them  lor  him.  To  make  it  the  duty 
of  the  first  mortgagee  to  inquire  before  he  acts,  lest  he  may  in- 
jure some  one,  would  be  to  reverse  this  rule,  and  make  it  his 
duty  to  do  for  the  second  mortgagee  what  the  latter  should  do  for 
himself.'^ 

In  like  manner,  the  recording  of  a  mortgage  affords  no  notice 
whatever  to  a  prior  purchaser  of  the  land,  who  is  in  possession 

330;  Iglehart  V.  Crane,  42  111.  261.     Ken-  51.    New  Jersey :    Hill  v.  McCarter,  27 

tucky  :  Halstead  r.  Bank   of  Ky.  4  J.  J.  N.  J.  Eq.  41 ;  Blair  v.  Ward,  10  N.  J.  Eq. 

Marsh.    555,    558.      New  York:    King  y.  119,  126;  Van  Orden  r.  Johnson,  14  N.J. 

McVickar,  3  Sandf.  Ch.  192;  Westbrook  Eq.  376;  Hoy  v.  Bramhall,  19  N.  J.  Eq. 

V.   Gleason,    14    Hun,    245;   Truscott   v.  563.     Ohio:  Leiby  v.  Wolf,  10  Ohio,  83. 

King,  6  Barb.  346 ;  Stuyvesant  v.  Hall,  2  'Wisconsin :  Straight   v.    Harris,  14  Wis. 

Barb.  Ch.  151 ;  Raynor  v.  Wilson,  6  Hill,  509.     South  Carolina:  Lake  v.  Shumate, 

469  ;  Howard  Ins.  Co.  v.  Halsey,  8  N.  Y.  20  S.  C.  23. 

271  ;  Wheelwright  v.  De  Peyster,  4  Edw.  i  Ward  v.  Hague,  25  N.  J.  Eq.  397. 

232 ;  Talmadge   v.  Wilgers,  lb.  239,   d.  ;  2  Duester  v.  McCamus,  14  Wis.  307  ; 

Stuyvesant   v.   Hone,   1    Sandf.  Ch.  419.  Straight  v.  Harris,  supi-a. 

Pennsylvania:  Taylor  v.  Maris,  5  Rawle,  3  James  v.  Brown,  11  Mich.  25  ;  Bimie 

452  V.  Main,  29  Ark.  591.     See  §  372. 


EFFECT   OF   A   RECORD   DULY    MADE.         [§§  563-565. 

under  a  bond  for  a  deed,  so  that  the  mortgagee  had  constructive 
notice  of  his  rights,  and  without  actual  notice  he  may  lawfully 
complete  his  payments  to  his  vendoi',  without  becoming  liable  to 
such  mortgagee.^ 

563.  The  extent  of  the  lien.  —  The  record  of  the  mortg-acre 
is  notice  of  an  incumbrance  for  the  amount  specified  in  it,  or  so 
referred  to  as  to  put  subsequent  purchasers  upon  inquiry  as  to 
the  extent  of  the  lien.^  It  is  not  notice  of  any  claim  which  is 
not  so  specified  or  referred  to.^  Subsequent  purchasers  are  bound 
by  nothing  more  than  is  disclosed  by  record,  unless  express  no- 
tice is  proved.  As  against  them,  if  the  mortgage  debt  is  not 
payable  with  interest,  they  cannot  be  prejudiced  by  any  change 
of  interest ;  although  in  case  there  be  other  security  for  tlie  debt, 
they  cannot  object  to  the  application  of  that  to  the  payment  of 
interest  in  the  first  place."*  But  actual  notice  of  the  amount  se- 
cured by  a  mortgage  is  binding  upon  a  subsequent  purchaser, 
although  there  be  a  mistake  in  the  record.^ 

564.  Extension  of  mortgage.  —  An  agreement  for  further 
time,  and  a  higher  rate  of  interest,  is  not  binding  upon  the  prop- 
erty, or  upon  subsequent  purchasers,  unless  duly  executed  and 
recorded.  It  is  merely  a  personal  obligation  between  the  parties, 
and  the  increased  indebtedness  cannot  operate  as  a  lien  upon  the 
land.^  An  agreement  for  extension  duly  i-ecorded,  but  which 
does  not  identify  the  mortgage  by  any  suSicient  reference,  has  no 
greater  effect  by  reason  of  the  record.'' 

bG5.  Rate  of  interest.  —  The  mortgage  is  a  lien  only  for  the 
rate  of  interest  specified  in  it,  or  for  the  rate  established  by  law, 
when  it  is  simply  made  payable  with  interest.^  If  the  parties 
to  the  mortgage  subsequently  agree  upon  an  advanced  rate,  this 
agreement  is  not  binding  upon  subsequent  purchasers,  unless  it  is 
executed  with  the  formalities  which  entitle  it  to  be  recorded,  and 
is  in  fact  duly  recorded  before  others  acquire  any  interest  in  the 
property. 

In  like  manner,  where  a  mortgage  was  given  without  interest, 
but  with  a  verbal  agreement  that  the  mortgagee  should  receive 

J  Doolittle  V.  Cook,  75  111.  354.  «  See  §  361 ;  Davis  v.  .Jewctt,  3  Greene 

2  YounKB  V.  Wilson,  27  N.  Y.  351  ;  (Iowa),  226 ;  Gardner  r.  Emerson,  40  111. 
Dean  I'.  I^e  I^zardi,  24  Miss.  424.  296. 

3  Hinehman  v.  Town,  10  Mich.  508.  ''  Bassett  v.  Hathaway,  9  Mich.  28. 

*  Lash  V.  Eflgerton,  13  Minn.  210.  8  gee   §  361  ;    Wliittacre   v.   Fuller,   5 

^  Frost  V.  Beekman,  1  Johns.  (N.  Y.)     Minn.  508. 


Ch.  288. 


453 


§  566.]  REGISTRATION  AS   AFFECTING   PRIORITY. 

certain  rents  in  lieu  of  interest,  he  cannot,  as  against  a  subsequent 
mortgagee  who  had  no  notice  of  this  agreement,  enlarge  his  de- 
mand beyond  what  appeared  of  record,  and  claim  a  lien  upon  the 
property  for  the  payment  of  interest  as  well  as  principal. ^ 

After  the  making  of  a  mortgage,  the  parties  to  it  cannot  make 
an  agreement  for  the  payment  of  a  higher  rate  of  interest  than 
that  stipulated  for  in  the  mortgage,  that  will  be  a  lien  upon  the 
premises  as  against  a  purchaser  of  the  property  before  such  agree- 
ment was  made,  or  after  it  was  made  but  without  notice  of  it.^ 

But  in  case  of  a  mortgage  for  the  purchase  money,  the  wife 
having  no  right  of  dower  except  in  the  surplus  above  the  mort- 
gage, an  agreement  to  pay  a  higher  rate  of  interest  in  considera- 
tion of  an  extension  of  time  may  be  enforced  against  the  property, 
so  far  as  the  wife's  dower  is  concerned.'^ 

566.  The  recording  acts  have  no  application  to  mortgages 
executed  and  recorded  simultaneously.^  Neither  have  they 
any  application  to  mortgages  executed  at  the  same  time  and  held 
by  the  same  person,  for  he  has,  of  necessity,  notice  of  both  mort- 
gages.^ The  record  of  one  before  the  other  is  in  such  case  with- 
out effect.  Such  mortgages  are  concurrent  liens,  whether  in  the 
hands  of  the  mortgagee  or  in  the  hands  of  assignees.  Nor  have 
they  any  application  when  the  mortgages  expressly  declare  that 
neither  is  to  have  precedence  of  the  other,  but  are  to  be  alike 
security  for  the  several  debts.^  Nor  have  they  any  application 
as  between  two  mortgages  given  for  purchase  money  at  the  same 
time ;  and  when  this  fact  appears  upon  the  face  of  the  deeds,  the 
prior  record  of  one  gives  it  no  priority  over  the  other."  The 
rights  of  the  parties  in  such  cases  may  sometimes  be  controlled 
by  other  considerations  ;  and  if  there  be  any  priority  of  one  over 
the  other,  that  priority  is  determined  by  considerations  of  equity. 
Equitable  rights  and  agreements  as  to  priority  are  recognized  and 
enforced  only  in  courts  of  equity.^ 

When  two  mortgages  executed  at  different  dates  are  recorded 
on  the  same  day,  and  there  is  nothing  to  show  which  was  in  fact 

1  St.  Andrew's  Church  v.  Tompkins,  7  ^  Gausen  v.  Tomliiison,  23   N.   J.  Eq. 

Johns.  (N.  Y.)  Ch.  14.  405  ;    Vredenburgh  v.    Burnet,  31  N.  J. 

'^  Bassettv.  McDonel,  13  Wis.  444.  Eq.  229. 

3  Thompson  v.  Lyman,  28  Wis.  266.  6  Howard  v.  Chase,  104  Mass.  249. 

*  Stafford  v.   Van  Rensselaer,  9    Cow.  "^  Greene  v.  Deal,  N.  Y.  W.  Dig.,  re- 

(N.  Y.)   316,  aff'g  S.  C.  Hopk.  (N.   Y.)  versing  S.  C.  4  Hun  (N.  Y.),  703. 

569 ;   Douglass  v.  Peele,  Clarke  (N.  Y.),  »  Jones  v.  Phelps,  2  Barb.  (N.  Y.)  Ch 

563.  440. 
454 


EFFECT   OF  A   RECORD   DULY   MADE.  [§  566. 

first  recorded,  the  presumption  of  law  is  that  the  recording  of 
them  was  concurrent,  and  each  party  stands  charged  with  notice 
of  the  equities  of  the  other  on  that  day,  at  the  same  moment.  In 
such  case  the  mortgage  which  is  prior  in  execution  is  regarded 
as  having  the  superior  equity.^ 

The  chief  effect  of  recording  an  assignment  of  a  mortgage  is 
to  protect  the  assignee  from  a  subsequent  sale  of  the  mortgage.^ 
The  assignment  when  not  recorded  is  void  as  against  a  subsequent 
purchaser  of  the  mortgage.  Therefore,  when  two  simultaneous 
mortgages  of  the  same  land  are  made  under  an  agreement  that 
they  shall  be  equal  liens,  the  prior  record  of  one  gives  it  no  pref- 
erence over  the  other.  Such  a  mortgage  is  not  within  the  terms 
of  a  statute  declaring  an  unrecorded  conveyance  void  against  a 
subsequent  conveyance ^rsi  recorded.  A  simultaneous  conveyance 
is  not  a  subsequent  conveyance.  An  assignment  is  a  conveyance 
of  a  mortgage,  and  if  it  be  not  recorded  it  is  void  against  a 
subsequent  purchaser  of  the  mortgage.^  There  is  a  further  use 
in  recording  an  assignment  in  the  indirect  protection  that  the 
record  affords  the  holder  of  the  mortgage  as  against  innocent 
subsequent  purchasers  of  the  mortgaged  land ;  for  there  may  be 
grounds  for  the  purchaser's  believing  that  the  mortgage  had  been 
paid,  and,  the  assignment  not  being  recorded,  the  purchaser  would 
be  prevented  from  making  inquiries  of  the  real  owner  of  the  mort- 
gage.4 

If  an  assignee  of  one  of  two  simultaneous  mortgages  be  re- 
garded as  a  subsequent  purchaser  of  some  interest  in  the  real 
estate,  then  he  is  affected  by  the  record  of  the  other  mortgage,  as 
well  as  that  of  which  he  has  taken  an  assignment ;  and  if  either 
or  both  contain  a  recital  showing  that  they  are  simultaneous,  or 
that  both  were  given  for  the  purchase  money  of  the  same  land, 
then  the  prior  record  of  one  can  give  it  no  preference  over  the 
other.'^ 

If  one  of  two  simultaneous  mortgages  made  to  the  same  per- 
son be  assigned  with  the  representation  that  it  is  a  first  lien  upon 
the  premises,  this  representation  will  make  it  so  as  against  the  as- 
signor.    But  as  against  a  subsequent  assignee  of  the  otli.er,  with- 

1  lloufes  V.    Schultzc,  2    P.radw.   (111.)         *  lirowiil.iick  v.   Ozias    (Ph.).   11   Atl. 
196  ;  S.  C.  11  Chiciif,'o  L.  N.  75.  Kcp.  .301. 

-  §  474.  '"  Greene  v.  Wiimiik,  su/ira;  Van  Aken 

»  Greene  v.  Wartiiek,  04  N.  Y.  220.  i;.  Gleason,  34  Mieli.  477. 

455 


§§  567,  568.]      REGISTRATION  AS   AFFECTING   PRIORITY. 

out  notice,  such  representation  is  a  secret  equity  by  which  he  is 
not  bound. ^ 

567.  Simultaneous  mortgages  for  purchase  money.  — 
Where  two  or  more  mortgages  are  made  simultaneously  to  dif- 
ferent persons,  and  are  so  connected  with  each  other  that  they 
may  be  regarded  as  one  transaction,  each  mortgagee  having  no- 
tice of  the  other  mortgage,  they  will  be  held  to  take  effect  in 
such  oi'der  of  priority  or  succession  as  shall  best  carry  into  effect 
the  intention  and  best  secure  the  rights  of  all  the  parties.^  When 
the  equities  of  the  two  mortgages  are  equal  in  point  of  merit,  the 
oldest  in  point  of  time  will  prevail.^  If  there  be  no  intention  to 
give  any  preference  to  either,  no  preference  as  between  the  mort- 
gagees can  be  obtained  by  priority  of  record.'^  The  recording 
acts  in  such  case  have  no  application.  But  if  one  of  such  mort- 
gages be  assigned  to  a  purchaser  in  good  faith  without  notice  of 
any  superior  equity  in  the  holder  of  the  other  mortgage,  such  as- 
signee is  entitled  to  the  priority  gained  by  an  earlier  record  of 
his  mortgage,  even  if  the  other  mortgage  was  superior  in  equity.^ 
Upon  a  foreclosure  sale  under  such  mortgage  the  purchaser 
would  be  entitled  to  the  same  priority  which  the  assignee  would 
have.^ 

If  two  mortgages  be  made  to  the  same  person  to  secure  pur- 
chase money,  though  in  the  mortgagee's  hands  one  has  no  priority 
over  the  other,  he  may  assign  one  in  such  a  way  as  to  give  it 
priority  over  the  other  subsequently  assigned  by  him. 

A  foreclosure,  under  a  power  of  sale,  of  one  of  two  mortgages 
designed  to  be  simultaneous,  is  not  effectual  to  settle  the  relative 
rights  of  the  purchaser  and  the  holder  of  the  other  mortgage,  a 
bill  in  equity  being  necessary  to  determine  them  and  to  marshal 
the  assets.  To  effect  this  a  sale  is  necessary,  unless  one  of  the 
parties  take  up  the  other's  mortgage.'^ 

568.  Simultaneous  mortgages  of  which  one  is  for  purchase 

1  Vredeaburgh  v.  Burnet,  31  N.  J.  Eq.  *  Rhoades  v.  Canfield,  8  Paige  (N.  Y.), 
229.  In  Lane  v.  Nickerson,  17  Hun  (N.  545;  Sparks  v.  State  Bank,  7  Blackf. 
Y.),  148,  it  was  held  such  representation  (Ind.)  469;  Van  Aken  v.  Gleason,  34 
would  give  priority  even  as  against  the  Mich.  477. 

purchaser  of  the  other  mortgage.  5  Corning  v.  Murray,  3  Barb.  (N.  Y.) 

2  Pomeroy  v.  Latting,  15  Gray  (Mass.),  652;  Decker  v.  Boice,  19  Hun,  152;  83 
435;  Jones  v.  Phelps,  2  Barb.  (N.  Y.)  Ch.  N.  Y.  215;  Westbrook  v.  Gleason,  79  N. 
440;    Douglass  v.  Peele,  Clarke  (N.  Y.),  Y.  23. 

563.  6  Decker  v.  Boice,  supra. 

3  Houfes  V.  Schultze,   2   Bradw.    (III.)         '  Van  Aken  v.  Gleason,  supra. 
196. 

456 


EFFECT    OF   A   RECORD   DULY   MADE.  [§  569. 

/ 

money.  —  If  a  purchaser  of  land,  at  the  instant  of  receiving  his 
deed,  executes  and  delivers  two  mortgages  of  it,  one  to  his  grantor, 
to  secure  a  payment  of  a  part  of  the  purchase  money,  and  the 
other  to  a  third  person,  and  all  the  deeds  are  entered  for  record  at 
the  same  moment,  the  mortgage  to  his  grantor  takes  precedence. 
The  deed  and  the  mortgage  for  the  purchase  money  are  parts  of 
one  transaction,  and  give  the  purchaser  only  an  instantaneous 
seisin.  Moreover,  the  deed  and  mortgages  being  all  delivered  at 
the  same  time,  the  several  grantees  must  be  considered  as  know- 
ing all  that  took  place  concerning  them,  and  the  third  person, 
therefore,  as  knowing  of  the  mortgage  for  the  purchase  money, 
to  which  his  own  became  subject  as  effectually  by  his  knowledge 
of  its  existence  as  it  would  have  been  if  it  had  been  posterior  in 
time  of  entry  for  record.^ 

A  vendor  of  real  estate  who  records  his  mortgage  at  the  same 
instant  that  the  deed  from  him  is  recorded  has  no  occasion  to 
examine  the  records  for  incumbrances  created  by  his  ventlee  upon 
the  propei-ty  prior  to  the  recording  of  his  deed.  If  there  be  de- 
lay in  recording  such  deed  and  mortgage,  and  the  vendee  execute 
another  mortgage  of  the  same  property  to  a  stranger,  and  this  is 
recorded  before  the  deed  to  the  vendee  and  his  mortgage  for  the 
purchase  money  are  recorded,  the  recording  of  the  mortgage  to 
such  third  person  is  not  notice  to  the  vendor,  because  at  that  time 
the  deed  to  the  vendee  had  not  been  recorded.^ 

For  the  same  reason  a  purchase  money  mortgage  has  prece- 
dence of  mechanics'  liens  placed  upon  a  building  between  the  ex- 
ecution of  the  contract  of  purchase  and  the  conveyance,  although 
the  conveyance  and  mortgage  are  made  when  the  building  is  al- 
most finished.'^ 

But  although  executed  and  delivered  at  the  same  time,  so  that 
they  take  effect  upon  the  estate  at  the  same  instant,  if  the  record- 
ing of  the  purchase  money  mortgage  is  delayed  and  the  other  is 
first  recorded,  it  will,  in  the  absence  of  any  notice  of  the  pur- 
chase money  mortgage,  be  held  to  be  superior  in  right.* 

569.  The  English  doctrine  of    tacking^  has  no  application 

'  Clark   V.   J5ro\vn,    .'{    Allen    (Mass.),  Paul  y.  Ilocft,  28  N.  J.  Eq.  11;  Lamb  v. 

509  ;  lirasted  v.  Sutton,  29  N.  J.  Eq.  513;  Ciuinon,  38  N.  J.  L.  382;  Strong  v.  Van 

Heffron  v.  Flanigan,  37  Mich.  274;  City  Dourseu,  23  N.  J.  Eq.  3G9  ;  Macintosh  v. 

Nat.  Hank  A\,\,.  91  I'a.  St.  103.  Thurston,  25  N.  J.  Eq.  242. 

-  IJoyd   IK   .Mundorf,  30  N.  J.  Eq.  545;  ^  DuHcnbnry   v.    Ilulbcrt,  2  Thomj).  & 

Losey  i;.  Sirnj.Hon,  11  N.  J.  Eq.  246.  C.  (N.  Y.)  177. 

8  Gibbs   V.   Grunt,   29   N.  J.  Eq.  419;  '>  Tacking  iu  England  was  abolished  by 

457 


§  569.] 


REGISTRATION   AS   AFFECTING   PRIORITY. 


to  registered  mortgages.  These  are  paj^able  according  to  the 
priority  of  their  record.^  Another  kind  of  tacking  arises  when 
the  mortgagee  attaches  to  the  mortgage  lien  other  debts  not  in- 
cluded in  the  mortgage.  This  he  may  do,  so  far  as  the  mort- 
gagor is  concerned,  when  an  express  or  implied  agreement  exists 
allowing  him  to  do  so ;  but  he  cannot  tack  other  debts  to  his 
mortgage  as  against  intervening  mortgagees  and  judgment  cred- 
itors.^ 


the  Vendor  and  Purchaser  Act  of  1874. 
The  dimensions  to  which  the  learning  on 
this  subject  had  grown  may  be  gathered 
from  the  fact  that  in  Mr.  Coventry's  edi- 
tion of  Powell  on  Mortgages,  published  in 
1822,  it  occupies  one  hundred  and  twenty- 
five  pages. 

1  See  §§  357,  360  ;  Grant  v.  U.  S.  Bank, 
1  Caines  Cas.  (N.  Y.)  112  ;  Wing  v.  Mc- 
Dowell, Walk.  (Mich.)  175;  Chandler  v. 
Dyer,  37  Vt.  345. 

458 


It  is  prohibited  by  statute  in  Georgia. 
Code  1873,  §  1962.     See  §  1082. 

2  Orvis  V.  Newell,  17  Conn.  97  ;  Col- 
quhoun  v.  Atkinsons,  6  Munf.  (Va.)  550; 
Siter  w.  M'Clanachan,  2  Gratt.  (Va)  280; 
Towner  v.  Wells,  8  Ohio,  136;  Hughes 
V.  Worley,  1  Bibb  (Ky.),  200  ;  Chase  v. 
M'Donald,  7  Har.  &  J.  (Md.)  160;  Averill 
V.  Guthrie,  8  Dana  (Ky.),  82. 


CHAPTER   XIII. 


NOTICE  AS   AFFECTING   PRIORITY. 


I.  Notice  as  affecting  priority  under  the 

registry  acts,  570-577. 
IL  Actual  notice,  578-583. 

III.  Implied  notice,  584-590. 

IV.  Constructive  notice,  591-598. 
V.  Lis  pendens,  599. 


VI.  How  far  possession  is  notice,  600, 
601. 
VII.  Fraud    as    affecting   priority,   602, 

603. 
VIII.  Negligence   as    affecting    priority, 
604-609. 


I.  Notice  as  affecting  Priority  under  the  Registry  Acts. 

570.  In  general.  —  Under  the  local  registry  acts  in  England, 
it  has  always  been  conceded  that  notice  of  a  prior  deed  would 
supersede  the  effect  of  a  prior  registry. ^  The  preamble  of  the 
statute  of  the  7th  of  Anne,  providing  for  a  registry  in  the  county 
of  Middlesex,  recites  in  substance  that,  "  by  the  different  and  se- 
cret ways  of  conveying  lands,  such  as  are  ill-disposed  have  it  in 
their  power  to  commit  frauds,  and  frequently  do  so,  by  means 
whereof  several  persons  have  been  undone  in  their  purchases  and 
mortgages,  by  prior  and  secret  conveyances  and  fraudulent  in- 
cumbrances ; "  and  therefore  it  is  enacted  that  a  memorial  of 
conveyances  made  after  the  27th  of  September,  1709,  of  lands  in 
that  county,  may  be  registered  ;  and  that  every  deed  "  shall  be 
adjudged  fraudulent  and  void  against  any  subsequent  purchaser 
or  mortgagee  for  valuable  consideration,  unless  such  memorial  be 
registered,  as  by  this  act  is  directed,  before  the  registering  of  the 
memorial  of  the  deed  or  conveyance  under  which  such  subsequent 
[)urchaser  or  mortgagee  shall  claim."  In  a  leading  case  involv- 
ing the  construction  of  this  act.  Lord  Hardwicke  asks.  What  ap- 
pears by  the  preamble  to  be  the  intention  of  the  act  ?  "  Plainly," 
he  answers,  "  to  secure  subsequent  purchasers  and  mortgagees 
against    prior   secret  conveyances  and  fraudulent   incumbrances. 

'  The  registry  ac.tH  of  England  are  as  der  the  Irish  Registry  Act,  6  Anne,  ch.  2, 

follows:    West    l{iding   of   Yorkshire,   5  which  is  materially  dillorent  from  the  Eng- 

Anne,  ell.  18;  East  Uiding  of  Yorkshire  lish,   the   record   gives   absolute  priority, 

and    Kingston-on-IIull,  G   Anne,   ch.  35  ;  and  the  doctrine  of  notice  is  not  admitted. 

Middlesex,  7   Anne,  ch.  20  ;   and    North  IJuahcll  v.  Bushcll,  1  Sch.  &  Lef.  90,  98. 
Riding  of  Yorkshire,  8  Geo.  2,  cli.  6.     Un- 

459 


§  571.]  NOTICE   AS   AFFECTING   PRIORITY. 

Where  a  person  had  no  notice  of  a  prior  conveyance,  there  the 
registering  his  subsequent  conveyance  shall  prevail  against  the 
prior ;  but  if  he  had  notice  of  a  prior  conveyance,  then  that 
was  not  a  secret  conveyance  by  which  he  could  be  prejudiced."  ^ 
After  referring  to  several  cases  on  the  registry  acts,^  he  contin- 
ues :  "  Consider,  therefore,  what  is  the  ground  of  all  this,  and 
particularly  of  those  cases  which  went  on  the  foundation  of  notice 
to  the  agent.  The  ground  of  it  is  plainly  this,  that  the  taking 
of  a  legal  estate  after  notice  of  a  prior  right  makes  a  person  a 
maid  fide  purchaser ;  and  not  that  he  is  not  a  purchaser  for  a 
valuable  consideration  in  every  other  respect.  This  is  a  species 
of  fraud  and  dolus  mains  itself ;  for  he  knew  the  first  purchaser 
had  the  clear  right  of  the  estate,  and  after  knowing  that,  he  takes 
away  the  right  of  another  person  by  getting  the  legal  estate.  .  .  . 
Now,  if  a  person  does  not  stop  his  hand,  but  gets  the  legal  estate 
when  he  knew  the  right  was  in  another,  machinatur  ad  circum- 
veniendum.  It  is  a  maxim,  too,  in  our  law,  Frans  et  dolus  nemini 
patrocianari  debenV  Fraud  or  bad  faith,  therefore,  is  the  ground 
on  which  the  court,  in  this  as  well  as  in  other  cases,  place  the  doc- 
trine of  notice  as  modifying  the  registry  acts.^ 

571.  The  policy  of  the  doctrine  of  notice,  as  laid  down  by 
Lord  Hardwicke  and  repeatedly  afBrmed  in  England,  has  been 
the  subject  of  some  criticism  ;  ^  and  regret  has  been  expressed 
that  the  doctrine  has  so  far  superseded  the  terms  of  the  registry 
acts.  In  Davis  v.  Strathmore^  Lord  Eldon  said  :  "  With  regard 
to  the  observation  thrown  out  at  the  bar,  that  the  registry  acts 
were  overturned  by  Lord  Hardwicke,  I  should  feel  myself  bound 

1  Le  Neve  v.  Le  Neve,  1  Ambler,  436;  ^  16  Ves.  419.  See,  also,  Ford  r.  White, 
White  &  Tudor's  Lead.  Cas.  vol.  ii.  p.  16  Beav.  123;  Wyatt  Barwell,  19  Ves. 
109,  4th  Am.  ed. ;  and  see  Neal  v.  Kerrs,  435,  438.  In  the  latter  case  Sir  Wm. 
4  Ga.  161.  Grant  said:  "It  has  been  much  doubted 

2  Forbes  v.  Deniston,  2  Bro.  P.  C.  425;  whether  courts  ought  ever  to  have  suffered 
Blades  v.  Blades,  1  Eq.  Cas.  Abr.  358,  pi.  the  question  of  notice  to  be  agitated  as 
2;  Cbeval  v.  Nichols,  1  Stra.  664.  against  a   party  who  has  duly  registered 

8  And  see,  also,  Hine  v.  Dodd,  2  Atk.  his  conveyance ;  but  they  have  said,  '  We 

275  ;  Tunstall  v.   Trappes,   3    Sim.    287,  cannot  permit  fraud  to    prevail  ;  and  it 

301 ;  Cheval  v.  Nichols,  supra.     In  the  lat-  shall  only  be  in  cases  where  the  notice  is 

ter  case  it  was  said  :   "For  where  a  man  so  clearly  proved  as  to  make  it  fraudulent 

purchases  with  notice  of  a   prior  incum-  in  the  purchaser  to  take   and  register  a 

brance,  he  purchases  with  an  ill  conscience,  conveyance  in  prejudice  to  the  known  title 

and  in  a  court  of  equity  his  purchase  will  of  another,  that  we  will  suffer  the  regis- 

never  be  established."  tered  deed  to  be  affected." 

*  Benham  v.  Keane,  7  Jur.  N.  S.  1096  ; 
1  John.  &  H.  685,  and  cases  cited. 

460 


UNDER   THE  REGISTRY   ACTS.  [§  5T2. 

to  consider  those  decisions  right  if  they  rested  upon  his  authority- 
alone ;  but,  confirmed  as  that  doctrine  has  been  ever  since  his 
time  in  cases  directly  upon  those  acts,  and  admitted  to  be  right 
in  questions  upon  other  acts  of  parliament,  I  dare  not  venture  to 
contradict  it."  In  a  recent  case  before  the  Court  of  Appeal  in 
chancery,!  ^]^q  Chancellor,  Lord  Hatherley,  after  referring  to  the 
case  of  Le  Neve  v.  Le  Neve  with  approbation,  said  :  "  Whether 
it  be  prudent  or  imprudent  that  the  law  should  continue  in  that 
state  is  not  a  matter  which  I  have  to  discuss  on  the  present  occa- 
sion. Some  think  that  the  law  should  be  rendered  like  that  re- 
lating to  ship  registrj^  ;  but  ship  registers  are  of  a  very  different 
character,  and  how  far  one  rule  or  the  other  is  right  is  not  a 
matter  which  it  is  easy  for  anybody  to  determine.  What  has 
hitherto  repressed  those  who  have  been  anxious  to  do  away  with 
this  doctrine  of  notice  is,  that  there  would  always  remain  a  very 
strong  feeling  on  the  part  of  mankind  against  a  person  who, 
knowing  distinctly  that  his  neighbor  had  lent  a  large  sum  of 
money,  took  a  security  subject  to  that,  and  then  obtained  priority 
by  a  previous  registration,  doing  that  which,  as  I  held  in  Benham 
V.  Keane^  this  court  will  not  allow  to  be  done.  This  court  will 
not  allow  a  man  who  has  already  pledged  his  estate  to  pledge  it 
a  second  time,  and  will  not  allow  anj^  person  to  assist  him  in  so 
doing,  b}'-  lending  a  second  sum  of  money  in  this  way." 

572.  The  doctrine  of  notice  as  affecting  priority  is  gen- 
erally adopted  in  this  country.  Subsequent  purchasers,  who 
have  notice  of  a  prior  unrecorded  mortgage,  are  affected  by  their 
knowledge  of  it  in  the  same  way  that  the  prior  record  of  the 
mortgage  would  affect  them."^  The  record  is  constructive  notice 
only  ;  but  it  is  notice  to  all  the  world  that  comes  after.  Any 
other  notice  must  in  the  natui-e  of  things  be  limited  in  the  extent 
of  it,  but,  so  far  as  it  goes,  its  effect  is  equitably  not  any  less, 

1  Kolland  i;.   Hart,  L.  R.  6  Ch.  App.  2  Muiif.   (Va)   196;    Butler  t>.  Viele,  44 

078,  and  sec  numerous  cases  cited.  Barb.  (N.  Y.)  IGC  ;  Fort  v.  Burch,  5  Den. 

-  1  John.  &  II.  685  ;  S.  C.  7  Jur.  (N.  S.)  (N.  Y.)  187  ;  Jackson  v.  Van  Valkenburgli, 

109G.  8  Cow.  (N.  Y.)  260  ;  Mus^rove  v.  Bonser, 

3  Conover  v.  Von  Mater,  18  N.  J.  Eq.  .5  Oreg.  313;  liuebsch   i*.   Sched,  81  111. 

481  ;    Ilendrickson   »■    Woolley,  39  N.  J.  281;    Maxwell    v.    Brooks,    54    Ind.   98; 

Eq.  307;  Bell  v.  Thomas,  2  Iowa,  384;  Morrill  y.  Morrill,  53  Vt.  74  ;  Kirkpatrick 

I'eters  v.  Ham,  62  low.i,  6.'J6  ;  Sparks  v.  r.  Ward,  5   Lea  (Tenn.),  434;  Patterson 

State  Bank,  7  Blackf.  (Ind.)  469;  Wood-  v.  Dc  la  Konde,  8  Wall.  292;  Howell  v. 

worth  V.  Guzman,  1   Cal.  203;  Nelson  i;.  Williams,  54  Wis.  630  ;  12  N.  W.  Hep.  86  ; 

Dunn,  15  Ala.  501  ;  Underwood  u.  Ogden,  Mueller  ;;.   BriKhara,  53  Wis.  173;   10  N. 

C  B.  Mon.  (Ky.)  606  ;  Lambert  v.  Nanny,  W.  Kep.  366. 

461 


§  572.]  NOTICE   AS   AFFECTING    PRIORITY. 

certainly,  tliaii  that  of  the  record.  Having  notice  of  a  mortgage 
defectively  recorded,  or  not  recorded  at  all,  a  subsequent  pur- 
chaser cannot  claim  priority  for  his  own  deed.^  As  between  him 
and  the  mortgagee,  it  is  the  same  as  if  the  prior  mortgage  had 
been  duly  recorded.^  Thei*efore,  priority  among  mortgagees  and 
grantees  depends  not  only  upon  the  date  of  their  deeds  and  the 
date  of  their  record,  but  also  upon  the  knowledge  they  have  of 
the  true  state  of  the  facts  as  to  the  title,  and  of  the  rights  and 
equities  of  those  who  have  not  fixed  their  priority  by  duly  record- 
ing their  deeds.^ 

There  is  a  presumption  that  the  first  recorded  mortgage  is  the 
first  lien  ;  and  the  burden  of  proving  that  the  mortgagee  in  such 
mortgage  had  knowledge  of  the  existence  of  a  mortgage  of  prior 
execution  rests  upon  the  party  who  makes  this  claim.* 

The  notice,  however,  loses  its  effect  through  the  agreement  of 
the  mortgagee  of  the  unrecorded  mortgage.  Thus  where  such 
mortgagee  agreed  to  keep  his  mortgage  off  the  record  in  order  to 
enable  the  mortgagor  to  borrow  money  on  the  property  by  giving 
a  first  mortgage,  and  such  agreement  was  made  known  to  the 
mortgagee  taking  the  mortgage  second  in  date,  at  or  before  its 
execution,  and  his  mortgage  was  first  recorded,  such  notice  will 
not  give  the  unrecorded  mortgage  priority.^ 

Undoubtedly  it  was  the  purpose  of  the  laws  providing  for  the 
registry  of  conveyances  of  land  to  enable  every  one  by  this  means 
to  determine  fully  the  title  to  the  land,  without  depending  upon 
the  possession  of  the  title  deeds,  or  upon  inquiry  or  notice  outside 
of  the  registr3^  The  symmetry  of  the  registry  sj^stem  has  been 
disturbed  and  broken  in  upon  by  judicial  construction,  in  order 
to  prevent  a  fraudulent  use  of  the  statute,  which  it  is  to  be  pre- 
sumed the  statute  did  not  intend.  To  allow  one  who  has  actual 
or  implied  notice  of  a  prior  unrecorded  deed  of  the  same  prop- 
erty, or  such  notice  of  equitable  rights   of  other  persons  in  the 

1  Johnston  v.  Ciinby,  29  Md.  211 ;  Coe  Solms  v.  McCulloch,  5  Pa.  St.  473;  Jack- 
V.  Winters,  15  Iowa,  481;  Forepaugh  v.  son  v.  Van  Valkenburgh,  8  Cow.  (N.  Y.) 
Appold,  17  B.  Mon.  (Ky.)  625;  Johnson     260. 

i;.  Badger  Mill  &  Mining  Co.  13  Nev.  351.  3  La  Farge   Fire  Ins.  Co.  v.  Bell,  22 

2  Hill  V.  McNichol,  76  Me.  314;  Cope-  Barb.  (N.  Y.)  54;  Vredenburgh  v.  Burnet, 
land  V.  Copeland,  28  Me.  525  ;  Smallwood     31  N.  J.  Eq.  229. 

V.  Lewin,  15  N.  J.  Eq.  60;  Ohio  Life  Ins.  *  Hendrickson  v.  Woolley,  39  N.  J.  Eq. 

&  Trust  Co.  V.  Ross,  2  Md.  Ch.  Dec.  25 ;  307. 

Smith  V.  Nettles,  13  La.  Ann.  241  ;  Pike  &  Hendrickson  v.  Woolley,  supra. 
V.   Armstead,    1    Dev.    (N.  C.)    Eq.   110; 

462 


UNDER   THE   REGISTRY   ACTS.  [§  573. 

property,  to  obtain  priority  by  recording  his  own  deed,  would  be 
to  enable  him  to  take  advantage  of  the  registry  laws  to  obtain  an 
unfair  or  fraudulent  advantage  by  means  of  them.  Exceptions 
to  the  literal  application  of  the  law  have  therefore  been  engrafted 
upon  it  to  meet  the  equitable  consequences  of  such  notice.^ 

673.  Exceptions  as  to  Ohio  and  North  Carolina.  —  As  al- 
ready noticed,  it  has  been  questioned  whether  the  courts  ought 
ever  to  have  suffered  the  question  of  actual  notice  to  be  agitated 
against  one  whose  conveyance  is  duly  registered.'^ 

The  basis  of  the  doctrine  of  notice  is,  that  it  is  unconscientious 
and  fraudulent  to  permit  a  junior  purchaser  to  defeat  a  prior  con- 
veyance or  incumbrance  of  which  he  has  knowledge.^  But  it 
has  been  doubted  whether  this  doctrine  does  not  give  occasion 
to  more  fraud  than  it  prevents ;  and  whether  vigilance  in  record- 
ing a  mortgage  should  not  be  rewarded  as  much  as  vigilance  in 
obtaining  it.* 

Under  the  registration  law  in  North  Carolina  it  is  held  that  no 
notice,  however  full  and  formal,  will  supply  the  place  of  registra- 
tion of  a  deed  of  trust  or  mortgage;  the  statute  declaring  that 
they  shall  not  be  valid  at  law  to  pass  any  property  as  against 
creditors  or  purchasers  for  a  valuable  consideration  but  from  their 
registration.^ 

Under  the  recording  acts  of  Ohio  it  is  held  that  the  doctrine 
of  notice  has  no  place,  but  that  mortgages  have  priority  of  lien 
in  the  order  of  their  delivery  for  record,  whatever  notice  a  moi*t- 
gagee  may  have  of  a  prior  unrecorded  mortgage  or  other  convey- 
ance.'^'  Inasmuch  as  a  mortgage  is  declared  to  take  effect  only 
from  the  time  it  is  left  for  record,  a  judgment  recovered  after  the 
date  of  the  mortgage,  and  before  it  is  recorded,  takes  precedence 
of  it." 

The  admission  of  evidence  of  actual  notice  of  a  prior  unre- 
corded deed,  as  affecting  a  mortgagee's  right  of  priority,  is  at- 

^  See  Hart  v.  Farmers'  &  Mechanics'  Eq.  584 ;    Leggett  r.  Bullock,  Busb.  (N. 

Bank,  .33  Vt.  252,  per  Chief  Justice  Red-  0.)  L.  283. 

field.  «  §  613  ;  Holliday  v.  Franklin  Bank,  16 

■^  Per  Sir  Wm.  Grant,  in  Wyatt  i-.  Bar-  Ohio,  533;  Stansell  v.  Roberts,  13  Ohio, 

well,  19  Ves.  435,  439  ;  per  Colcock,  J.,  in  148;  Mayham  v.  Coombs,  supra;   Bloom 

Price  V.  White,  Bailey  Kq.  (S.  C.)  240.  v.  No<xgk',  4  Ohio  St.  45 ;  Bercaw  v.  Cock- 

•'  Ilarrint'ton  v.  Allen,  48  Miss.  492.  erill,    20    Ohio   St.    163,  and  cases    there 

■•Per    Hitchcock,    J.,  in    Mayham    v.  cited.     And  sec  Astor  c.  Wells,  4   Wheat. 

Coombs,  14  Ohio,  428.  406. 

**  liohinson    i-.    Willoughhy,    70   N.   C.  '^  Mayham  r.  Coombs,  s«/^a ;  Holliday 

358;  Fleming  i-.   Burgin,  2  Ircd.  (N.  C.)  v.  Franklin  Bank,  supra. 

463 


574.] 


NOTICE  AS  AFFECTING   PRIORITY. 


tended  with  all  the  danger  and  uncertainty  incident  to  parol  evi- 
dence, when  used  for  the  purpose  of  affecting  written  instruments 
and  disturbing  titles,  and  for  this  reason  the  policy  has  been 
adopted  in  these  states  of  allowing  the  whole  question  of  priority 
to  be  settled  by  the  simple  fact  of  prior  registry.  This  furnishes 
a  clear  and  certain  standard  of  decision  incapable  of  variation, 
and  thus  avoids  a  very  fruitful  source  of  litigation. ^ 

574.  It  may  happen  that  a  purchaser  or  mortgagee,  though 
holding  title  in  good  faith  under  a  regular  chain  of  recorded 
conveyances,  may  yet  have  no  title  at  all,  for  the  reason  that 
there  is  no  difference  between  the  effect  of  the  constructive  no- 
tice derived  from  the  recording  of  a  deed  and  an  actual  notice, 
so  far  as  respects  the  person  receiving  such  actual  notice,  and  that 
a  grantor  in  the  chain  of  title  had  knowledge,  when  he  took  the 
conveyance  to  himself,  of  a  prior  unrecorded  mortgage  or  con- 
veyance, which  was,  however,  recorded  before  his  own  convey- 
ance or  mortgage  to  his  grantee.^     "  Suppose,  for  instance,"  says 


1  Per  Eanney,  J.,  in  Bloom  v.  Noggle, 
4  Ohio  St.  45. 

-  This  point  is  illustrated  by  the  case  of 
Van  Rensselaer  v.  Clark,  17  Wend.  (N. 
Y.)  25.  Derick  Schuyler  owned  the  prem- 
ises in  question  on  the  25th  of  August, 
1794.  He  that  day  conveyed  them  to 
James  Van  Rensselaer,  but  the  deed  was 
not  recorded  till  January  2,  1804.  July 
2,  1799,  Derick  Schuyler  conveyed  the 
same  premises  to  Philip  Schuyler,  who 
had  notice  of  the  unrecorded  deed  to 
James  Van  Rensselaer.  The  deed  to 
Philip  Schuyler  was  recorded  October  25, 
1802.  On  the  2d  of  April,  1805,  Philip 
Schuyler  conveyed  to  Clark,  who,  in  1806, 
conveyed  to  Emott,  who,  in  1833,  con- 
veyed to  Miller.  The  court  held  that 
Philip  Schuyler  was  a  bond  fide  pur- 
chaser ;  that,  the  deed  to  Van  Rensselaer 
being  recorded  before  the  deed  from 
Philip  Schuyler  to  Clark,  the  latter  took 
the  land  chargeable  with  notice  of  the 
deed  to  Van  Rensselaer;  that  although 
neither  Clark,  Emott,  or  Miller  had  ac- 
tual notice  or  knew  of  the  deed  from  Der- 
ick Schuyler  to  Van  Rensselaer,  and 
although  upon  the  examination  of  the 
records  they  found  a  regular  recorded 
title  in  their  respective  grantors,  yet  the 

464 


records  informed  them  that  Derick  Schuy- 
ler had  conveyed  the  premises  to  Van 
Rensselaer  previously  to  the  conveyance 
to  Philip  Schuyler.  It  was  argued  that 
Clark  bought  of  Philip  Schuyler  on  the 
faith  of  finding  that  his  deed  was  first  re- 
corded, and  that  he  should  not  be  held  to 
look  further  and  run  the  hazard  of  actual 
notice  to  Philip  Schuyler.  But  it  was  held 
otherwise  by  the  court;  which  decided 
that,  to  entitle  a  purchaser  to  protection 
under  the  recording  acts,  he  must  not 
have  notice  which  is  inconsistent  with 
good  faith. 

These  principles  have  been  affirmed  in 
Schutt  i:  Large,  6  Barb.  (N.  Y.)  373; 
Ring  V.  Steele,  3  Keyes  (N.  Y.),  450; 
Jackson  i-.  Post,  15  \Yend.  (N.  Y.)  588; 
Fort  V.  Burch,  5  Den.  (N.  Y.)  187  •  West- 
brook  V.  Gleason,  79  N.  Y.  23 ;  Clark  v. 
Mackin,  30Hun  (N.  Y.),  411. 

The  following  case  is  still  later :  On 
the  10th  day  of  April,  1871,  A.,  the  owner 
of  certain  lands,  mortgaged  them  for 
$3,000  to  B.,  who,  on  the  25th  of  July, 

1871,  delivered  the  same  to  C,  and  on 
the  28th  of  October,  1871,  executed  to 
him  a  formal  assignment,  which,  with 
the  mortgage,  was  recorded   January  2, 

1872.  On  September  13,  1871,  A.  con- 


UNDER   THE   REGISTRY   ACTS.  [§  574  a. 

Chief  Justice  Shaw,  in  an  important  case  on  this  subject,^  "  A. 
conveys  to  B.,  who  does  not  immediately  record  his  deed.  A.  then 
conveys  to  C,  who  has  notice  of  a  prior  unregistered  deed  to  B. 
C.'s  deed,  though  first  recorded,  will  be  postponed  to  the  prior 
deed  to  B,  Then,  suppose  B.  puts  his  deed  on  record,  and  after- 
wards C.  conveys  to  D.  If  the  above  views  are  correct,  D.  could 
not  hold  against  B.:  not  in  right  of  C,  because,  in  consequence 
of  actual  knowledge  of  the  prior  deed,  C.  had  but  a  voidable 
title  ;  and  not  in  his  own  right,  because,  before  he  took  his  deed, 
B.'s  deed  was  on  record,  and  was  constructive  notice  to  him  of 
the  prior  conveyance  to  B.  from  A.  under  whom  his  title  is  de- 
rived. But  in  such  case,  if,  before  B.  recorded  his  deed,  C.  had 
conveyed  to  D.  without  actual  notice,  then  D.,  having  neither  ac- 
tual nor  constructive  notice  of  the  pi'ior  deed,  would  take  a  good 
title.  And  as  D.  in  such  case  would  have  an  indefeasible  title 
himself  against  B.'s  prior  deed,  so,  as  an  incident  to  the  right  of 
property,  lie  could  convey  a  good  and  indefeasible  title  to  any 
other  person,  although  such  grantee  should  have  full  notice  of  the 
prior  conveyance  from  A.  to  B.  Such  purchaser,  and  all  claiming 
under  him,  would  rest  on  D.'s  indefeasible  title,  unaffected  by 
any  early  defect  of  title,  by  want  of  registration,  which  had  ceased 
to  have  any  effect  on  the  title,  by  a  conveyance  to  D.  without 
notice,  by  one  having  a  good  apparent  record  title." 

574  a.  The  better  rule,  however,  is  that  which  is  now  the 
settled  rule  in  Massachusetts,  which  is,  in  effect,  that  when  a 
purchaser,  upon  examining  the  registry,  finds  a  good  conveyance 
from  the  owner  of  the  land  to  his  grantor,  he  is  not  required  to 
look  further.  If  the  owner  has  made  a  second  deed  to  another 
person,  wlio  has  knowledge  of  the  first  deed,  and  the  second  deed 
is  recorded  before  the  first  deed,  and  the  second  purchaser  sells 
the  land,  in  good  faith  and  for  a  valuable  consideration,  to  a  per- 
)n  wholly  ignorant  of  the  first  deed,  the  latter  purchaser  has  the 

vcycd  the  premises  to  D.,  wlio  had  actual  2,  1872,  it  was  a   complete   and   jiorfect 

knowledge  of  the  mortga{,'c  to  IJ.,  and  of  title,  and   that   the  lien  acquired  by  F., 

the    consideration    he    had    paid    for   it.  under   the  second   mortgage,  was   subse- 

This  deed  was  recorded  October  5,  1871.  quent  to  it.     Goelet  r.  McManiis,   1    Hun 

On   the   16th  of  January,  1873,    D.  exe-  (N.  Y".),  306. 

cuted  a  mortgage  upon   the  premises  to         '  Flynt  v.  Arnold,  2   Met.  (Mass.)  619. 

K.  for  S2,000,  who  assigned  it  to  F.,  who  These  views,  expressed  by  Chief  Justice 

had  no  notice  of  tiie  first  mortgage,  ex-  Shaw,  are  to  be  considered  as  dicta,  the 

cept  such  constructive  notice  as  was  given  judgment  of  the  <-ourt  being  distinctly  put 

by  the  record.     It  wjis  held  that  when  (.'.  ujion   aiiotlicr  ground.      For  tlio  rule  in 

put  the  first  mortgage  on  record,  January  Massachusetta,  see  §  674  n. 
VOL.  I.            30  405 


§  574  a.] 


NOTICE   AS    AFFFXTING   PRIORITY. 


better  title  to  the  land.  "  II:  this  were  not  so,"  said  Jackson,  J., 
in  an  early  case,i  "  our  laws,  which  require  the  registering  of 
deeds,  would  be  useless  it"  not  worse ;  because  a  purchaser,  after 
the  most  thorough  examination  in  the  registry  of  deeds,  and  find- 
ing a  succession  of  conveyances,  all  in  legal  form  and  in  perfect 
order,  might  still  be  evicted  upon  proof  of  a  secret  trust,  or  a 
fraud,  on  the  part  of  some  former  owner." 

The  rule  established  in  this  early  case  has  received  confirmation 
by  the  same  court  in  a  recent  case,  in  which  the  court  say  in  sub- 
stance that  the  recording  of  a  perfect  record  title  is  equivalent  to 
the  notorious  act  of  livery  of  seisin,  and  that  a  purchaser  is  enti- 
tled  to  rely  upon   such  record  title,  and  is  not  obliged  to  search 


1  Connecticut  v.  Bradish,  14  Mass.  296, 
301.  The  principle  of  this  case  was  af- 
firmed in  Trull  v.  Bigelow,  16  Mass.  406, 
where  Parker,  C.  J.,  said  :  "  This  princi- 
ple is  just ;  for  the  honest  assignee  finds 
a  good  subsisting  title  on  record  in  his 
grantor,  pays  him  the  value  of  the  land, 
and  is  wholly  ignorant  of  any  circum- 
stances which  contradict  the  apparent 
fairness  of  the  title.  In  such  case  the 
negligence  of  the  first  purchaser  is  the 
cause  of  the  difficulty  ;  and  although  he 
shall  not  suffer,  when  his  negligence  is 
fraudulently  taken  advantage  of  by  a  sub- 
sequent purchaser,  yet,  when  a  third  party 
claims  the  land,  deriving  his  title  from 
him  who  in  the  public  registry  appears 
to  be  the  lawful  owner,  negligence  ought 
to  turn  the  scale  against  the  party  who 
was  guilty  of  it."  Followed  also  in  Gl id- 
den  V.  Hunt,  24  Pick.  (Mass.)  221. 

InFlynt  u.  Arnold,  2  Met.  619,  Shaw, 
C.  J.,  criticises  the  case  of  Connecticut  v. 
Bradish,  supra,  saying  that  the  head-note 
in  that  case  states  a  correct  proposition  of 
law,  but  in  point  of  fact  the  first  mort- 
gagee had  put  his  deed  on  record  before  the 
assignment  was  made  by  the  second  mort- 
gagee. But  the  court  treated  this  as  only 
evidence  to  go  to  the  jury,  tending  to  show 
that  the  assignee  of  the  second  mortgage 
had  actual  notice  of  the  prior  mortgage, 
and  not  as  being  constructive  notice.  As 
to  the  general  principle  of  that  case,  the 
eminent  chief  justice  said  :  "If  the  object 
of  any  one,  in  searching  the  record  to  as- 

466 


certain  the  goodness  of  a  title,  is  to  inquire 
and  ascertain  whether  any  one  through 
whom  the  title  is  derived,  whilst  he  had 
the  title,  and  had  the  power  to  aliene  or 
incumber  it,  did  so,  then,  by  following 
the  conveyances  down  from  each  former 
holder  of  the  estate  to  the  time  of  the 
search,  he  could  find  the  alienation  or  in- 
cumbrance, if  one  had  been  made  and  re- 
corded. The  object  of  the  registry  is  to 
give  notoriety  to  all  conveyances,  and 
make  them  certainly  known  to  one  in- 
quiring. If  an  ordinarily  diligent  search 
would  bring  the  inquirer  to  a  knowledge 
of  a  prior  incumbrance  or  alienation,  then 
he  is  presumed  to  know  it.  It  is  this 
presumption,  and  not  the  fact  of  actual 
knowledge  of  a  prior  incumbrance,  which 
binds  all  subsequent  purchasers,  and 
makes  the  registry  conclusive  evidence  of 
notice.  It  serves  all  the  purposes  of  actual 
knowledge,  by  enabling  an  inquirer  with 
ordinary  diligence  to  ascertain  the  fact. 
It  would  seem  that  a  search,  so  far  as  to 
ascertain  whether  any  former  proprietor, 
whilst  he  had  the  estate,  had  aliened  or 
incumbered  it,  would  be  necessary,  in 
order  to  render  the  public  registry  avail- 
able to  the  full  extent  to  which  it  was 
designed  by  law ;  and  therefore  it  would 
be  reasonable  to  presume  in  each  case 
that  such  search  had  been  made,  and,  if 
any  such  deed  from  a  proprietor  was  on 
record,  that  it  had  been  discovered,  and 
was  known  to  the  subsequent  purchaser." 


UNDER  THE  REGISTRY  ACTS. 


[§  575. 


the  records  afterwards  in  order  to  see  if  any  unrecorded  deed  of 
the  original  owner  has  since  been  recorded.^ 

575.  The  right  of  the  first  purchaser  or  mortgagee  to  pre- 
serve his  title  by  recording  his  deed  continues  after  any  num- 
ber of  subsequent  conveyances  in  the  chain  of  title  derived  from 
the  second  grantee  from  the  original  grantor,  although  the  deeds 
in  this  chain  of  title  have  all  been  duly  recorded,  provided  that 
such  subsequent  purchasers,  one  and  all,  have  bought  either  with 
knowledge  of  the  prior  unrecorded  deed  or  without  paying  valu- 
able consideration.  So  long  as  this  state  of  things  continues  the 
prior  title  will  hold,  and  may  be  perfected  by  record.  But  so 
soon  as  any  one  in  the  chain  of  title  under  the  second  conveyance 
purchases  in  good  faith  for  a  valuable  consideration,  and  places 
his  deed  on  record,  the  title  under  the  first  unrecorded  deed  is 
fjone  forever.^ 


1  Morse  v.  Curtis,  140  Mass.  112;  S. 
C.  54  Am.  Rep.  456. 

-  This  point  is  fully  illustrated  in  the 
case  of  Fallass  v.  Pierce,  30  Wis.  443, 
which  was  several  times  argued  before 
the  court,  and  was  finally  decided   in   a 


from  C.  to  Z.  inclusive,  paid  any  valuable 
consideration  for  the  land,  or  if,  in  the 
case  of  each  successive  grantee,  his  title 
was  defective  and  invalid  as  against  B., 
either  by  reason  of  his  knowledge  of  B.'s 
title  or  because  he  was  a  mere  volunteer, 


well-considered   opinion  by  Chief  Justice     paying  no  consideration  whatever  for  the 


Dixon.  Using  the  same  illustration 
given  above,  he  says :  "  If,  for  example, 
in  the  case  supposed,  C.  took  his  deed 
with  knowledge  of  the  prior  conveyance 
to  B.,  and  had  then  conveyed  to  D.,  who 
had  like  knowledge,  and  D.  should  con- 
vey to  E.,  and  so  on,  conveyances  should 
be  executed  to  the  end  of  the  alphabet, 
each  subsequent  grantee  having  knowl- 
edge of  B.'s  prior  right,  and  all  of  their 
conveyances  being  recorded,  yet  then,  if 
B.  should  record  his  deed  before  the  last 
grantee  with  knowledge,  and  Z.  should 
make  conveyance,  the  purchaser  from  Z. 
would  be  bound  to  take  notice  of  B.'s 
rights,  and  of  the  relations  existing  be- 
tween them,  and  all  the  subsequent  pur- 
chasers from  C.  to  Z.  inclusive.  And  in 
the  same  case,  if  Z.  should  sell  to  a  pur- 
chaser in  good  faith  for  value  from  him, 
yet  if  B.  should  get  his  conveyance  re- 
corded Ijffore  that  of  such  purchaser,  his 
title  would  be  preferred  because  of  such 
first  record.  And  it  i.s  manifest  that  the 
same  result  would  follow  if  in  the  case 
supposed  none  of  the  subsequent  grantceB, 


conveyance."  The  case  of  Ely  v.  Wil- 
cox, 20  Wis.  523,  is  overruled.  Fallass 
V.  Pierce,  supra,  is  followed  in  Girardin  v. 
Lampe,  58  Wis.  267  ;  Erwin  v.  Lewis,  32 
Wis.  276. 

See  White  &  Tudor's  Lead.  Cas.  in  Eq- 
4th  Am.  ed.  vol.  2,  pt.  1,  p.  212,  for  a  dis- 
sent to  this  line  of  decisions,  because  they 
make  it  requisite  to  search  for  convey- 
ances from  two  persons  during  the  same 
period.  The  authorities  cited  in  support 
of  this  view  are  the  earlier  cases  in  Mas- 
sachusetts and  Wisconsin. 

In  Day  v.  Clark,  25  Vt.  397,  402,  the 
rule  is  laid  down  that  the  record  of  the 
prior  deed  after  the  second  is  notice  to  a 
purchaser  from  the  vendee  in  the  second 
that  there  is  such  a  prior  deed ;  but  the 
record  of  it  is  no  notice  that  the  vendee 
in  the  second  deed,  at  the  time  he  secured 
it,  had  notice  of  the  first  deed,  and  with- 
out such  notice  the  title  of  the  purchaser 
from  the  vendee  in  the  second  but  first 
recorded  deed  would  not  be  afTocted  by 
the  fraud  or  knowledge  of  iiis  vendor. 

The  doctrine  of  the  text   is  also  sup- 

467 


§  576.]  NOTICE   AS   AFFECTING   PRIORITY. 

This  class  of  cases  very  frequently  presents  questions  of  the 
greatest  difficulty ;  and  the  language  of  Lord  Chancellor  North- 
ington  is  generally  applicable  to  any  one  of  them  :  "  This  is  one 
of  those  cases  which  are  always  very  honorably  labored  by  the 
counsel  at  the  bar,  and  determined  with  great  anxiety  by  the 
court,  as  some  of  the  parties  must  be  shipwrecked  in  the  event."  ^ 

576.  As  a  general  rule  a  purchaser  is  not  bound  to  search 
the  records  for  incumbrances  as  against  a  title  that  does  not 
appear  of  record.^  Generally,  therefore,  the  record  of  any  mort- 
gage prior  to  the  conve3^ance  by  which  the  mortgagor  took  his 
title  is  no  notice  of  the  incumbrance  to  a  subsequent  purchaser.^ 
The  whole  object  of  the  registry  acts  is  to  protect  subsequent  pur- 
chasers and  incumbrancers  against  previous  conveyances  which 
are  not  recorded,  and  to  deprive  the  holder  of  previous  unregis- 
tered conveyances  of  his  right  of  priority,  which  he  would  have 
at  the  common  law.  The  title  upon  record  is  the  purchaser's  pro- 
tection. The  registry  of  a  deed  is  notice  only  to  those  wlio  claim 
through  or  under  the  grantor  by  whom  the  deed  was  executed. 
When  one  link  in  the  chain  of  title  is  wanting,  there  is  no  clue 
to  guide  the  purchaser  in  his  search  to  the  next  succeeding  link 
by  which  the  claim  is  continued.  When  the  purchaser  has  traced 
the  title  down  to  an  individual,  out  of  whom  the  record  does  not 
carry  it,  the  registry  acts  make  that  title  the  purchaser's  protec- 
tion.* 

Yet  the  circumstances  may  be  such  that  a  purchaser  will  be 
bound  to  search  the  records  for  incumbrances  as  against  a  title 
which  does  not  appear  upon  the  records ;  as,  for  instance,  when 
he  has  actual  notice  of  the  existence  of  a  mortgageable  estate  in 
one  prior  to  the  date  of  his  title  to  an  absolute  fee.  One  holding 
an  executory  contract  of  purchase,  or  one  in  possession  of  land 
under  a  contract  of  sale,  though  the  contract  be  by  parol,  has  a 
mortgageable  interest,  and  a  mortgage  of  it  may  be  legally  and 

ported  by  English  v.  Waples,  13   Iowa,  359;  Wing  v.  McDowell,  Walk.  (Mich.) 

57;  Sims   v.   Hammond,   33    Iowa,    368;  175;  Farmers' Loan  &  Trust  Co.  y.  Malt- 

Bayles  v.  Young,  51  111.  127;  Mahoney  v.  by,  8  Paige  (N.  Y.),  361  ;  Montgomery?;. 

Middleton,  41  Cal.  41  ;  Hill  v.  McNichol,  Keppel  (Cal.),  19  Pac.  Kep.  178;  Bing- 

76  Me.  314,  316.  ham  v.  Kirkland,  34  N.  J.  Eq.  229  ;  Tar- 

1  See  Stanhope  v.  Verney,  2  Eden,  81.  bell  v.  We.st,  86  N.  Y.  280. 

2  Cook  V.  Travis,  20  N.  Y.  400,  402 ;  *  pgr  Chancellor  Williamson,  in  Losey 
Losey  v.  Simpson,  11  N.J.  Eq.  3  (Stockt.)  v.  Simpson,  supra;  and  see  Cook  v.  Tra- 
246 ;  Clark  v.  Mackin,  30  Hun  (N.  Y.),  vis,  supra ;  Parkist  v.  Alexander,  1  Johns. 
411  ;  Stockwell  v.  State,  101  Ind.  1.  (N.  Y.)  Ch.  394,  398. 

3  §  469;  Calder  v.  Chapman,  52  Pa.  St. 

468 


UNDER   THE   REGISTRY    ACTS.  [§  577. 

properly  recorded,  so  as  to  take  precedence  of  a  subsequent  con- 
ve^'HHce  of  the  property,  if  the  subsequent  purchaser  had  actual 
notice  of  the  existence  of  a  mortgageable  estate  in  the  mortgagor 
prior  to  his  receiving  an  absolute  deed  of  the  land.^ 

A  recital  in  a  deed  that  the  grantee  had  been  in  possession  of 
the  granted  farm  since  a  given  date,  several  months  prior  to  the 
deed,  under  a  contract  for  the  purchase  of  it,  is  actual  notice  to 
one  chiiming  under  the  title  of  such  deed  that  the  grantee  had 
been  in  possession  before  he  received  a  deed  of  the  land  ;  and  the 
law  charges  him  with  notice  that  such  grantee  had,  during  such 
possession,  a  mortgageable  interest  in  tlie  land  ;  and  he  is  bound 
to  search  the  records  for  incumbrances  against  the  title  from  the 
time  the  grantee  entered  into  possession  under  his  conti'act,  and 
he  is  bound  by  a  mortgage  made  by  such  grantee  while  in  posses- 
sion under  the  contract  of  sale  and  before  receiving  a  deed.^ 

577.  Notice  of  a  secret  trust.  —  It  is  frequently  the  case  that 
an  estate  which  appears  by  tlie  record  to  be  absolutely  the  prop- 
erty of  the  grantee  is  in  fact  held  by  him  in  trust  for  another 
person.  In  such  case,  any  one  who  deals  with  him  in  respect  to 
this  estate,  with  knowledge  of  the  trust,  takes  it  subject  to  the 
trust,  and  a  mortgagee  with  such  knowledge  will  be  required  to 
discharge  the  lien.-^  If  the  conveyance,  though  absolute  in  form, 
be  in  fact  a  mortgage,  a  purchaser  with  knowledge  of  this  fact 
takes  the  estate  subject  to  the  mortgage.  "  Though  a  purchaser 
may  buy  in  an  incumbrance,  or  lay  hold  on  any  pUmk  to  protect 
himself,  yet  he  shall  not  protect  himself  by  the  taking  a  convey- 
ance from  a  trustee  after  he  had  notice  of  the  trust,  for,  by  taking 
a  conveyance  with  notice  of  the  trust,  he  himself  becomes  the 
trustee,  and  must  not,  to  get  a  plank  to  save  himself,  be  guilty 
of  a  breach  of  trust."  ^ 

'  Sec  §  469 ;  Crane  v.   Turner,  7  Ilnn  back  to  the  date  of  the  confirmatory  deed 

(N.  Y.),  357.  was  due  dili<^encc  in  a  person  who  had 

-  Crane  v.  Turner,  supra.     Mr-  Justice  actual  notice  of  the  recital,  even  though 

Follett,  hy  way  of  illustration,  said  :  "If,  accompanied  by  inquiry  of   the  grantee; 

January  first,  a  grantee  receives  a  deed  and  if  he  sliouhi  take  a  mortgage  and  re- 

and  enters  into  pos-cssion,  but  neglects  to  cord  it,  it  would  not  have  precedence  over 

record   the   deed,  or  it  is  destroyed,  and  a  duly  recorded  mortgage  given  between 

subsequently  he  receives  a  new  deed  bear-  the  dates  of  the  first  and  second  deeds." 
ing  a  later  date  and  reciting  that  it  is  c-on-        ^  Harwood  v.  Pearson,  122  Mass.  425  ; 

firmatory  of  a  deed  dated  January  first,  Jackson  v.  Ulackwood,  4  McAr.  (D.  C.) 

under  which    he   has  been   in   posseasion  188. 

since  that  date,  ami  which  deed  has  been         *  Saunders  v.  Dehew,  2  Vern.  271. 
lost,  it  would  not  be  held  that  a  search 

469 


§§  578,  579,]        NOTICE  as  affecting  priority. 

One  who  acquires  the  legal  title  to  land  with  notice  of  an  equi- 
table mortgage  in  another  will  be  decreed  to  hold  the  legal  title 
for  the  benefit  of  the  equitable  mortgagee.^ 

II.  Actual  Notice. 

578.  There  are  three  kinds  of  notice  :  actual,  implied,  and 
constructive.  As  the  doctrine  of  notice  as  affecting  the  priority 
of  incumbrances  arises  from  the  equitable  view  that  it  is  fraud  in 
one,  who  has  notice  of  an  adverse  claim  in  another,  to  attempt  to 
acquire  a  .title  to  the  prejudice  of  the  interest  of  which  he  has 
been  made  aware,  it  is  obvious  that  the  actual  culpabiUty  in- 
volved by  the  notice  must  depend  altogether  upon  the  kind  and 
degree  of  notice  received.  Yet  the  legal  consequences  are  the 
same,  whatever  the  kind  and  degree  of  the  notice  may  be,  pro- 
vided the  notice  is  imputed  at  all. 

579.  Actual  notice  literally  means  direct  personal  knowl- 
edge.2  Yet  the  term  is  often  used  in  a  broader  sense  as  including 
notice  implied  from  indirect  or  circumstantial  evidence. ^  Whether 
it  exists  in  any  particular  case,  and  whether  it  is  sufficient  to 
charge  the  party  whom  it  is  sought  to  affect  by  it,  is  a  question 
of  fact  to  be  considered  and  determined  upon  the  evidence  in 
each  particular  case.  It  is  deemed  effectual  and  sufficient  when 
the  evidence  shows  that  the  matters  relating  to  the  prior  claim 
or  interest  of  another,  constituting  notice  of  it,  are  brought  dis- 
tinctly to  the  knowledge  and  attention  of  the  person  it  is  sought 
to  affect.* 

Actual  notice  may  be  verbal  or  written  ;^  it  may  be  intended 

1  Gale  V.  Morris,  29  N.  J.  Eq.  222.  v.  Kent,  7  Allen,  16.     This  provision  was 

2  Story's  Eq.  Jur.  §  399;  Lamb  v.  first  adopted  in  the  Eev.  Stat,  of  1836,  be- 
Pierce,  113  Mass.  72;  Crassen  v.  Swove-  fore  which  time  implied  or  constructive 
land,  22  lud.  427  ;  Rogers  v.  Jones,  8  N.  notice  was  held  to  be  sufficient,  but  now 
H,  264  ;  Williamson  v.  Brown,  15  N.  Y.  has  no  effect.  Parker  r.  Osgood,  3  Allen, 
354 ;  Baltimore  v.  Williams,  6  Md.  235.  487  ;   and    see   Lawrence   v.   Stratton,   6 

The  statutes  of  Massachusetts  provide  Cush.   163,  166  ;  Pomroy  v.  Stevens,  11 

that  no  unrecorded  deed  shall  be  valid,  Met.   244  ;  Dooley  v.  Wolcott,  4  Allen, 

save  as  against  the  grantors  and  persons  406 ;  Sibley  v.  Leffingwell,  8  Allen,  584. 

having  "actual  notice  thereof."     By  ac-  ^  Knapp  v.  Bailey  (Me.),  9  Atl.  Kep. 

tual  notice  is  not  meant  necessarily  that  a  122. 

person  must  actually  have  seen  or  been  *  Robinson's  Law  of  Priority,  p.  27  ; 

told  of  the  deed  by  the   grantor,  but  it  Michigan  Mut.  L.  Ins.  Co.  v.  Conant,  40 

means  any  intelligible  information  of  it,  Mich.  530;  Vest  v.  Michie,  31  Gratt.  (Va.) 

either  verbal  or  in  writing,  coming  from  149  ;  Jackson,  L.  &  S.  R.  Co.  v.  Davison 

a  source  which  a  party  ought  to  give  heed  (Mich.),  37  N.  W.  Rep.  537. 

to.     Curtis  V.  Mundy,  3  Met.  405  ;  George  *  North  British  Ins.  Co.  v.  Hallett,  7 

47Q  Jur.  (N.  S.)  1263. 


ACTUAL   NOTICE.  [§  579. 

or  accidental ;  ^  it  may  affect  an  infant  or  feme  covert  as  well  as 
an  adult  nian.^  A  cestui  que  trust  is  bound  by  notice  to  the 
trustee ;  ^  notice  to  one  of  several  partners  is  notice  to  the  part- 
nership ;  ^  and  notice  to  one  of  several  trustees  is  generally  suffi- 
cient.'' 

Implied  or  constructive  notice  of  an  unrecorded  deed  does  not 
affect  a  subsequent  purchaser  who  is  protected  by  a  statute  re- 
quiring actual  notice.  The  courts  even  go  so  far  as  to  hold  that 
although  a  purchaser  has  knowledge  that  the  lands  had  been  sold 
and  purchased  by  another  person,  yet  if  no  deed  had  been  re- 
corded, and  the  purchaser  had  no  knowledge  that  a  deed  had 
been  made,  he  is  not  chargeable  with  actual  notice.^  Therefore 
proof  of  open  and  notorious  occupation  and  improvement,  or  of 
other  facts  which  would  reasonably  put  a  purchaser  upon  inquiry, 
are  not  sufficient ;  but  one  claiming  under  an  unrecorded  deed 
must  prove  that  the  subsequent  purchaser  had  actual  knowledge 
of  some  claim  or  I'iglit  of  the  person  holding  possession,  or  actual 
knowledge  or  notice  of  the  unrecorded  deed.  This  construction 
of  the  requirement  of  actual  notice  to  affect  a  subsequent  pur- 
chaser gives  full  effect  to  the  words,  and  is  in  accordance  with 
the  definition  of  them  given  b}'  the  best  writers.  This  construc- 
tion, moreover,  gives  full  effect  to  the  registry  laws,  and  enables 
purchasers  to  rely  upon  them  fully  and  implicitly  without  search- 
ing the  outside  world  to  ascertain  the  true  state  of  the  title.  It 
simply  requires,  of  all  persons  who  hold  or  claim  any  interest  in 
real  estate,  that  they  shall  use  due  care  and  diligence  in  placing 
their  rights  Deyond  all  danger  by  obtaining  and  putting  upon  rec- 
ord proper  deeds. 

It  is  true,  however,  that  in  several  states  in  which  there  are 
statutes  requiring  actual  notice  to  affect  a  purchaser,  a  less  strict 
interpretation  of  the  word  is  adopted  ;  and  while  actual  notice 
of  an  unrecorded  deed  is  distinguished  from  mere  notice  such 
as  would  be  imputed  from  actual,  open,  and  visible  occupation, 
whether  known  to  the  purchaser  or  not,  yet  the  words  are  held 
to  include  constructive  knowledge  imputed  from  actual,  open,  and 
visible  occupation,  where  such  occupation  is  in  fact  known  to  the 
purchaser.^     Notice    is  regarded    as    actual   when  the    purchaser 

1  Smith  V.  Smith,  2  Oompt.  &  M.  231.  ''  Meux  v.  Hell,  1  Hare,  73. 

■2  Fisher  on  Mort.  3d  ed.  p.  448.  o  Lamb  i-.  I'iirce,  li;)  Mass.  72, 

'  Wise  «;.  Wise,  2  Jones  &  Liit.  403.  '^  §  253.    In  IJriiikmiin  (-..loiies,  44  Wis. 

♦  Travis  v.  Milne,  9  Hare,  141.  498,  this  view   is  ahly  presented  and  the 

471 


§  580.]  NOTICE   AS   AFFECTING   PRIORITY. 

either  knows  of  the  existence  of  the  adverse  claim  of  title,  or  is 
conscious  of  having  the  means  of  such  knowledge.^ 

580.  The  degrees  and  kinds  of  actual  notice  are  of  course 
without  number,  ranging  from  a  formal  written  statement  of  the 
lien,  giving  all  its  detail,  to  a  mere  verbal  declaration  of  the  fact 
of  its  existence ;  it  may  be  one  given  expressly  as  a  notice,  or  it 
may  have  come  in  an  accidental  way.  But  neither  the  manner 
of  the  notice  nor  the  purpose  of  it  is  material.^  The  degree  of 
the  notice,  however,  is  material.  "  Flying  reports  are  many  times 
fables  and  not  truth."  ^  A  mere  rumor  that  some  other  person 
claims  an  interest  in  the  property  will  not  affect  a  person  with 
notice  of  such  interest.^  Generally  such  notice,  to  be  binding, 
must  proceed  from  some  person  interested  in  the  property.^  This 
latter  proposition  has,  however,  been  questioned ;  and  it  is  said 
that  if  the  information  be  derived  from  any  other  source  entitled 
to  credit,  and  it  be  definite,  it  will  be  equally  binding  as  if  it 
came  from  the  party  himself.^ 

Notice  of  an  intention  on  the  part  of  the  owner  of  property  to 
execute  a  lien  upon  it  does  not  prevent  the  person  having  such 
notice  from  taking  a  valid  incumbrance  upon  it.  But  where  a 
prior  mortgage,  which  was  intended  to  be  a  conveyance  in  fee, 
was  by  mistake,  as  executed,  only  a  conveyance  for  life,  and  a 
second  mortgagee  had  such  actual  notice  of  it  as  induced  him  to 
believe  that  the  mortgage  was  in  fee,  it  was,  as  against  him,  held 
to  be  a  mortgage  in  fee.'^ 

A  creditor  may  by  his  vigilance  secure  his  demand,  if  possible, 
by  taking  a  mortgage  from  his  debtor,  just  as  he  might  by  an 
attachment,  although  he  knew  that  another  creditor  intended  to 
make  an  attachment  in  the  one  case,  or  to  take  a  mortgage  in  the 
other,  and  had  taken  steps  for  effecting  this,^ 

authorities  in  support  of  it  collected.    See,  Jaques  v.  Weeks,  7  Watts  (Pa.),  261,  267  ; 

also,  CuDLingham  v.  Brown,  44  Wis.  72.  Wilson  v.  McCnllongh,  23  Pa.  St.  440. 

1  Speck  V.  Riggin,  40  Mo.  405 ;  Michi-  &  Natal  Land  Co.  v.  Good,  2  L.  R.  P. 
gan  Mut.  L.  Ins.  Co.  v.  Conant,  40  Mich.  C.  121;  Barnhart  v.  Greenshields,  9  Moore 
530.  P.  C.  18,  36;  Rogers  v.  Hoskins,  14  Ga. 

2  Smith  V.  Smith,  2  Crompt.  &  M.  231  ;  166 ;  Lamont  v.  Stimson,  5  Wis.  443  ;  Van 
North  British  Ins.  Co.  v.  Hallett,  7  Jur.  Duyue  v.  Vreeland,  12  N.  J.  Eq.  142,155; 
N.  S.  1263.  Peebles  v.  Reading,  8  S.  &  R.  484,  496. 

3  Wildgoose  v.  Way  land,  Gouldsb.  147,  6  Mulliken  v.  Graham,  72  Pa.  St.  484, 
pi.  67,  per  Lord  Keeper  Egerton  ;  and  see  490  ;  Curtis  v.  Mundy,  3  Met.  (Mass.) 
Butler  V.  Stevens,  26  Me.  484 ;  Doyle  v.  405,  407. 

Teas,  4  Scam.  (111.)  202.  "^  Gale  v.  Morris,  30  N.  J.  Eq.  285;  S. 

*  JoUand  v.  Stainbridge,3  Ves.  Jr.  478;     C.  7  Reporter,  436. 

472  ^  Warden  v.  Adams,  15  Mass.  233. 


ACTUAL   NOTICE.  [§  581. 

The  burden  of  proof  is  upon  the  person  who  claims  priority, 
and  charges  another  with  notice  of  his  own  incumbrance,  to  make 
out  affirmatively  tliat  the  other  had  such  notice. ^  The  mere  fact 
that  one  who  was  a  witness  to  an  unrecorded  mortgage  after- 
wards became  the  purchaser  of  the  hind  fi'om  the  mortgagor  is 
not  sufficient  to  affect  him  with  notice  of  the  mortgage,^ 

Notice  to  supply  the  place  of  registry  must  be  more  than  what 
is  barely  sufficient  to  put  the  party  upon  inquir}'.^  To  break  in 
upon  the  registry  acts,  it  must  be  such  as  will,  with  the  attend- 
ing circumstances,  affect  the  party  with  fraud.^  The  notice  must 
be  clear  and  undoubted ;  ^  and  when  that  is  the  case  it  is  re- 
garded as  jyer  se  evidence  of  fraud  for  one  to  attempt  to  defeat  a 
prior  incumbrance  by  setting  up  a  subsequent  deed.^  It  is  suf- 
ficient if  it  comes  within  the  rule,  Id  certum  est,  quod  certum 
reddi,  potest.  The  facts  disclosed  amount  to  notice  when  they 
are  such  as  render  it  incumbent  on  the  purchaser  or  mortgagee  to 
inquire,  and  at  the  same  time  enable  him  to  prosecute  the  inquiry 
successfully.''  If  in  such  case  he  wilfully  closes  his  eyes  and  re- 
mains ignorant  of  facts  he  would  ascertain  by  a  reasonable  in- 
quir}^  he  is  affected  with  notice  of  them  just  as  much  as  he  would 
be  had  he  made  the  inquir3\^ 

581.  Notice  has  effect  if  received  at  any  time  before  com- 
pletion of  the  trade.  A 'subsequent  purchaser  is  bound  by  notice 
of  a  prior  unrecorded  mortgage,  although  not  received  till  after 
he  has  agreed  upon  the  terms  of  the  trade,  if  received  before  he 
has  actually  paid  the  consideration,  or  in  any  way  put  himself  to 

1  Hardy,  ex  parte,  2  D.  &  C.  393  ;  Fort  182;  Jacksou  v.  Burgott,  10  Johns.  (N. 
V.  Biircli,  6  Barb.  N.  Y.  60,  78  ;  Center  v.  Y.)  457  ;  Vest  v.  Michie,  supra. 
Planters'  &  Merchants'  Bank,  22  Ala,  6  Hine  ?;.  Dodd,  2  Atk.  275;  West  v. 
743  ;  McCormick  v.  Leonard,  38  Iowa,  Reid,  2  Hare,  249  ;  liiley  v.  Hoyt,  29  Hun 
272;  Miles  v.  Blanton,  3  Dana  (Ky.),  (N.  Y.),  114;  Condit  v.  Wilson,  36  N.  J. 
523 ;    Van  Wagenen  v.  Hopper,  8  N.  J.  Eq.  370. 

Eq.  (4  Ilalht.)  684,  707  ;  Marshall  v.  Dun-  «  Dunham  v.  Dey,  15  Jolins.  (N.  Y.) 

ham,   06    Me.    539;    Vest   v.  Michie,  31  555. 

Gratt.  (Va.)  149.  ■^  Spofford    v.   Weston,   29    Me.    140; 

2  Vcht  I'.  Michie,  supra;  Goodwin  v.  Parker  v.  Kane,  4  Wis.  1;  Nute  w.  Nute, 
Dean,  50  Conn.  517.  41  N.  II.  60. 

3  Jackson  v.  Van  Valkcnliurgh,  8  Cow.  8  Blaisdell  v.  Stevens,  16  Vt.  179,  186; 
(N.  Y.)  260;  Williamson  i;.  Brown,  15  Bunting  v.  Kicks,  2  Dev.  &  Bat.  (N.  C.) 
N.  Y.  354  ;  and  cases  cited ;  Reed  i'.  Can-  Eq.  130;  and  bce  VViiite  &  Tudor's  Lead, 
non,  50  N.  Y.  345;  and  see  Webster  i;.  Cas.  4th  Am.  ed.  vol.  2d,  j)t.  1,  pj).  152- 
Van  Hicenbergh,  40  Harb.  (N.  Y.)  211.  155. 

*  Dey  V.  Diinhum,  2  Johns.  (N.  Y.)  Ch. 

473 


§  582.]  NOTICE   AS   AFFECTING  PRIORITY. 

disadvantage  by  a  partial  completion  of  the  transaction.^  But 
after  the  sale  is  completed  by  the  payment  of  the  consideration, 
notice  of  a  prior  mortgage  is  without  effect.^ 

If  a  mortgagee  has  notice  of  a  prior  unrecorded  mortgage  be- 
fore paying  over  the  money  secured  by  his  mortgage,  he  takes 
subject  to  the  unrecorded  mortgage,  though  his  own  mortgage 
has  ah'eady  been  recorded.^ 

Lord  Hardwicke  is  reported  to  have  held  that  a  purchaser 
having  notice  of  a  prior  interest  after  payment  of  the  purchase 
money,  but  before  conveyance,  is  not  entitled  to  protection,  for 
the  reason  that  some  suspicion  arises  from  his  not  taking  the 
lesal  estate  at  the  time  when  the  money  is  paid.*  But  the  deci- 
sion is  at  variance  with  all  other  cases  on  this  point ;  and  the  law 
at  the  present  day  upon  the  subject  is  undoubtedly  expressed  in 
the  dictum  of  Lord  Thurlow,  that  "  the  time  when  the  money 
was  advanced  is  that  at  which  the  notice  is  material."  ^  And  in 
the  later  saying  of  Lord  Hatherley,  that  "  in  itself  it  is  imma- 
terial whether  the  purchaser  knows  or  not  that  another  had  an 
equitable  interest  prior  to  his  own,  provided  he  did  not  know 
that  fact  on  paying  his  purchase  money."  ^ 

A  mortgagee  cannot  escape  the  effect  of  a  notice  he  has  re- 
ceived of  a  previous  lien  by  having  forgotten  it  at  the  time  he 
took  the  mortgage.'' 

582.  One  with  notice  may  acquire  a  good  title  from  one 
without  notice.  The  rule,  that  one  purchasing  or  taking  a  mort- 
gage of  property  with  notice  of  some  prior  adverse  claim  to,  or 
interest  in,  such  property,  takes  subject  to  such  interest,  is  sub- 
ject to  the  limitation  that  if  a  person  with  such  notice  acquires  a 
legal  title  to  the  property  from  one  who  is  without  such  notice, 
he  is  entitled  to  the  same  protection  as  his  vendor,  "  as  otherwise 
it  would  very  much  clog  the  sale  of  estates."  ^     Therefore,  if  a 

1  Beckett  v.  Cordley,  1  Bro.  C.  C.  353 ;  6  pucher  v.  Eawlins,  L.  R.  7  Ch.  App. 
English  V.  Waples,  13  Iowa,  57.  259. 

2  Syer  v.  Bundy,  9  La.  Ann.  540 ;  Ja-  '  Hunt  v.  Clark,  6  Dana  (Ky.),  56. 
mison  y.  Gjemenson,  10  Wis.  411 ;  Lynch  ^  Lovvther    v.    Carlton,    2    Atk.    242; 
V.  Hancock,  14  S.  C.  66.  Brandlyn  v.  Ord,  1  Atk.  571  ;  Harrison  v. 

3  Schultze  V.  Houfes,  96  111.  335.  Forth,  Free.  Ch.  51 ;  Sweet  v.  Southcote, 
*  Hardingham  v.  Nichols,  8  Atk.  304 ;     2  Bro.  Ch.  66 ;  Cook  v.  Travis,  22  Barb. 

Wigg  V.  Wigg,  1  Atk.  382 ;  and  see  Mack-  (N.  Y.)  338 ;  S.  C.  20  N.  Y.  400 ;  Varick 

reth  V.  Symmons,  15  Ves.  329,  335,  per  v.  Briggs,  6  Paige  (N.  Y.),  323;  Bell  v. 

Sir  S.  Romilly ;  S.  C  2  Dart.  Vend.  &  P.  Twilight,  18  N.  H.  159  ;  Boynton  v.  Rees, 

4th  ed.  760;  Rayne  v.  Baker,  1  Giff.  241.  s  Pick.  (Mass.)  329  ;  Brackett  v.  Ridlon, 

5  Beckett  v.  Cordley,  supra.  54  Me.  426 ;   Hill   v.  McNichol,  76    Me. 

474  314. 


ACTUAL   NOTICE.  [§  583. 

person  takes  a  mortgage  or  other  conveyance  with  notice  of  a  prior 
incumbrance,  but  takes  it  from  one  who  purchased  without  such 
notice,  and  therefore  acquired  a  title  good  against  such  incum- 
brance, such  subsequent  mortgagee  with  notice  may  shelter  him- 
self under  the  protection  which  the  law  affords  his  grantor  ;  he 
takes  the  hitter's  rights. ^ 

One  who  takes  a  second  mortgage,  with  notice  of  a  prior  un- 
recoi'ded  mortgage,  is  not  the  less  a  purchaser  with  notice,  and 
subject  to  such  mortgage,  because  he  is  at  the  same  time  informed 
that  the  debt  secured  by  such  mortgage  is  usurious.^ 

A  judgment  creditor  who  has  notice  of  an  unrecorded  mortgage 
holds  his  lien  subject  to  the  mortgage.^ 

It  is  no  defence  to  one  who  takes  a  deed  of  land  with  actual 
knowledge  on  his  part  of  a  previous  mortgage  upon  it,  that  the 
parties  to  the  mortgage  agreed  that  it  should  not  be  recorded, 
and  the  mortgagee  received  a  written  guaranty  "  to  hold  him 
harmless  from  any  loss  by  reason  of  not  recording  the  deeds."* 

583.  Another  limitation  to  the  rule  of  notice  arises  when 
a  person  without  notice  in  good  faith  acquires  a  legal  title 
from  one  w^ho  has  notice  of  a  prior  equitable  right.^  The  last 
purchaser's  "  own  bona  fides  is  a  good  defence,  and  the  mala  fides 
of  his  vendor  ought  not  to  invalidate  it."  Therefore,  although 
one  who  has  notice  of  a  prior  unrecorded  mortgage  cannot  himself 
purchase  the  land,  or  take  a  mortgage  upon  it,  without  its  being 
subject  to  such  unrecorded  mortgage,  yet  if  he  sell  the  land  or 
the  mortgage  to  a  purchaser  in  good  faith  before  the  record  of 
the  prior  mortgage,  the  purchaser  from  him  will  acquire  a  title 
superior  to  the  unrecorded  mortgage ;  but  should  such  purchaser 
omit  to  record  his  deed  or  assignment  until  the  mortgage  is  re- 
corded, he  would  stand  in  no  better  position  than*liis  assignor.*^' 

In  like  manner  an  attaching  creditor  without  notice  of  an  un- 

1  Harrington  v.  Allen,  48  Miss.  492 ;  Bcav.  285,  293 ;  Harrison  v.  Forth,  Prec. 
Chance  f.  McWhorler,  26  Ga.  315.  Ch.  51;  M'Queen   v.   Farquhar,   11  Ves. 

2  Beverley  v.   Brooke,  2  Leigh   (Va.),  4G7,  478;  Hill  v.  McNichol,  76  Me.  314. 
425.  «  §  475  ;  Fort  v.  Biirih,  5  Dcnio  (N.  Y.), 

3  See  §  461;  Williams  v.  Tatnall,  29  187;  Jackson  v.  Van  Valkenburgh,  8 
111.  S.W;  Thuina.s  y.  Vatilieu,  28  Cal.  616;  Cow.  (N.  Y.)  260;  Stroud  v.  Lockart,  4 
but  see  Smiili  c  Jordan,  25  Ga.  687  ;  Con-  Dall.  153;  Harrington  v.  Allen,  48  Miss, 
dit  V.  Wilson,  36  N.  J.  Kq.  370.  492;  Westbrook  v.  Gleason,  79  N.  Y.  23, 

••  Ivord  V.  Doyle,  1  Cliflf".  453.  reversing  S.  C.  14  Hun,  245;  Doherty  v. 

^  Merlins  u.JoIiffe,  Amb.  311,  313  ;  and      Stimmel,  40  Ohio  St.  294. 
see,  also.  Attorney  General  v.  Wilkins,  17 

475 


§  584.]  NOTICE   AS   AFFECTING   PRIORITY. 

recorded  deed  will  hold  the  estate,  although  the  debtor  had  notice 
of  it.i 

III.   Implied  Notice. 

584.  Notice  to  the  principal  is  implied  from  notice  to  his 
agent.  When  an  agent  acquires  a  knowledge  of  any  matters  or 
instruments  affecting  the  title  of  any  lands,  about  the  purchase 
or  mortgcige  of  which  he  is  employed,  and  this  knowledge  is  such 
that  it  is  his  duty  to  communicate  it  to  his  principal,  the  law 
imputes  this  knowledge  to  the  principal  ;  or,  in  other  words,  no- 
tice to  the  principal  of  such  matters  or  instruments  is  implied.^ 
Such  notice  is  sometimes  called  constructive  ;  but  it  is  really 
implied  from  the  identity  of  principal  and  agent,  and  not  im- 
puted by  virtue  of  a  construction  placed  upon  their  conduct  or 
relation. 

Notice  to  an  agent,  to  bind  the  principal,'  must  be  brought 
home  to  the  asfent  while  ens:asced  in  the  business»and  negotiation 
of  the  principal,  and  when  it  would  be  a  breach  of  trust  in  the 
former  not  to  communicate  the  knowledge  to  the  latter."^  The 
agency  must  also  be  established.'^  The  knowledge  or  notice  of 
fads  acquired  by  an  attorney,  while  engaged  in  the  business  of  his 
client,  is  knowledge  or  notice  of  them  by  the  client  himself.^ 

Where  a  solicitor  induced  a  client  to  take  a  mortgage  upon  the 
lands  of  a  third  person,  situate  in  the  county  of  Middlesex,  in 
England,  and  soon  afterwards  induced  a  second  client  to  advance 
money  on  a  mortgage  of  the  same  lands,  without  informing  him  of 
the  existence  of  the  first  mortgage,  and  the  second  mortgage  was 
registered  before  the  first  mortgage  was  registered,  it  was  held 
that  the  holder  of  the  second  mortgage  must  be  taken  to  have 
had,  through  the  solicitor,  notice  of  the  first  mortgage,  and  could 
not  by  the  prior  registration  obtain  priority.^     Lord  Chancellor 

1  Coffin  V.  Ray,  1  Met.  (Mass.)  212.  Borel,  12  Cal.  91 ;  Haywood  v.  Shaw,  16 

2  Fuller  V.  Benett,  2  Hare,  394,  and  How.  (N.  Y.)  Pr.  119;  Fry  v.  Shehee,  55 
cases  cited  ;  Williamson  y.  Brown,  15  N.  Ga.  208;  Houseman  t>.  Girard  Mut.  Build. 
Y.  354,  359;  Hovey  v.  Blanchard,  13  N.  &  Loan  Association,  81  Pa.  St.  256;  Mor- 
H.  145  ;  Bank  of  U.  S.  t;.  Davis,  2  Hill  rison  v.  Bausemer,  32  Gratt.  (Va.)  225. 
(N.  Y.),  451  ;  Josephthal  v.  Heyman,  2  *  Caughman  v.  Smith  (S.  C),  5  S.  E. 
Abb.   N.  C.    (N.   Y.)  22;    Josephthal   v.  Rep.  362. 

Steffen,   8  N.  Y.  Weekly  Dig.  61  ;  Wal-  ^  Jones    v.    Bamford,   21    Iowa,   217  ; 

ker  V.  Schreiber,  47  Iowa,  529 ;  Donald  v.  Jackson  v.  Van  Valkenburgh,  8  Cow.  (N. 

Beals,  57  Cal.  399  ;  Bigley  v.  Jones,  114  Y.)  260.     And  see  Josephthal  v.  Heyman, 

Pa.  St.  510;  7  Atl.  Rep.   54 ;  Yerger  v.  2  Abb.  N.  C.  (N.  Y.)  22;  S.  C.  4  Cent.  L. 

Barz,  56  Iowa,  77.  J.  368. 

8  Pringle  i;.Dunn,37  Wis.  449;  Mayu.  ^  Rolland   v.  Hart,  L,  R.  6  Ch.  App. 

476  "8. 


IMPLIED  NOTICE.  [§§  585,  586. 

Hatherley  said  :  "  It  has  been  held  over  and  over  again  that 
notice  to  a  solicitor  of  a  transaction,  and  about  a  matter  as  to 
which  it  is  part  of  his  duty  to  inform  himself,  is  actual  notice 
to  the  client.  Mankind  would  not  be  safe  if  it  were  held  that, 
under  such  circumstances,  a  man  has  not  notice  of  that  which  his 
agent  has  actual  notice  of.  The  purchaser  of  an  estate  has,  in 
ordinary  cases,  no  personal  knowledge  of  the  title,  but  employs  a 
solicitor,  and  can  never  be  allowed  to  say  that  he  knew  nothing 
of  some  prior  incumbrance  because  he  was  not  told  of  it  by  his 
solicitor." 

585.  "It  is  a  moot  question  upon  what  principle  this  doc- 
trine rests,"  says  Vice-Chancellor  Kindersley.^  "  It  has  been  held 
by  some  that  it  rests  on  this :  that  the  probability  is  so  strong 
that  the  solicitor  would  tell  his  client  what  he  knows  himself, 
that  it  amounts  to  an  irresistible  presumption  that  he  did  tell 
him  ;  and  so  you  must  presume  actual  notice  on  the  part  of  the 
client.  I  confess  my  own  impression  is,  that  the  principle  on 
which  the  doctrine  rests  is  this :  that  my  solicitor  is  alter  ego  — 
he  is  myself ;  I  stand  in  precisely  the  same  position  as  he  does  in 
the  transaction,  and  therefore  his  knowledge  is  my  knowledge ; 
and  it  would  be  a  monstrous  injustice  that  I  should  have  the  ad- 
vantage of  what  he  knows  without  the  disadvantage.  But  what- 
ever be  the  principle  upon  which  the  doctrine  rests,  the  doctrine 
itself  is  unquestionable." 

"  In  such  a  case,"  said  Lord  Chancellor  Brougham,^  "  it  would 
be  most  iniquitous  and  most  dangerous,  and  give  shelter  and  en- 
couragement to  all  kinds  of  fraud,  were  the  law  not  to  consider 
the  knowledge  of  one  as  common  to  both,  whether  it  be  so  in 
fact  or  not." 

586.  The  notice  must  be  in  the  same  transaction.  Notice 
to  the  agent  binds  the  principal  only  when  it  is  given  to  or  ac- 
quired by  him  in  the  transaction  in  which  the  principal  employs 
him.'^     Tlie  reason  for  this  limitation  has  been  stated  to  be,  that 

1  Boursot  V.  Savage,  L.  R.  2  Eq.  134,  and  see  2  White  &  Tudor's  Lead.  Cas.  in 
142.  Eq.  4th  Am.  ed.  pt.  1,  pp.  170,  173  ;  and 

2  Kennedy  i-.  Green,  3  M}1.  &  K.  699,  see  Kolland  v.  Hart,  L.  K.  6  Ch.  App. 
719.     And  see  Bradlcv  v.  Riches,  L.  R.  9  678. 

Ch.  I).  189.  "It  was  said,   in  substance,    by  Lord 

3  Warricii  v.  Warrick,  :i  Atk.  291,  294,  llardwickc,  in  Warrick  v.  Warrick,  supra, 
per  Lord  llardwickc;  Fitz;,'crald  v.  Fau-  that  notice  to  tiie  agent  or  counsel,  who 
conbcrg,  Fitz  (j.  207  ;  Fuller  i;.  IJeuett,  was  cinjdoyed  in  the  business  by  another 
2  Hare,  404  ;  New  York  Central  Ins.  Co.  person,  or  in  another  bn>inc.s.M,  and  at  an- 
V.  National  Ins.  Co.  20  Barb.  (N.  Y.)  408;  other  lime,  is  no  notice  to  his  client  who 

477 


§  587.]  NOTICE   AS   AFFECTING  PRIORITY. 

an  agent  cannot  stand  in  the  place  of  the  principal  until  the  rela- 
tion is  constituted ;  and  that  as  to  all  the  information  which  he 
has  previously  acquired,  the  principal  is  a  mere  stranger.^  An- 
other explanation  commonly  made  of  the  rule  is,  that  the  agent 
may  have  forgotten  the  former  transaction.  Under  this  latter 
view  of  the  doctrine,  the  criticism  of  Lord  Eldon^  might  well  be 
regarded  as  shaking  it ;  but  it  is  suggested  in  later  cases,  that  it 
was  not  the  purpose  of  his  dictum  to  question  the  general  doc- 
trine itself.  At  any  rate  this  has  been  insisted  upon  ever  since 
his  time,  and  may  be  regarded  as  settled.^ 

When  the  agent  or  attorney  is  employed  by  a  person  in  several 
mortgage  transactions,  and  he  acts  for  the  mortgagees  also  in  all 
of  them,  although  the  transactions  are  distinct,  the  later  mort- 
gagees are  said  to  be  affected  with  notice  of  the  earlier  mort- 
gages ;  on  the  ground  that  the  transactions  follow  each  other  so 
closely  that  they  amount  to  a  continuous  dealing  with  the  same 
title.*  This  exception  would  remain  good  only  when  the  mort- 
gagor was  the  same  in  all  the  transactions,  and  the  same  attorney 
is  employed  in  all. 

687.  The  notice  must  be  of  some  matter  material  to  the 
transaction ;  of  some  thing  which  it  is  the  duty  of  the  agent  to 
make  known  to  the  principal.^  If  the  agent  acts  merely  in  a 
ministerial  capacity,  as,  for  instance,  in  obtaining  the  execution 
of  a  deed,  the  principal  is  not  affected  with  the  agent's  knowl- 
edge.^ In  like  manner,  a  mortgagor  to  whom  a  mortgage  is  in- 
trusted for  record  is  not  such  an  agent  of  the  mortgagee  that 
notice  to  him  of  an  incumbrance,  or  his  knowledge  of  it,  is  con- 
structive notice  to  the  mortgagee.^  As  pointed  out  by  Lord  West- 
employs  him  afterwards.  It  would  be  that  if  an  attorney  has  notice  of  a  trans- 
very  mischievous  if  it  was  so  ;  for  the  action  in  the  morning,  he  shall  be  held  in 
man  of  most  practice  and  greatest  emi-  a  court  of  equity  to  have  forgotten  it  in 
nence  would  then  be  the  most  dangerous  the  evening."  And  see  Hargreaves  v. 
to  employ."  Rothwell,    1    Keen,   154;    Brotherton   v. 

1  Mountford  v.  Scott,  3  Madd.  40;  and     Hatt,  2  Vern.  574;  Constant  v.  Am.  Bap. 
see  Fuller  v.  Benett,  2  Hare,  394,  per  Sir     Soc.  21  J.  &  S.  170. 
J.  Wigram.  8  Fuller  v.  Benett,  supra. 

-  When  the  case  of  Mountford  v.  Scott  *  Brotherton r.  Hatt, supra;  Hargreaves 
was  on  appeal  before  Lord  Eldon,  L.  C.  v.  Rothwell,  supra;  Winter  v.  Anson,  1 
(Turn.  &  R.  274),  he  remarked  that  "it  gim.  &  St.  434;  S.  C.  3  Russ.  488,  493  ; 
might  fall  to  be  considered,  whether  one  and  see  Distilled  Spirits,  U  Wall.  356. 
transaction  might  not  follow  so  close  upon  5  Wyllie  v.  Pollen,  32  L.  J.  (N.  S.)  Ch. 
the  other  as  to  render  it  impossible  to  give     732. 

a  man  credit  for  having  forgotten  it.     I         6  Wyllie  v.  Pollen,  supra. 
should  be  unwilling  to  go  so  Jar  as  to  say  7  Anketel  v.  Converse,  17  Ohio  St.  n  ; 

478  Hoppock  V.  Johnson,  14  Wis.  303. 


IMPLIED   NOTICE.  [§§  588,  589. 

bury,i  a  solicitor  whose  notice  affects  his  client  must  be  a  solicitor 
"  for  the  confidential  purpose  of  advising ;  "  otherwise  there  is  no 
duty  on  his  part  to  communicate  the  knowledge  to  the  client,  and 
the  doctrine  of  implied  notice  has  no  application. 

Notice  of  the  existence  of  an  unrecorded  mortgage  upon  the 
property  to  an  officer  emplo^'ed  to  make  an  attachment  is  notice 
to  the  plaintiff,  and  is  equivalent  to  a  record  in  protecting  it 
against  the  attachment.^  But  such  knowledge  on  the  part  of  an 
attorney  who  makes  the  writ,  but  has  no  agency  in  procuring  the 
attachment,  has  been  held  not  to  affect  the  plaintiff.^ 

588.  When  the  same  agent  or  attorney  is  employed  by 
both  parties  in  the  same  transaction,  his  knowledge  is  then  the 
knowledge  of  both  the  vendor  and  vendee,  of  both  the  mortgagor 
and  mortgagee.^  In  such  case,  moreover,  the  rule  that  the  agent's 
notice  must  be  in  the  same  transaction  is  less  strictly  adhered  to.^ 
Thus,  where  a  person  made  two  successive  mortgages  of  the  same 
property,  and  then  gave  a  further  charge  to  the  first  mortgagee, 
and  the  same  solicitor  was  employed  in  all  three  transactions,  it 
was  held  that  the  first  mortgagee  had  implied  notice  of  the  second 
mortgagee's  incumbrance,  and  that  the  latter  was  entitled  to  pri- 
ority over  the  further  charge  to  the  first  mortgagee.'' 

589.  When  the  attorney  himself  is  the  borrower,  the  rule, 
that  the  knowledge  of  the  attorney  is  the  knowledge  of  the  client, 
has  no  application.  Therefore,  where  one  was  attorney  for  two 
persons,  and  executed  to  one  of  them  a  mortgage,  which  was  not 
recorded,  and  afterwards  executed  another  mortgage  of  the  same 
premises  to  the  other,  and  this  mortgage  w^as  recorded,  it  was 
held  that  the  priority  of  the  latter  mortgage  was  not  affected  by 
the  attorney's  knowledge  of  the  mortgage  first  executed."  When- 
ever the  agent  is  "  the  contriver,  the  actor,  and  the  gainer  of  the 
transaction,"  the  reason  for  charging  the  principal  with  notice  of 
the  facts  no  longer  exists.* 

1  In  Wyllie  r.  Pollen,  32  N.  J.  (N.  S.)         c  Hargrcavcs  v.  Kothwell,  1  Keen,  154. 

Ch.  782.  See  Jamison  v.  Gjcmenson,  10  Wis.  411. 

•■^  Tucker  v.  Tilton.  S.")  N.  II.  223.  7  Hope  y.  ins.  Co.   v.  Canilirellin-,',  1 

3  Tucker  v.  Tilton,  supra.  Hun  (N.  Y.),  493.     And  see  lioUand  v. 

*  Losiy   V.   Simpson,   11   N.  J.  Eq.  (3  Hart,  L.  R.  6  Ch.  App.  678,  683,  per  Lord 

Stock.)  240.  See  Astor  i;.  Wells,  4  Wheat.  Ilatlierley  ;  Kennedy  v.  Green,  3  Myl.  & 

460;  Cou.stanti;.  Am.Bap.  Soc.  21  J.  &S.  K.  099  ;    McCorniick    r.  Wheeler,  36  111. 

(N.  Y.)  170.  114  ;  Winchester  y.  IJalto.  &,  Husciuchaiiiia 

6  Fuller  V.  IJenctt,  2  Hare,  403  ;  Broth-  K.  U.  Co.  4  Md.  231. 
ertou  V.  Halt,  2  Vcrn.  574.  8  Kennedy  v.  Green,  supra. 

479 


§  590.]  NOTICE   AS   AFFECTING  PRIORITY. 

In  like  manner,  when  the  agent  is  guilty  of  any  fraud,  for  the 
carrying  out  of  which  it  is  necessary  that  he  should  conceal  it 
from  his  principal,  notice  of  it  cannot  be  imputed  to  the  latter.^ 
"  It  must  be  made  out  that  distinct  fraud  was  intended  in  the 
very  transaction,  so  as  to  make  it  necessary  for  the  solicitor  to 
conceal  the  facts  from  his  client,  in  order  to  defraud  him.'.'^  The 
fraud  must  exist  independently  of  the  question  whether  the  act 
was  communicated  to  the  principal  or  not.^ 

Applying  these  principles,  the  High  Court  of  Justice  of  Eng- 
land in  a  recent  case,  where  a  trustee  who  was  a  solicitor  used 
trust  funds  in  purchasing  an  estate  which  was  conveyed  to  his 
brother,  and  afterwards  acted  as  solicitor  for  the  mortgagee  in 
raising  money  on  the  estate,  held,  that  the  fraud  of  the  solicitor 
ran  through  the  whole  transaction,  and  prevented  the  imputation 
of  notice.* 

In  other  words,  if  the  act  done  by  the  agent  is  such  as  cannot 
be  said  to  be  done  by  him  in  the  character  of  agent,  but  is  done 
by  him  in  the  character  of  a  party  to  an  independent  fraud  on 
his  principal,  it  is  not  to  be  imputed  to  the  principal  as  an  act 
done  by  his  agent.^  Or,  to  state  the  matter  somewhat  differently, 
notice  is  imputed  to  the  principal  by  reason  of  the  agent's  knowl- 
edge, unless  there  are  such  circumstances  in  the  case,  independ- 
ently of  the  fact  under  inquiry,  as  to  raise  an  inevitable  conclusion 
that  the  notice  had  not  been  communicated.^ 

590.  Director  of  a  corporation.  —  A  corporation  taking  a 
mortsfasfe  of  land  is  not  chargeable  with  constructive  notice  of  a 
prior  conveyance  of  it  by  the  mortgagor,  because  the  latter  was, 
at  the  date  of  the  deed  and  of  the  mortgage,  a  director  of  the 
company,  for  in  such  a  transaction  the  mortgagor  deals  with  the 
company  as  a  third  party  on  his  own  behalf,  acting  for  himself 
with  and  against  the  company,  and  not  for  it." 

*  Kennedy  v.   Green,  3  Myl.  &  K.  699  ;  5  Cave  v.  Cave,  supra,  per  Fry,  J. ;  Es- 
and  see  In  re  European  Bank,  L.  R.  5  Ch.  pin  v.  Pemberton,  3  De  G.  &  J.  547. 
App.  358  ;  Fulton  Bank  t;.  N.  Y.  &  Sharon  6  Thompson   v.   Cartwright,   33   Beav. 
Canal  Co.  4  Paige  (N.  Y.),  127.  178. 

2  Holland  v.  Hart,  L.  R.  6  Ch.  App.  '  La  Farge  Fire  Ins.  Co.  v.  Bell,  22 
678,682.  Barb.   (N.   Y.)  54,  61.     "If   his  position 

3  Atterbury  v.  Wallis,  8  De  G.,  M.  &  as  a  director,"  says  Mr.  Justice  Emott, 
G.  454,466;  and  see  Sharpe  f.  Foy,  L.  R.  "could  make  him  the  figent,  or  rather 
4  Ch.  App.  35  ;  Hewitt  v.  Loosemore,  9  identify  him  entirely  with  the  plaintiffs  in 
Hare,  449,  455.  such  sort   as  to   charge  them   with   con- 

*  Cave  V.  Cave,  L.  R.  15  Ch.  D.  639.  structive  notice  of  all  the  facts  with  which 

480 


CONSTRUCTIVE   NOTICE.  [§§  591,  592. 

IV.   Constructive  Notice. 

591.  In  general.  —  Constructive  notice  is  that  wbich  is  im- 
puted to  a  person-  of  matters  which  he  necessarily  ought  to  know, 
or  which,  by  the  exercise  of  ordinary  diligence,  he  might  know. 
It  cannot  be  controverted.^  The  most  familiar  instance  of  con- 
structive notice  is  that  which  under  the  registry  laws  is  afforded 
by  the  record  of  a  deed.  Every  subsequent  inquirer  is  bound  to 
know  the  existence  and  contents  of  such  deed.  But  there  are 
various  other  kinds  of  constructive  notice,  and  a  purchaser  or 
mortgagee  is  as  much  bound  by  the  knowledge  thus  imputed  to 
him  of  matters  and  instruments  affecting  the  title  to  property,  as 
he  would  be  if  he  were  informed  of  them  by  a  deed  properly  re- 
corded. Whether  the  person  charged  with  such  notice  actually 
had  knowledge  of  the  facts  affecting  the  property  in  question,  or 
might  have  learned  them  by  inquiry,  or  whether  he  studiously 
abstained  from  inquiry  for  the  very  purpose  of  avoiding  notice, 
he  is  alike  presumed  to  have  had  notice.^ 

592.  Constructive  notice  is  imputed  either  upon  the 
ground  of  fraud  or  of  negligence.  It  does  not  exist  without 
one  or  the  other.  ''  If,  in  short,  there  is  not  actual  notice  that 
the  property  is  in  some  way  affected,"  says  Vice-Chancellor 
Wigram,3  "and  no  fraudulent  turning  away  from  a  knowledge 
of  facts  which  the  res  gestce  would  suggest  to  a  prudent  mind ;  if 
mere  want  of  caution,  as  distinguished  from  fraudulent  and  wilful 
blindness,  is  all  that  can  be  imputed  to  a  purchaser,  there  the 
doctrine  of  constructive  notice  will  not  apply  ;  there  the  pur- 
he  was  personally  acquainted  as  to  the  r.  Bailey  (Me.),  9  At).  Rep.  122.  See  arti- 
title  to  lands  in  which  they  had  any  inter-  cle  on  Constructive  Notice,  by  William  L. 
est,  in  any  case,  it  could  not  be  so  when     Scott,  17  Am.  Law  Rev.  849. 

he  did  not  become  concerned  as  their  es-  As  to  tlie  term  ordinary  diligence,  see 

pecial  agent,  or  transact  business  in  their  Passumpsic  Sav.  Bank   v.   Nat.  Bank  of 

behalf.    Most  clearly  it  cannot  be  the  case  St.  Johnsbury,  53  Vt.  82,  90. 

where  the  facts  concerned  his  private  af-  "^  Whitbread    v.    Jordan,    1    Y.    &   C. 

fairs,  and  the  transaction  was  one  in  which  Exch.  303,  328  ;  Jones  u.  Smith,  1   Hare, 

he  was  dealing  with  the   company  as   a  43,55;  Bisco  v.  Banbury,  1  Ch.  Ca.  287, 

third  party  on  his  own  behalf,  and  acting  291 ;  Ware  v.  Egraont,  4  De  G.,  M.  &  G. 

for  himself  with  and  against  them."  460,   473  ;    and  see  cases  collected  in   2 

1  Plumb  V.  Fluitt,  2  Anst.  432,438,  per  White  &  Tudor's  Lead.  Gas.  4th  Am.  ed. 

Ilyre,  C.  B. ;  Kennedy  v.  Green,  3  Myl.  &  p.  121  ;  Jackson  v.  Blackwood,  4  McAr. 

K.    699,   719;    Hewitt  v.   Loosemore,    9  (D.  C.)  188. 

Hare,  449;  Grifhth  f.  Griilith,   Hon'.   (N.  «  Jones   v.    Smith  supra;   aOirmed  on 

V.)   153;    Weildcr  i'.   Farmers'   Bank  of  appeal,  1  Ph.  244. 
Lantrastcr,  1 1    S.   &  K.  (I'a.)  134;  Knapp 

VOL,  I.              31  481 


§§  593,  594.]        NOTICE  as  affecting  priority. 

chaser  will  in  equity  be  considered,  as  in  fact  he  is,  a  bond  fide 
purchaser  without  notice."  In  another  case  Vice-Chancellor 
Turner  said :  ^  '*  When  this  court  is  called  upon  to  postpone  a 
legal  mortgage,  its  powers  are  invoked  to  take  away  a  legal  right, 
and  I  see  no  ground  which  can  justify  it  in  doing  so,  except 
fraud,  or  gross  and  wilful  negligence,  which  in  the  eye  of  this 
court  amounts  to  fraud." 

593.  Notice  of  the  existence  of  the  lien  without  the  partic- 
ulars of  it  is  sufficient.  One  who  has  knowledge  of  a  prior 
unrecorded  mortgage  upon  some  portion  of  the  premises  of  which 
he  is  about  to  purchase  a  part  is  bound  by  such  knowledge  to  as- 
certain the  extent  of  that  mortgage,  and  whether  it  covers  the 
portion  of  the  property  he  is  about  to  acquire  an  interest  in,  and 
he  will  be  postponed  to  such  prior  mortgage,  even  if  this  proves 
to  be  an  incumbrance  upon  the  whole  property .^  Having  notice 
of  its  existence  he  is  chargeable  with  notice  of  all  its  contents.^ 
One  having  notice  of  the  existence  of  a  mortgage  can  only  ac- 
quire an  interest  subordinate  to  it,  though  the  mortgage  fails  to 
recite  the  amount  of  the  note  which  it  was  given  to  secure,*  or 
it  recites  that  it  was  given  to  secure  "  any  indebtedness  "  of  the 
mortgagor  to  the  mortgagee,  and  these  words  referred  only  to  a 
future  indebtedness.^ 

One  having  notice  that  an  estate  is  incumbered  is  not  justified 
in  assuming  that  the  incumbrance  is  one  already  known  to  him  ; 
he  is  bound  to  inquire  into  the  nature  and  extent  of  the  charge 
referred  to.^  A  notice  of  a  lease  is  notice  of  all  the  covenants 
and  provisions  contained  in  it.'' 

594.  Notice  from  recitals.  —  When  a  person  claims  under  a 
deed  which  by  its  recitals  leads  him  to  other  facts  affecting  the 
title  to  the  property,  he  is  presumed  to  know  such  facts  ;  for  it 
would  be  gross  negligence  in  him  not  to  make  inquiry  as  to  the 
facts  he  is   thus  put  in  the  way  of  ascertaining.^     A  recital  or 

1  Hewitt  V.  Loosemore,  9  Hare,  449,  Cauble,  72  Ind.  67  ;  Ijames  v.  Gaither,  93 
458.  N.  C.  358,  362. 

2  2  White  &  Tudor's  Lead.  Cas.  in  Eq.  *  Wilson  v.  Vaughan,  61  ]\Iiss.  472. 
4th  Am.  ed.  pt.  I,  190;  Williuk  v.  Morris  6  Simons  v.  First  Nat.  Banl?,  93  N.Y. 
Canal  &  Banking  Co.  4  N.  J.  Eq.  (3  Green)  269.     See,  however,  §  344 ;  Morris  v.  Mur- 
377  ;  and  see  Hall  v.  Smith,  14  Ves.  426 ;  ray,  82  Ky.  36. 

Guion  V.  Knapp,  6  Paige  (N.  Y.),  35.  «  Jones  v.  Williams,  24  Beav.  47. 

3  George  v.  Kent,  7  Allen  (Mass  ),  16  ;  ^  Taylor  v.  Stibbert,  2  Ves.  Jun.  437. 
Pike  V.  Goodnow,  12  lb.  472,  474;  Barr  »  Bacon  v.  Bacon,  Tothill,  133;  Moore 
V.  Kinard,  3  Strobh.  (S.  C.)  73 ;  Martin  v.  v.  Bennett,  2  Ch.  Ca.  246 ;  Buchanan  v. 

Balkum,   60  N.  H.  406;  iEtna  Life  Ins. 

482 


CONSTRUCTIVE   NOTICE.  [§  594. 

description  in  a  deed,  to  have  this  effect,  must  be  in  the  course  of 
the  title  under  which  the  purchaser  chdms.^  It  must  be  suffi- 
ciently clear  to  put  the  purchaser  upon  inquiry,  and  to  lead  him 
to  the  requisite  information.  If  the  recital  does  not  explain  itself, 
it  must  refer  to  some  deed  or  fact  which  will  explain  it,  to  make 
it  constructive  notice.-  Notice  flowing  from  matters  of  record  can 
never  be  more  extensive  than  the  facts  stated  or  referred  to.^ 

A  description  of  a  portion  of  the  land  described  in  a  deed  as 
"  land,  the  title  to  which  is  in  A.,  given  as  collateral  security  to 
pay  certain  notes,"  is  sufficient  notice  to  the  purchaser  of  an  un- 
recorded mortgage  to  A.  to  preserve  the  priority  of  the  mort- 
gage.* But  a  purchaser  from  one  who  has  covenanted  to  pay  all 
legal  mortgages  and  incumbrances  of  whatever  nature  and  de- 
scription on  the  premises  is  not  put  upon  inquiry  as  to  any  incum- 
brance not  of  record,  when  there  is  a  mortgage  of  record  to  which 
the  covenant  could  properly  refer.  Neither  could  he  be  charged 
with  constructive  notice  of  a  mortgage  improperly  recorded,  as, 
for  instance,  one  without  seal.^ 

A  note  secured  by  a  mortgage  or  deed  of  trust,  and  referring 
to  such  mortgage  or  deed  by  a  statement  that  the  note  is  secured 
by  a  moitgage  or  deed  of  trust,  as  the  case  may  be,  gives  notice 
of  the  terms  of  the  mortgage  or  deed  of  trust,  so  far  as  these 
terms  in  any  way  qualify  the  terms  of  the  note,  and  the  holder  of 
the  note  is  bound  by  such  provisions  of  the  mortgage  ;^  thus,  he 
is  bound  by  a  provision  in  the  mortgage  that  the  non-payment  of 
interest  on  the  note  shall  have  the  effect  of  making  the  note  due 
and  payable  at  once."" 

Co.  V.  Ford,  89  111.  252;  S.  C.  11  Chicago  mortgage,  the  following  words  were   in- 

L.  N.  47;  United  States  Mortgage  Co.  v.  closed  in  parenthe.-i.s :  — 

Gross,  9.3   111.   483;   Foster  v.  Strong,  5  /     Of  six  hundred  dollars                 said\ 

Bradw.  (111.)  223;  Hassey  v.  Wilke,   55  \ premises  are  subject  to  a  former            / 

Cal.  525 ;  Parke  v.  Neeley,  90  Pa.  St.  52 ;  It  was  held  that  this  was  notice  of  a 

Reeves  v.  Vinacke,  1  McCrary,  213  ;  Cen-  prior  mortgage  of  that  amount. 

tral  Trust  Co.  v.  Wabash,  &c.  Ily.  Co.  29  3  Gale   v.   Morris,   29   N.  J.  Eq.  222  ; 

Fed.  Kep.  546;  Clark  v.  Holland  (Iowa),  Briggs  v.  Rice,  130  Mass.  50;  Norman  v. 

:i3  N.  W.  Rep.  350;  ^tna  L.  Ins.  Co.  ?•.  Towne,  130  Mass.  52;  Branch  r.  Giithu 

Bishop,  69  Iowa,  645.  (N.  C),  5  S.  E.  Rep.  393. 

•  Boggs   V.  Varner,  6  W.   &  S.  (Pa.)  *  I)unli:un  v.  IKy,   15  Johns.   (N.  Y.) 

409;  Mueller  v.  Eiigeln,  12  Bush  (Ky.),  555. 

441.  ''  Racouillat  v.  Rene,  32  Cal.  450. 

-  White  V.  Carjientcr,  2  Paige  (N.  Y.),  «  Orrick  r.  Durham,  79  Mo.  174. 

217.     In  Sanborn  v.  Robinson,  54  N.  11.  ''  Noell  v.  Gaint.s  C8  Mo.  649;  ^".  C.  8 

2.39,  at  the  close  of  the  description  iu  a  Cent.   L.  J.   353  ;   Clark  v.  Bullard,   66 

Iowa,  747. 

483 


§  595.]  NOTICE    AS   AFFECTING   PRIORITY. 

595.  One  who  purchases  land  by  a  deed,  which  expressly 
recites  that  the  premises  are  subject  to  a  mortgage,  has  no- 
tice of  the  mortgage  from  the  recital,  and  cannot  claim  against  it, 
although  it  be  not  recorded. ^  In  like  manner,  and  for  stronger 
reasons,  one  who  has  purchased  land  subject  to  a  mortgage,  which 
he  agrees  to  pay,  takes  a  title  subject  to  the  mortgage,  although 
it  be  not  recorded,  or  be  recorded  in  such  a  way  that  it  is  not 
notice.^ 

A  mortgagee  whose  mortgage  recites  that  another  mortgage  is 
a  first  lien  upon  the  property,  cannot  claim  that  his  mortgage 
takes  precedence  of  a  new  mortgage  after wai'ds  executed  and  re- 
corded, to  correct  a  mistake  in  the  description  of  the  property  in 
the  first  mortgage.^ 

Where  two  mortgages  made  by  the  same  person  upon  the  same 
land,  as  parts  of  one  transaction,  though  dated  on  different  days, 
refer  to  each  other,  the  question  of  priority  depends  upon  the 
intention  of  the  parties  as  determined  by  the  terms  in  which  the 
references  are  made.* 

In  Ohio,  where  the  statute  is  such  that  a  mortgage  takes  effect 
only  from  its  delivery  for  record,  and  its  priority  is  not  affected 
by  notice  of  a  prior  unrecorded  mortgage,  of  course  the  mere 
mention  of  a  prior  mortgage  in  the  deed,  as,  for  instance,  ex- 
cepting it  from  the  covenants  of  warranty,^  does  not  affect  the 
priority  given  by  the  record  ;  yet,  if  the  mortgage  be  expressly 
made  subject  to  another,  priority  of  record  will  avail  nothing.^ 
Moreover,  one  taking  a  mortgage  made  expressly  subject  to  a 
prior  mortgage  cannot  avoid  it  and  acquire  a  larger  lien  than 
contracted  for,  although  that  mortgage  be  invalid  as  against 
the  mortgagor.''  When  a  mortgage  is  expressly  excepted  from 
a  covenant  of  warranty  in  a  deed,  this  exception  charges  the  pur- 
chaser with  notice  of  the  mortgage,  although  the  mortgage  be  not 
recorded.^ 

It  is  a  general  rule,  as  elsewhere  shown,  that  when  the  mort- 

1  §§  736,  744 ;  Eeeves  v.  Vinacke,  1  Mc-  *  Iowa  College  v.  Fenno,  67  Iowa,  244. 
Crary,  213;  Westervelt  v.  Wyckoff,  32  N.  °  Bercaw  v.  Cockerill,  20  Ohio  St.  163. 
J.  Eq.  188 ;  Hull  v.  Sullivan,  63  Ga.  126 ;  6  Coe  v.  Col.,  Piqua  &  Ind.  K.  K.  Co. 
Garrett  v.  Puckett,  15  Ind.  485;  George  10  Ohio  St.  372,  406. 

r.  Kent,   7    Allen    (Mass.),   16;   Howard  ^  jjardin  y.  Hyde,  40  Barb.  (N.Y.)  435; 

V.   Chase,    104    Ma.=s.    249  ;    Kitchell    v.  Freeman  v.  Auld,  44  N.  Y.  50,  reversing 

Mudgett,  37  Mich.  81.  S.  C.  44  Barb.  14 ;  S.  C.  37  Barb.  587. 

2  Ross  V.  Worthington,  11  Minn.  438.  8  Morrison  r.  Morrison,  38  Iowa,  73. 
^  Council  Bluffs  Lodge  v.  Billups,  67 

Iowa,  674. 

484 


CONSTRUCTIVE  NOTICE.  [§  596. 

gaged  premises  Lave  been  sold  in  parcels  to  different  persons  at 
different  times,  in  the  absence  of  any  intervening  equities,  the  sev- 
eral parcels  are  subject  to  the  mortgage,  and  are  to  be  resorted  to 
in  the  inverse  order  of  alienation.^ 

When,  however,  the  first  purchaser  express!}^  takes  subject  to 
the  mortgage,  he  has,  of  course,  no  equity  as  against  the  mort- 
gagor that  the  portion  still  held  by  the  latter  shall  be  first  ap- 
plied to  the  payment  of  the  incumbrance  ;  and  having  no  equity 
against  him,  he  has  none  against  his  grantee.  By  taking  such  a 
deed  he  consents  that  the  land  shall  remain  subject  to  its  jno  rata 
share  of  the  debt.^ 

A  purchaser  having  actual  notice  of  a  mortgage  is  affected  not 
only  with  the  incumbrance  of  such  mortgage,  but  with  any  other 
incumbrances  which  are  referred  to  in  that  mortgage,  or  in  other 
deeds  to  which  the  deeds  first  referred  to  may  in  turn  refer.^ 
Having  notice  of  the  mortgage  the  purchaser  is  bound  to  know 
the  contents  of  it,  and  that  would  lead  him  to  other  deeds,  in 
which,  pursued  from  one  to  another,  the  whole  case  would  be 
discovered  to  him.*  Though  the  contents  of  a  deed  be  stated  to 
a  purchaser,  and  he  relies  upon  such  statement,  and  the  state- 
ment be  erroneous,  he  is  bound  by  its  real  contents  ;^  and  in  like 
manner,  if  he  has  knowledge  of  an  unrecorded  mortgage,  and  rests 
upon  the  vendor's  assurance  that  the  debt  secured  by  it  has  been 
satisfied,  he  does  so  at  his  peril.^ 

596,  A  general  description  of  the  debt  is  sufficient.  A 
party  wilfully  closing  his  eyes  against  the  lights  to  which  his 
attention  has  been  directed,  and  which,  if  followed,  wouUl  lead  to 
a  knowledge  of  all  the  facts,  is  chargeable  with  notice  of  every 
fact  that  he  could  have  obtained  by  the  exercise  of  reasonable  dil- 
igence.^    It  is  sufficient  notice  of  an  incumbrance  to  put  a  pur- 

1  Iglehart  v.  Crane,  42  III.  261  ;  Mc-  *  Bisco  v.  Banbury,  supra,  per  Lord 
Kinney  v.  Miller,   19   Mich.  142.     See  §     Chancellor. 

1620.  6  Jones  v.  Smith,  1  Hare,  43  ;  on  appeal 

2  Briscoe  v.  Power,  47  111.  447.  affirmed,  I  Ph.  244,  and  cases  cited.     But 

3  Bisco  V.  Banbury,  1  Ch.  Ca.  287;  see  Drysdale  v.  Mace,  2  Sm.  &  G.  225; 
Coppin  V.  Fernyhou},'h,  2  Bro.  C.  C.  291  ;  S.  C.  .")  Dc  G.,  M.  &  G.  103. 

Hope  I'.  Liddell,  21   Beav.  183  ;  Howard  «  Price  v.  McDonsild,  1   Md.  403;  Hud- 
Ins.  Co.  V.  Ilalscy,  8  N.  Y.  271  ;  Green  v.  son  r.  Warner.  2  Harris  &  G.  (Md.)  415. 
Slaytcr,  4  .Johns.   (N.    Y.)    Ch.  38.     Sec  ^  Jackson,    L.  &  S.  11.  (^o.  c.  Davison 
Cambrid),'e    Valley    Bank   r.    Delano,  48  (Midi.),  37  N.  W.  Rep.  .o37 ;  Converse  w. 
N.  Y.  320  ;  and  M-e  Bent  v.  Coleman,  89  Blumriili,  14  Mich.  lO'.t,  120. 
111.  364  ;  S.  C.  7  Reporter,  306. 

485 


§  596.]  NOTICE    AS   AFFECTING   PRIORITY. 

chaser  upon  inquiry,  that  the  mortgage,  duly  recorded,  names  a 
sum  of  $500  in  addition  to  a  note  secured.^ 

In  like  manner,  where  a  mortgage  secured  several  notes,  but 
in  the  record  the  description  of  one  of  them  was  omitted,  though 
the  aggregate  amount  of  the  notes  was  given  coi-rectly,  it  was 
held  that  the  mortgage  was  notice  to  a  purchaser  for  the  full 
amount  of  the  mortgage  notes.^  When  a  deed  was  made  subject 
to  "  two  mortgages  for  $2,000,"  with  warranty  against  all  claims, 
"  except  said  mortgages,"  and  there  were  two  prior  mortgages, 
one  for  $1,500,  which  was  recorded,  and  of  which  the  purchaser 
had  actual  knowledge,  and  one  of  $2,000,  which  was  not  re- 
corded, and  of  which  he  had  no  notice  except  such  as  was  given 
by  the  deed,  it  was  held  that  the  recitals  in  the  deed  were  suffi- 
cient to  put  him  upon  inquiiy,  and  to  charge  him  with  actual 
knowledge  of  the  unrecorded  mortgage.^ 

A  general  description  of  the  debt  secured  is  sufficient  to  put 
all  parties  interested  upon  inquiry,  and  to  charge  them  with  no- 
tice of  all  facts  that  could  be  obtained  by  the  exercise  of  ordinary 
diligence  and  the  px-osecution  of  the  inquiry  in  the  right  direc- 
tion.'^ 

The  limit  of  inquiry  necessary  in  any  case  is  that  required  by 
the  use  of  reasonable  diligence.  What  is  reasonable  diligence 
cannot  be  determined  by  any  general  rule,  but  must  vary  with 
the  circumstances  of  each  case.  Thus  where  a  mortgage  was 
given  to  a  retiring  pai'tner,  to  secure  him  against  the  liabilities 
of  the  partnership,  and  also  for  the  "balance  which  should  be 
due  him  on  the  purchase  of  such  property,"  and  notes  were  given 
for  such  purchase  money,  but  no  mention  of  them  was  made  in 
the  mortgage,  it  was  held  that  a  second  mortgagee  who  had  taken 
his  mortgage  after  inquiring  of  both  the  mortgagor  and  the  mort- 
gagee whether  anything  was  due  for  purchase  money,  and  received 
the  answer  from  both  that  it  was  all  paid,  was  entitled  to  priority 
over  the  prior  mortgagee,  and  even  as  against  the  assignee  of  one 
of  the  notes  given  for  purchase  money .^ 

^  §  343  ;  Passumpsic  Sav.  Bank  v.  Nat.  sumpsic  Sav.  Bank  v.  Nat.  Bank  of  St. 

Bank  of  St.  Johnsbury,  53  Vt.  82,  quoting  Johnsbury,  supra.     See,  however,  §'471  ; 

text ;  Bahcock  v.  Lisk,  57  III.  327  ;  Hea-  Morris  ;;.  Murray,  82  Ky.  36 ;  Bullock  v. 

ton  V.  Prather,  84  111.  330.     See  Vreden-  Battenhausen,  108  111.  28. 

burgh  V.  Burnet,  31  N.  J.  Eq.  229.  5  Passumpsic  Sav.  Bank  v.  Nat.  Bank 

2  Dargin  v.  Beeker,  10  Iowa,  571.  of  St.  Johnsbury,  supra.     Veazey  J.,  de- 

2  Hamilton  v.  Nutt,  34  Conn.  501.  livering  the  opinion  of   the   court,  said  : 

*  Seymour  v.  Darrow,  31  Vt.  133;  Pas-  "Where  the  form  or  specification  of  the 

486 


LIS  PENDENS.  [§§  597-599. 

The  record  of  a  foreclosure  suit  may  affect  one  wlio  derives 
title  under  the  foreclosure  sale  with  knowledge  of  another  unsat- 
isfied mortgage  upon  the  premises,  and  of  the  equity  of  the  holder 
of  that  mortgage  as  against  the  purchaser  at  that  sale.^ 

597.  A  conveyance  of  land  to  the  mortgagee  subject  to  a 
mortgage  may  or  may  not  imply  that  he  has  assigned  the 
mortgage.  It  has  already  been  noticed  that  a  deed  conveying 
land  subject  to  a  certain  mortgage,  or  warranting  it  against  all 
incumbrances  except  the  mortgage,  is  notice  to  all  persons  claim- 
ing under  such  deed  of  the  existence  of  the  mortgage.  If  such  a 
deed  of  the  equity  of  redemption  be  made  to  the  mortgagee  him- 
self, it  is  a  question  of  fact  for  a  jury  whether  such  recital  or  war- 
ranty implies  that  the  mortgage  is  not  then  held  by  the  mort- 
gagee, or  is  notice  to  his  attaching  ci'editors  that  the  mortgage  has 
been  assigned  to  another.^ 

The  record  of  a  purchase  money  mortgage  is  not  notice  of  the 
conveyance  for  which  such  mortgage  was  given,  so  as  to  invali- 
date the  title  of  one  who  subsequently  purchases  of  the  vendor 
before  the  first  deed  given  by  him  is  recorded.^ 

598.  One  who  merely  takes  a  release  of  all  the  interest  of 
the  mortgagor,  while  an  unrecorded  mortgage  made  by  him  is 
outstanding,  obtains  only  the  mortgagor's  equity  of  redemption 
subject  to  such  mortgage.^ 

V.    Lis  Pendens. 

599.  The  force  and  effect  of  the  recording  of  a  mortgage  are 
limited  not  only  b}'  the  actual  notice  which  the  mortgagee  may 
have  of  prior  unrecorded  conveyances,  but  also  by  constructive 

obligation  intended  to  be  secured  is  de-  seems  to  us  that  inquiry  of  those  i)ersoiis 

scribed  or  referred  to,  or  wiiere  the  de-  is  the  use  of  that  degree  of  dilij^encc  which 

scription  indicates  that  the  debt  is  specified  the  law  requires  ;  and  that,  in  view  of  the 

in   some  written   form,  or   is  of  such  a  facts  alluded  to,  the  defendant's  mortgage 

character  that  it  is  practicable  to  be  pur-  should  prevail." 

sued  by  inquiry  beyond  the  parties  to  the  i  Locker  v.  Riley,  30  N.  J.  Eq.  104. 
mortgage,  and  the  facts  as  to  its  payment  2  dark  v.  Jenkins,  5  Pick.  (Mass.)  280. 
determined,  the  authorities  indicate  that  ^  Pierce  v.  Taylor,  23  Me.  246 ;  Lo.sey 
a  purchaser  or  subsequent  incumbrancer  v.  Simpson,  11  N.  J.  Eq.  (3  Stockt.)  246  ; 
proceeds  at  his  peril.  The  parties  to  the  but  it  is  notice  of  such  deed  to  one  claim- 
mortgage  have  furnished  him  the  means  ing  under  tlie  mortgagee.  Center  i*. 
of  finding  out  the  fiicts ;  therefore  he  Planters'  &  Merchants'  Hank,  22  Ala. 
must  finil  them  out.     But  such  is  not  this  743. 

case.     Here  the  parties  gave  no  clue   to  *  Smith  i>.  Br.  Bank  at  Mobile,  21   Al;i. 

any    discovery    attainable    beyond    them-  125. 
selves.       Under    such    circumstances,    it 

487 


§  600.].  NOTICE   AS   AFFECTING   PRIORITY. 

notice  of  rights  and  claims  of  other  parties,  furnished  by  the  pen- 
dency of  an  action  in  relation  to  the  title  of  the  mortgaged  prop- 
erty, notice  of  the  pendency  of  which  has  been  filed  according  to 
law;  as,  for  instance,  the  pendency  of  a  suit  to  set  aside  the  con- 
veyance to  the  mortgagor  as  fraudulent.^  The  doctrine  of  lis 
pendens  is  founded  upon  the  consideration  that  no  suit  could  be 
successfully  terminated  if,  during  its  pendency,  the  property  could 
be  transferred  so  that  it  would  not  be  bound  by  the  decree  or 
judgment  in  the  hands  of  the  assignee. 

This  doctrine  of  lis  pendens^  however,  is  not  carried  to  the  ex- 
tent of  making  it  constructive  notice  of  a  prior  unregistered 
deed ;  ^  as,  for  instance,  proceedings  to  foreclose  an  unrecorded 
mortgage  do  not  constitute  such  a  lis  pendens  as  would  be  notice 
to  a  purchaser  of  the  mortgaged  property. 

Only  those  persons  are  charged  with  notice,  or  are  affected  by 
a  lis  pendens,  who  purchase  from  a  party  to  the  suit.^ 

VI.  Hoiv  far  Possession  is  Notice. 
600.  Possession  by  one  who  is  not  the  owner  of  record  is 
a  fact  which  should  induce  one  proposing  to  purchase  to  inquire 
whether  the  possession  is  founded  on  any  right  or  title.  It  is  no- 
tice of  the  rights  of  the  occupant,  whatever  they  may  be  ;  and  if 
he  claim  by  deed,  his  possession  is  regarded  by  some  authorities 
as  equivalent  to  the  recording  of  such  deed.*     If  the  mortgage  be 

1  Tyler  i;.  Thomas,  25  Beav.  47  ;  Wors-  able  with  notice  of  judicial  proceedings  in 
ley  V.  Scarborough,  3  Atk.  392  ;  Bellamy  which  the  title  of  the  property  is  involved, 
V.  Sabine,  1  De  G.  &  J.  566,  580;  Ayrault  unless  he  is  a  party  to  such  proceedings. 
V.  Murphy,  54  N.  Y.  203 ;  Murray  v.  Bal-  Notice  in  this  state  is  not  as  a  rule  equiv- 
lou,  1  Johns.  (N.  Y.)  Ch.  566;  and  see  alent  to  registry.  Boyer  v.  Joffrion,  4 
Mitchell  V.  Smith,  53  N.  Y,  413;  Young  So  Rep.  872. 

V.  Guy,  23  Hun  (N.  Y.),  1  ;  affirmed  87  3  Green  v.  Rick  (Pa.),  15  Atl.  Rep.  497. 
N.  Y.  457  ;  Lawrence  v.  Conklin,  17  Hun  *  James  v.  Lichfield,  L.  R.  9  Eq.  51  ; 
(N.  Y.),  228  ;  Center  v.  Planters'  &  Mer-  Taylor  v.  Stibbert,  2  Ves.  Jun.  437  ;  More- 
chants'  Bank,  22  Ala.  743  ;  Allen  v.  Poole,  land  v.  Richardson,  24  Beav.  33  ;  Wilson 
54  Miss.  323 ;  and  see,  also,  cases  collected  v.  Hart,  L.  R.  1  Ch.  App.  463,  467 ; 
in  2  White  &  Tudor's  Lead.  Cas.  in  Eq.  Brainard  v.  Hudson,  103  111.  218;  Trues- 
4th  Am.  ed.  pt.  1,  i)p.  192  et  seq.  See  dale  v.  Ford,  37  111.  210,  213;  Brown 
§1411.  V.   Gaffney,   28  111.    149,    157;    Doyle  v. 

2  1  Story's  Eq.  Jur.  §  406;  Douglass  v.  Stevens,  4  Mich.  87;  Farmers'  Loan  & 
McCrackin,  52  Ga.  596  ;  Newman  v.  Chap-  Trust  Co.  v.  Maltby,  8  Paige  (N.  Y.),  361  ; 
man,  2  Rand.  (Va.)  93.  In  Alabama,  on  Emmons  v.  Murray,  16  N  H.  385;  Mul- 
the  contrary,  such  suit  is  notice  from  the  lins  v.  Wimberly,  50  Tex.  457 ;  S.  C.  7 
time  when  service  is  perfected.  Hoole  v.  Reporter,  280 ;  2  White  &  Tudor's  Lead. 
Attorney  General,  22  Ala.  190.  Cas.  in  Eq.  4th  Am.  ed.  pt.   1,  p.  180; 

In  Lotiisiana  a  purchaser  is  not  charge-     Stagg  v.  Small,  4  Bradw.  (111.)  192  ;  West- 

488 


HOW   FAR   POSSESSION   IS   NOTICE. 


[§  600. 


by  an  absolute  deed,  the  defeasance  of  which  is  not  recorded,  the 
mortgagor's  continued  possession  and  occupation  of  the  premises, 
within  the  knowledge  of  grantees  of  the  mortgagee,  is  held  by 
some  courts  to  be  sufficient  notice  of  the  mortgagor's  title  ;i  but 
by  others  his  possession  is  not  regarded  as  notice  of  the  defea- 
sance,^  for  the  principle  that  possession  is  notice  of  the  possessor's 
title  is  intended  to  protect  only  equitable  rights,  and  not  to  cover 
the  possessor's  fraud,  or  to  protect  him  when  he  has  no  equity.^ 
In  like  manner  it  has  been  held  that  where  land  is  conveyed,  and 
at  the  same  time  mortgaged  back  for  the  security  of  the  purchase 
money,  and  the  grantor  becoming  the  mortgagee  continues  in 
actual  possession  and  occupation  of  the  land,  but  neither  the  deed 
nor  the  mortgage  is  recorded,  and  the  mortgagor  in  the  mean 
time  makes  another  mortgage  of  it  to  a  third  person,  the  mort- 
gage for  the  purchase  money  is  entitled  to  priority,^ 

Possession  of  a  part  of  the  premises  described  in  a  mortgage 
may  be  notice  to  the  mortgagee  of  the  condition  of  the  title  of  the 
entire  tract,  if  the  mortgagee  has  actual  notice  of  the  possession  ; 
for,  having  such  notice,  he  is  bound  to  follow  up  the  inquiry,  and 
if  that  would  necessarily  lead  to  the  knowledge  of  the  possession 


brook  V.  Gleason,  79  N.  Y.  23  ;  Taylor  v. 
Mosely,  57  Miss.  544 ;  Morrison  v.  March, 
4  Minn.  422;  Groff  v.  Ramsey,  19  Minn. 
44;  Cowen  v.  Loomis,  91  111.  132;  Sey- 
mour V.  McKinstry  (N.  Y.),  12  N.  E.  Rep. 
348 ;  Perkins  v.  West,  55  Vt.  265. 

In  Massachusetts,  since"  the  Rev.  Stat. 
of  1836,  constructive  notice  of  a  prior 
unrecorded  deed  is  not  admissible ;  the 
notice,  to  be  effectual,  must  be  actual. 
Lamb  v.  Pierce,  113  Mass.  72.  There- 
fore open  posses>ion  by  one  who  has  an 
unrecorded  deed  of  land  will  not  avail  as 
notice  of  such  deed,  for  it  is  not  evidence 
of  "  actual  notice."  Dooley  v.  Wolcott, 
4  Allen,  406;  Pomroy  v.  Stevens,  11  Met. 
224.  Proof  of  such  fact  may,  however, 
be  made  in  connection  with  evidence  of 
actual  notice.  Sibley  v.  Leflinf^well,  8 
Allen,  584;  Mara  v.  Pierce,  9  Gray,  306. 
Nor  is  the  fact  that  land  is  assessed  to  one 
who  holds  an  unrecorded  deed  actual  no- 
tice of  it.  Parker  v.  Osgood,  3  Allen, 
487,  490. 

In  Kome  cases  it  is  said  that  possession 
is  not  notice  of  the  equities  of  the  occu- 


pant, but  only  evidence  tending  to  prove 
his  equity.  Notice  is  the  ultimate  fact  to 
be  ])roven,aud  possession  is  evidence  upon 
that  issue.  Pico  v.  Gallardo,  52  Cal.  206  ; 
Fair  v.  Stevenot,  29  Cal.  486. 

1  Daubenspeck  v.  Piatt,  22  Cal.  330 ; 
New  V.  Wheaton,  24  Minn.  406 ;  Pell  v. 
McElroy,  36  Cal.  268. 

2  Crassen  v.  Swoveland,  22  Ind.  427; 
Newhall  v.  Pierce,  5  Pick.  (Mass.)  450; 
Groton  Savings  Bank  v.  Batty,  30  N.  J. 
Eq.  126;  S.  C.  7  Reporter,  505;  Brophy 
Mining  Co.  v.  Brophy  &  Dale  Gold  and 
Silver  Mining  Co.  15  Nev.  101;  Wool- 
dridge  v.  Miss.  Valley  Bank,  36  Fed.  Rep. 
97;  Asher  v.  Mitchell,  9  Bradw.  (111.) 
335. 

3  Groton  Sav.  Bank  v.  B^itty,  supra; 
Sawyers  v.  Baker,  66  Ala.  292  ;  Berryhill 
V.  Kirchner,  96  Pa.  St.  489 ;  Stafford 
Nat.  Bank  v.  Sprague,  17  Fed.  Rep.  784; 
Atkins  V.  Paul,  67  Ga.  97. 

■»  M'Kecknie  i;.  Hoskin",  23  Me.  230; 
Parsell  v.  Thayer,  39  Mich.  467.  See, 
however,  Koon  v.  Tramel  (Iowa),  32  N. 
W.  Hep.  243. 

480 


§  600.]  NOTICE   AS   AFFECTING   PRIORITY. 

of  tlie  other  part  by  another  person  under  the  same  title,  he  is  af- 
fected with  notice  of  the  possession  of  such  other  part.^  But  if 
his  notice  of  the  possession  of  a  part  be  constructive  only,  its 
effect  cannot  be  extended  to  lands  outside  the  limits  of  the  pos- 
session.2 

An  actual  possession  of  the  premises,  to  operate  as  implied  no- 
tice, must  be  visible  and  open,  notorious  and  exclusive,  and  not 
merely  a  constructive  possession.^ 

The  continued  possession  of  the  mortgagor  after  the  premises 
have  been  sold  under  a  foreclosure  against  him  is  not  deemed 
constructive  notice  of  any  subsequent  title  or  interest  he  may 
have  acquired  which  does  not  appear  of  recoi-d.*  Due  diligence 
on  the  part  of  the  mortgagee,  in  obtaining  information  after  hav- 
ing been  put  upon  inquiry,  is  a  test  of  good  faith.^ 

But  it  is  held  that  possession,  to  operate  as  notice,  should  be 
inconsistent  with  the  title  upon  which  the  possessor  relies.  The 
owner  and  occupant  of  a  house  conveyed  it  in  fee  to  a  son ;  and 
taking  back  a  lease  for  life,  remained  in  possession.  The  son, 
before  the  lease  was  recorded,  gave  a  mortgage  on  the  property 
to  one  who  made  reasonable  inquiries  as  to  liens.^  It  was  held 
that  the  possession  of  the  former  owner  under  the  lease  was  not 
such  as  to  give  the  mortgagee  notice  of  any  rights  in  the  premises. 

Possession  by  a  grantor,  after  a  full  recorded  conveyance,  is  not 
constructive  notice  to  subsequent  purchasers  of  any  right  reserved 
in  the  land  by  the  grantor.  Thus  where  a  grantor  took  a  mort- 
gage while  in  possession  from  his  grantee,  after  the  latter  had 
given  a  mortgage  to  another,  the  last  named  mortgage,  being  first 
recorded,  was  held  to  have  priority.'^  The  reason  for  this  excep- 
tion to  the  general  rule  is  in  some  cases  said  to  be,  that  a  subse- 
quent purchaser  is  entitled  to  rely  upon  the  presumption  that  pos- 
session retained  after  a  conveyance  may  be  presumed  to  be  a  mere 
holding  over  at  will  until  it  becomes  convenient  for  the  grantor  to 

1  Watkinsi;.  Edwards,  23  Tex.  443.  *  Dawson  v.  Danbury  Bank,  15  Mich. 

2  Daggs  V.  Ewell,  3  Woods,  344.  489  ;  and  see  Cook  v.  Travis,  20  N.  Y. 
8  Noyesr.  Hall,  97  U.  S.  34;  Gum    v.     400. 

Equitable    Trust    Co.    1    McCrary,   51  ;  s  Reed  v.  Gannon,  50  N.  Y.  345,  350. 

Webster   v.   Van    Steenbergh,    46    Barb.  6  Staples  v.  Fenton,    5  Hun    (N.  Y.), 

(N.  Y.)  211  ;  Tuttle  v.  Jackson,  6  Wend.  172.     A  like   discussion  on  similar  facts 

(N.  Y.)  213,  226  ;  Brophy  Mining  Co.  v.  was  made  in  Bell  v.  Twilight,  18  N.  H. 

Brophy  &  Dale  Gold  and  Silver  Mining  159 ;  but  the  same  reasons  were  not  as- 

Co.    15   Nev.    101 ;    Trezise   v.   Lacy,   22  signed. 

Kans.  742.  7  Koon  v.   Tramel   (Iowa),  32  N.   W. 

Rep.  243. 
490 


HOW   FAR   POSSESSION   IS   NOTICE.  [§  601. 

remove  from  the  land.  Moreover,  a  party  ought  not  be  allowed 
to  contradict  the  force  and  effect  of  a  full  conveyance  by  the  mere 
fact  of  possession  after  his  deed  has  been  recorded.^ 

As  against  an  innocent  mortgagee,  notice  from  the  possession 
of  land  cannot  be  set  up  by  an  occupant  who,  for  the  purpose  of 
concealing  his  interest  from  creditors,  placed  the  title  in  the  name 
of  another,  and,  after  the  latter  had  given  a  mortgage  upon  the 
land,  kept  silent  and  permitted  the  mortgagor  to  borrow  more 
monej^  of  tlie  mortgagee  on  a  second  mortgage  ;  when,  if  such 
occupant  had  notified  the  mortgagee  of  his  claim  upon  his  first 
being  made  aware  of  the  existence  of  the  earlier  mortgage,  the 
mortgagee  might  have  collected  the  mortgage  debt,  and  would  not 
have  made  the  second  loan  upon  the  security  of  the  land.^ 

Possession  by  a  vendee  under  a  contract  of  purchase,  whether 
it  be  personal  or  by  a  tenant,  is  constructive  notice  of  his  equi- 
table rights  as  purchaser,  and  any  one  taking  a  mortgage  under 
such  circumstances  from  his  vendor,  takes  subject  to  his  rights.^ 
The  mortgage  lien  in  such  case  covers  the  property  only  to  the 
extent  of  the  unpaid  purchase  money.* 

601.  An  equivocal,  occasional,  or  temporary  possession 
will  not  take  the  case  out  of  the  operation  of  the  registry  laws. 
The  protection  furnished  by  these  laws  should  not  be  taken  away 
except  upon  clear  pft)of  of  a  want  of  good  faith  in  the  party 
claiming  their  protection,  and  a  clear  right  in  him  who  seeks  to 
establish  notice  by  means  of  possession.^  The  circumstances  must 
be  such  that  a  prudent  man  would  be  put  upon  inquiry,  and 
would  be  chargeable  with  bad  faith  if  he  did  not  inquire.  "  We 
would  observe,"  said  Chief  Justice  Parsons,  in  an  earl}'  case  in 
Massachusetts,^  "that  the  statute  requiring  the  registry  of  con- 
veyances being  so  very  beneficial,  and  it  being  so  easy  to  conform 
to  it,  when  a  prior  conveyance  not  recorded  until  after  one  of  a 
subsequent  date  is   attempted  to   be  supported  on  the  ground  of 

1  Koon    V.  Tramel,   (Iowa),  32  N.  W.  325;  5.  C.  5  Weekly  Dig.  399;  23   Ilun, 

Rep.  243  ;  Eylar  i'.  Eylar,  60  Tex.  3iry;  1  ;  affirmed  87  N.  Y.  457. 
Bloomer  v.  Henderson,  8  Mich.  395,  404.  ''  Brown  v.  Volkeninn^,  N.  Y.  Ct.  of  Ap- 

•'  Groton  Savings  Bank  v.  Batty,  30  N.  peals,  2  N.  Y.  W.  Dig.  8G  ;  Union  College 

J.  Eq.  120.  V.  Wheeler,  59  Barh.  (N.  Y.)  585;  Bogue 

•'  Bank  of  Orleans   v.    Flagg,  3   Barb.  ?;.  Williams,  48  HI.  371  ;  Biitlcr  u.  Stevens, 

(N.   Y.)  Ch.  316;  Braman  i-.  Wilkinson,  2C  Me.  484  ;  2  White  &  Tudor's  Lead.  Cas. 

3  Barb.  (N.  Y.)  151.  in  Eq.  4tli  Am.  ed.  pt.  1,  ]).  185,  and  cases 

*  Westbrook   v.    Gleason,    14    Iliin  (N.  cited;  Merritt  v.  Northern  K.  II.  Co.  12 

Y.),  245;  Young  v.  Guy,  12  Ilun  (N.  Y.),  Barb.  (N.  Y.)  C0.5. 

'  Norcrosa  v.  Widgery,  2  Mass.  506. 

491 


§  601.]  NOTICE   AS   AFFECTING   PRIORITY. 

fraud  in  the  second  purchaser,  the  fraud  must  be  very  clearly 
proved."  The  using  of  lands  for  pasturing,  or  for  cutting  timber, 
is  not  such  an  occupancy  as  will  charge  a  purchaser  with  notice. 
The  possession  must  be  accompanied  by  improvement  of  the 
property  to  constitute  notice. ^ 

One  purchasing  or  taking  a  mortgage  of  premises  in  the  pos- 
session of  a  tenant  is  bound  to  inquire  into  the  nature  and  extent 
of  the  tenant's  interest,  and  is  affected  with  notice  of  that  inter- 
est whatever  it  may  be.^  Such  possession  is  also  held  to  be  notice 
of  a  collateral  agreement  held  by  the  tenant  for  the  purchase  of 
the  property.^ 

A  husband  and  wife,  who  had  long  occupied  a  farm,  conve3''ed 
it  to  their  son,  and  took  back  a  mortgage  conditioned  for  their 
support,  but  omitted  to  record  it.  They  continued  upon  the  farm; 
they  and  the  son  constituting  one  family,  and  all  contributing  to 
its  support.  Some  years  afterwards  the  son  made  a  second  mort- 
gage, which  was  duly  recorded  ;  but  the  second  mortgagee  was 
regarded  as  having  had  notice  of  the  legal  title  of  the  first  mort- 
gagees.* 

A  joint  residence  of  husband  and  wife  does  not  give  notice  of 
any  claim  of  interest  in  the  land  by  the  wife.^ 

If  the  owner  of  land  conveys  only  a  partial  interest  in  it,  as, 
for  instance,  the  wood  and  timber  growiffg  upon  it,  and  takes 
back  a  mortgage  which  is  not  recorded,  his  continued  possession 
is  not  notice  of  his  claim  to  the  wood  and  timber,  as  against  one 
who  has  purchased  upon  the  faith  of  his  bill  of  sale.^ 

Actual  possession  of  land,  by  one  who  holds  an  unrecorded 
bond  for  a  deed,  is  notice  of  his  rights  to  one  who  takes  a  mort- 
gage on  the  land  from  the  vendor,  and  the  mortgagee  will  take  a 
lien  only  on  the  vendor's  right."  But  the  possession  of  a  mort- 
gagee, whose  mortgage  is  recorded,  is  not  notice  of  his  claim  un- 
der an  agreement  to  purchase  the  premises,  although  a  rumor 
of  his  purchase  was   current  in  the  neighborhood  ;  ^  for  in  such 

1  M'Mechan  v.  GriflBng,  3  Pick.  (Mass.)  '  *  Boggs  v.  Ander.sou,  .50  Me.  161.  See 
149,  and  cases  cited;  Holmes  v.  Stout,  10  Harrison  v.  N.  J.  R.  R.  &  Transportation 
N.  J.  Eq.  419 ;  Union  College  v.  Wheeler,     Co.  19  N.  J.  Eq.  488. 

59  Barb.  (N.  Y.)  58.5,  and  cases  cited.  ^  ^gal  v.  Perkersou,  61  Ga.  345. 

2  Cunningham  v.  Pattee,  99  Mass.  248,         «  Patten  v.  Moore,  32  N.  H.  382. 
252.  7  Doolittle  v.  Cook,  75  111.  354. 

3  Knight  V.  Bowyer,  23  Beav.  609,  641 ;  ^  piumer  v.  Robertson,  6  Serg.  &  R. 
Taylor  v.  Stibbert,  2  Ves.  Jr.  437;  Kerr  (Pa.)  179. 

V.  Day,  14  Pa.  St.  112. 
492 


FRAUD   AS   AFFECTING    PRIORITY.  [§§  602,  603. 

case  his  possession  is  consistent  with  his  record  title,  and  it  may- 
well  be  taken  for  granted  that  he  holds  under  the  recorded  title. 
Possession  is  notice  only  of  the  legal  or  equitable  interest  in  the 
land  of  the  person  in  possession.  It  vests  the  purchaser  with  no- 
tice of  every  fact  and  circumstance  which  he  might  have  learned 
by  making  inquiry  of  the  occupant,  but  it  does  not  impose  upon 
him  the  duty  of  searching  the  record  in  the  name  of  such  occupant 
to  ascertain  what  title  he  has  parted  with.^ 

VII.  Fraud  as  affecting  Priority. 

602.  Another  instance  of  constructive  fraud  arises  when 
a  person  having  a  mortgage  upon  an  estate  conceals  its  exist- 
ence, or  so  acts  in  relation  to  it  as  to  induce  another  to  purchase 
the  esiate,  or  to  loan  additional  money  upon  it,  in  the  belief  that 
it  is  free  from  incumbrance.  AVhat  circumstances  will  amount 
to  a  fraudulent  concealment  or  misrepresentation  may  depend  in 
some  measure  upon  the  inquiry  whether  the  prior  mortgage  is 
recorded  or  not ;  and,  moreover,  different  considerations  will  con- 
trol in  cases  of  this  sort,  where  a  registry  system  is  in  full  oper- 
ation, as  it  is  in  this  country,  from  those  that  prevail  in  Eng- 
land, where  the  possession  of  the  title  deeds  for  the  most  part 
stands  in  place  of  registration.  But  whatever  the  circumstances 
may  be,  "  the  rule  of  law  is  clear,  that  where  one  by  his  words 
or  conduct  wilfully  causes  another  to  believe  the  existence  of  a 
certain  state  of  things,  and  induces  him  to  act  on  that  belief  so  as 
to  alter  his  own  previous  position,  the  former  is  concluded  from 
averring  against  the  latter  a  different  state  of  things  as  existing 
at  the  same  time."^ 

603.  A  mortgagee  allowing  or  inducing  another  to  pur- 
chase the  property  as  unincumbered,  without  disclosing  his 
mortgage,  may  be  precluded  from  setting  it  up  against  such  pur- 
chaser ;  sucii,  for  instance,  is  the  case  of  an  attorney  who  acts 
for  the  mortgagor  in  drawing  a  deed  for  the  conveyance  of  land 
from  the  mortgagor  to  a  purciiaser,  but  does  not  disclose  a  mort- 
gage he  himself  holds  upon  the  property,  though  he  knows  that 
the  purchaser  is  buying  it  for  its  full  value  in  ignorance  of  the 
mortgage.^ 

'  Loscy  V.  Simpson,    11    N.  J.  Kq.  (3  age  w.  Foster,  9  Mod.  35;  Sharpc  t>.  Foy, 

Stockt.)  24G.  L.   K.  4  Ch.  App.  35;  Bcrrisford  v.  Mil- 

2  Per  Lord  Denman,  C.  J.,  in  Pickard  ward,  2  Atk.  49. 

V.  ScarH,  6  Ad.  &  Kl.  4C9,  471  ;  and  see  -  L'Anioureux     v.    \a.\nWiih\n^\\,     1 

I'eter  v.  KuB.-ell,  1  Kq.  Ca.  Abr.  322  ;  Sav-  493 


§  603.]  NOTICE   AS   AFFECTING   PRIORITY. 

A  mortgagee,  however,  whose  mortgage  is  recorded,  will  not 
be  so  postponed  mei-ely  because  he  knew  that  the  mortgagor  was 
making  a  subsequent  conveyance  of  the  premises,  and  did  not 
make  known  his  title  :  to  have  this  effect,  there  must  be  actual 
and  intentional  fraud  on  his  part ;  ^  or  he  must  have  done  some 
act,  or  made  some  representation,  to  inflnence  the  conduct  of  an- 
other by  inducing  a  belief  of  a  given  state  of  facts,  when  such 
party,  having  acted  upon  such  belief,  would  be  injured  by  show- 
ing a  different  state  of  facts.  An  estoppel  in  jjais  then  arises 
against  him.  But  he  loses  no  right  by  neglecting  to  give  a  per- 
sonal notice  of  his  mortgage  to  one  who  is  purchasing.  The  pur- 
chaser is  presumed  to  know  of  the  mortgage  which  has  been  duly 
recorded.     He  is  bound  at  his  peril  to  investigate  the  title.^ 

So,  also,  if  a  first  mortgagee,  having  notice  of  a  second  jnort- 
gage,  does  anything  to  the  prejudice  of  the  latter,  —  as,  for  in- 
stance, if  he  releases  anj^  part  of  the  mortgaged  premises  without 
receiving  payment  of  any  part  of  his  mortgage  debt,  — he  is,  to 
the  extent  of  injury  done,  postponed  to  the  second  mortgage.^ 

If  a  mortgagee  represents  to  another  person  that  the  debt  se- 
cured by  the  mortgage  has  been  paid  or  satisfied,  and  that  noth- 
ing is  due  on  it,  and  thereby  induces  him  to  release  other  secu- 
rity and  take  a  mortgage  of  the  same  land,  the  last  mortgage,  as 
between  the  two  mortgagees,  will  take  priority  of  the  first,  al- 
though the  first  was  on  record  when  such  representation  was 
made,  as  the  person  making  the  representation  is  estopped  from 
disputing  the  truth  of  it  with  respect  to  the  other,  who  was 
thereby  induced  to  alter  his  condition.*  And  so  if  the  first  mort- 
gagee in  any  way  combines  with  the  mortgagor  to  induce  another 
to  loan  money  upon  the  estate,  in  ignorance  of  the  first  mort- 
gage, this  fraud  will,  without  doubt,  postpone  his  own  mortgage.^ 
And  so  if  a  second  mortgagee  stands  by  and  sees  the  mortgagor 
induce  the  first  mortgagee  to  release  his  mortgage,  and  take  an 
assignment  of  another  mortgage  which  he  supposes  to  be  next  in 
priority  to  his  own,  but  which  is  in  fact  subsequent  to  the  second 

Paige  (N.  Y.),  316 ;  and  see  Lee  v.  Mun-         3  Bailey  r.  Gould,  Walk.  (Mich.)  478. 
roe,  7  Cranch,  366,  368.  *  Piatt  v.  Squire,  12  Met.  (Mass.)  494  ; 

1  Paine  I'.  French,  4  Ohio,  318;  Brinck-  Fay  v.  Valentine,  12   Pick.  (Mass.)   40; 
erhoff  V.  Lansinjr,  4  Johns.   (N.  Y.)    Ch.  Ileane  v.  Rogers,  9  Barn.   &   Cres.  577, 
65  ;  Palmer  v.  Palmer,  48  Vt.  69 ;  and  see  586  ;  Miller  v.  Bingham,  29  Vt.  82 ;  Ches- 
Marfton  r.  Brackett,  9  N.  H.336  ;  and  see  ter  v.  Greer,  5  Humph.  (Tenn.)  26. 
Story  Eq.  Juris.  §  391.  ^  Peter  v.  Russell,  1  Eq.  Ca.  Abr.  322. 

2  Rice  V.  Dewey,  54  Barb.  (N.  Y.)  455. 

494 


NEGLIGENCE   AS   AFFECTING   PRIORITY.  [§  604. 

mortgage,  as  against  the  second  mortgagee,  this  subsequent  mort- 
gage Avill  be  preferred  to  bis  own.^  When  the  holder  of  one  of 
two  mortgage  deeds,  executed  on  the  same  day,  has  represented 
to  a  person  about  to  take  an  assignment  of  the  other  mortgage 
that  the  deeds  were  delivered  at  the  same  time,  and  that  there 
was  no  priority  in  his  deed,  he  is  prechided  from  claiming  a  pri- 
ority against  such  person.^ 

Where  a  mortgage  and  a  deed  were  executed  by  the  same 
grantor  upon  the  same  property  to  different  persona,  without  any 
reference  in  either  deed  to  the  other,  and  the  agent  of  the  mort- 
gagee was  guilty  of  negligence  or  bad  faith  in  not  recording  the 
mortgage  until  after  the  deed  was  filed  for  record,  the  agent  can- 
not afterwards  purchase  the  land  from  the  grantee  of  the  deed 
and  hold  the  title  as  against  the  mortgagee,  for  the  priority  of  the 
deed  is  founded  upon  his  own  negligence,  and  he  must  hold  sub- 
ject to  the  rights  of  the  mortgagee  for  whom  he  acted  as  agent.^ 

VIII.  Negligence  as  affecting  Priority. 

604.  Negligence  is  not  fraud,  though  it  may  be  evidence 
of  it.^  When  a  person  having  a  mortgage  upon  an  estate,  or 
other  interest  in  it,  negligently  puts  it  in  the  power  of  another 
to  sell  or  mortgage  the  property  to  a  third  person,  who  is  igno- 
rant of  such  mortgage  or  interest,  he  cannot  afterwards  assert  his 
own  title  in  priority  to  the  title  of  the  party  whom  he  has  suf- 
fered to  be  deceived.'^  By  negligence  is  meant  the  want  of  that 
reasonable  degree  of  diligence  and  care  which  a  man  of  ordinary 
prudence  and  capacity  would  be  expected  to  exercise  in  the  same 
circumstances. 

A  person  taking  a  mortgage  or  other  conveyance  of  real  estate 
is  chargeable  with  notice  of  such  facts  as  are  indicated  upon  the 
face  of  the  deeds,  whether  they  indicate  anything  to  him  or  not ; 

1  Stafford  v.  Ballou,  17  Vt.  329.  of  another  to  deceive  and  raise  money 

2  Broome  v.  Beers,  6  Conn.  198.  must  take  the  consequences.    He  cannot 
^  Mitchell  i;.  Aten  (Kans.),  HPac.  Rep.     afterwards  relj  on  a  particular  or  a  dif- 

497.  fercnt  equity."    Most  of  tliu  Enylisli  cases 

*  Jones  V.  Smith,  1   Ilarc,  43  ;  Worth-  upon  this  point  relate  to  tlie  matter  of  the 

ington  V.  Morj,'an,  10  Sim.  547.  delivery  of  title  deeds;  and  tlareforo  are 

''  Brif^gs  V  Jones,  L.  K.  10  Eq.  92,  98  ;  for  the  most  part  of  use  in  this  country 

Robinson's  Law  of  Priority,  .'j4  ;  Rice  v.  only  as  illustrating  the  generiil  principles 

Rice,  2  Drew.  73;  1  Fisher  on  Mort.  3d  of  the  law  of  notice.    See  Tlior|)e  c.  II>lds- 

ed.  550.     In  Brings  v.  Jouch,  supra,  Lord  worth,  L.  R.  7  Kij.  139;  Layard  v.  Maud, 

Romilly  thus  stated  the  principle  of  this  L.  R.  4  Ecj.  397. 

rule:  "  A  person  who  puts  it  in  tiie  power 

495 


§§  605,  606.]  NOTICE   AS   AFFECTING    PRIORITY. 

for  if  he  does  not  use  the  precaution,  wliich  common  prudence 
requires,  to  employ  a  solicitor,  he  is  in  the  same  situation,  with 
respect  to  constructive  notice,  as  he  would  have  been  had  he  em- 
ployed a  solicitor.^ 

605.  It  sometimes  happens  that  a  mortgagee  may  lose  his 
position  of  priority,  and,  without  intending  to  impair  his  own 
security,  find  himself  in  the  place  of  a  subsequent  mortgagee, 
through  want  of  care  in  dealing  with  the  mortgaged  property. 
Thus,  if  a  mortgagee  knowingly  and  understandingly  cancels  his 
mortgage  when  there  is  a  second  mortgage  upon  the  pi'operty, 
and  in  lieu  of  the  mortgage  takes  an  absolute  conveyance  of  the 
property,  or  a  new  mortgage,  in  the  absence  of  any  fraud  on  the 
part  of  the  holder  of  the  second  mortgage,  the  lien  of  the  first 
mortgage  will  not  be  revived,  nor  the  second  mortgagee  prevented 
from  reaping  the  benefit  of  the  priority  of  his  mortgage,  upon  the 
records.^  In  like  manner,  where  a  senior  mortgage  is  released 
without  being  paid,  and  at  the  same  time  a  new  mortgage  is  taken 
for  the  same  sum,  the  question  is  whether  a  junior  mortgage  is 
thereby  let  into  the  position  of  priority.  Although  the  transac- 
tion be  a  simultaneous  one,  and  is  not  intended  to  impair  the  lien 
of  the  first  mortgage,  it  is  held  that  the  release,  if  it  be  absolute 
in  terms,  will  discharge  the  lien,  and  the  new  mortgage  will  be 
only  a  subordinate  lien.^ 

But  when  a  creditor  to  whom  land  has  been  conveyed  in  trust, 
to  secure  a  debt,  by  a  deed  absolute  in  form  reconveys  it  to  his 
grantor,  and  simultaneously  takes  back  a  niortgage  to  secure  the 
same  debt,  he  does  not  lose  his  lien  in  equity  as  against  a  judg- 
ment rendered  against  the  debtor  subsequent  to  the  original  con- 
veyance.^ 

606.  Priority  of  lien  between  the  holders  of  several  notes 
secured  by  a    mortgage  is,   by  some   authorities,  determined  ac- 

1  Kennedy  v.  Green,  3  Myl.  &  K.  699.  destroy  the  value  of  a  public  record. 
The  Master  of  the  Rolls,  referring  to  this  Smith  i-.  Brackett,  36  Barb.  (N.  Y.)  571 ; 
case  in  Greensdale  v.  Dare,  20  Beav.  284,  Banta  v.  Garmo,  I  Samif.  (N.  Y.)  Ch. 
291,  said  that  the  doctrine  of  this  case  re-  383;  Hutchinson  ?>.  Bramhall,  42  N.  J. 
quires  to  be  administered  with  the  greatest  Eq.  372 ;  Holt  v.  Baker,  58  N.  H.  276  ; 
care  and  delicacy,  and  that  probably  each  Keohane  v.  Smith,  97  111.  156;  Skeele 
case  must  stand  upon  the  peculiar  facts  v.  Stocker,  II  Bradw.  (111.)  143;  Daws  v. 
belonging  to  it.  Craig,  62  Iowa,  515.     See  §§  966-971. 

2  Frazee  v.  Inslee,  2  N.  J.  Eq.  (I  Green)  3  Woollen  v.  Hillen,  9  Gill  (Md.),  185. 
239.  The  Chancellor  said,  that  to  revive  To  the  same  effect,  see  Neidig  v.  White- 
the  mortgage  in  such  case  would  be  giving  ford,  29  Md.  178. 

encouragement  to  negligence,  and  would         *  Christie  v.  Hale,  46  111.  117. 

496 


NEGLIGENCE   AS  AFFECTING  PRIORITY.  [§  607. 

cording  to  the  order  of  their  maturity .^  If  judgment  is  obtained 
on  one  of  the  notes,  that  takes  the  place  of  the  note  on  which  it 
was  rendered.2  The  holder  of  the  note  first  maturing  may,  upon 
default,  or  at  any  time  afterwards,  foreclose  and  sell  the  prem- 
ises in  satisfaction  of  his  debt.^  His  delay  to  enforce  his  rights 
does  not  impair  his  prior  right.'*  But  the  mortgagee  may  by 
agreement  give  to  particular  notes  a  prior  lien  upon  the  security, 
irrespective  of  the  time  of  their  maturity  ;  and  therefore  one  who 
takes  an  assignment  of  a  part  of  the  notes  secured  by  a  mortgage 
should  inquire  of  the  maker  and  of  the  payee  whether  the  others 
have  been  sold  with  a  preferred  lien  upon  the  security.  It  is 
negligence  on  his  part  not  to  make  such  inquiry ;  and  if  the  pre- 
ferred lien  has  been  given,  it  will  be  valid  against  such  assignee.^ 
One  holding  a  mortgage  securing  several  promissory  notes  may 
assign  part  of  the  notes,  and  a  corresponding  interest  in  the  mort-. 
gage,  giving  priority  to  the  assignee,  or  a  j'j'ro  rata  interest  in  the 
security,  according  to  the  terms  of  the  assignment.^ 

A  mortgage  executed  by  one  partner  in  the  partnership  name 
of  real  estate  belonging  to  the  firm,  to  secure  a  partnership  debt, 
conveys  the  legal  interest  of  such  partner  and  the  equitable  inter- 
est of  the  copartner;  as  when  A.  executed  a  mortgage  in  the  firm 
name  of  A.  &  Bro.,  and  himself  acknowledged  it.  But  a  person 
taking  a  subsequent  mortgage,  properly  executed  by  both  part- 
ners, has  priority  as  to  the  interest  of  the  partner  who  did  not 
execute  the  first  mortgage.'  A  mortgage  by  one  tenant  in  com- 
mon of  his  interest  in  partnership  real  estate,  made  for  a  valid 
consideration  to  one  who  has  no  notice  of  the  partnership,  is  not 
subject  to  any  equities  arising  out  of  the  partnership  relation  of 
the  grantor.® 

607.  As  between  several  unrecorded  mortgages  or  other 
conveyances,  that  of  prior  execution  takes  precedence,'-*  and  in 
determining  such  priority,  fractions  of  a  day  will  be  considered.^'* 

1  Sec   §§  1699-1702,   1939;    Aultman-  ''  Chaveiicr  r.  Wood,   2   Oregon,  182 

Taylor  Co.  v.  McGeorge,  31   Kans.  329;  Ilaynes  r.  Seachrest,  13  Iowa,  455.     And 

Wilson  V.  Eigenbrodt,  30  Minn.  4.  sec  Brazleton  v.  Brazleton,  16  Iowa,  417. 

■-  Funk  V.  McKeynold,  33  III.  481.  8  gge  §§  119,  120  ;  McDcrmot  v.  Lau- 

'  Marine  Bank  v.  International  Bank,  rence,  7  S.  &  K.  (l*a.)  438. 

9  Wis.  57  ;  Wood  v.  Trask,  7  Wis.  506 ;  »  Ely  v.  Scofield,  35  Barb.  (N.  Y.)  330; 

Lyman  i'.  Smith,  21  Wis.  C74.  Berry  v.  Mut.  Ins.  Co.   2  Johns.   (N.  Y.) 

*  Lyman  v.  Smith,  supra.  Ch.  603. 

6  Walker  v.  Dement,  42  111.  272.  i»  Gibson  v.  Keycs  (Ind.),  14  N.  E.  Rep. 

•■'  Lane  v.  Davis,  14  Alien  (Mass.),  225;  591. 
Howard  r.  Schmidt,  29  La.  Ann.  129. 

VOL.  I.  32  497 


§§  607a,  608.]         NOTICE   AS   AFFECTING  PRIORITY. 

Of  two  mortgages  executed  at  the  same  time,  to  secure  debts 
which  mature  at  different  times,  if  there  be  no  other  ground  of 
priority,  according  to  the  authorities  in  some  states  that  is  the 
prior  lien  which  secures  the  payment  of  the  note  which  first  falls 
due.  The  rule  is  the  same  as  it  is  when  one  mortgage  secures 
debts  maturing  at  different  times  ;  they  are  to  be  paid  in  the 
order  of  their  maturity.^  It  makes  no  difference  in  the  order  of 
payment,  that  after  the  assignment  of  the  note  first  maturing  to 
one  person,  the  note  next  maturing  is  assigned  to  another  with 
the  mortgage  or  trust  deed.  The  holding  of  the  mortgage  secu- 
rity gives  no  preference  in  order  of  payment.^ 

In  other  states  such  mortgages  confer  equal  rights  ;  and  the 
fact  that  one  becomes  due  before  the  other  gives  no  priority.^ 

607  a.  Where  several  mortgages  are  executed  and  recorded 
at  the  same  time,  whether  the  parties  intended  that  one  of  them 
should  have  priority  is  a  matter  of  fact  for  the  jury  to  determine 
from  the  evidence  of  such  intention.*  Though  the  mortgagor 
intended  that  one  should  have  priority,  and  first  delivered  that 
one  to  the  recorder,  though  the  recorder's  certificate  showed  that 
they  were  filed  for  record  simultaneously,  neither  is  entitled  to 
priority  over  the  other.  The  fact  that  one  instrument  was  handed 
to  the  recorder  an  instant  before  the  other  is  immaterial.  Neither 
is  the  intention  with  which  the  act  was  done  important.^ 

608.  Agreement  fixing  the  priority  of  mortgages.  —  The 
parties  may,  as  between  themselves,  make  a  valid  agreement, 
though  it  be  verbal  only,  that  one  of  two  mortgages  shall  be 
prior  to  the  other,  and  the  order  of  record  is  then  immaterial  un- 
less they  are  subsequently  assigned  to  other  persons  who  have  no 
notice  of  the  agreement ;  ^  although,  according  to  some  authori- 

1  §  1699;  Isett  v.  Lucas,  17  Iowa,  503;  N.  J.  Eq.  38;  Riddle  v.  George,  58  N.  H. 
Bank  of  U.  S.  v.  Covert,  13  Ohio,  240;  25;  Shaw  v.  Newsom,  78  Ind.  335. 
Gardner  v.  Diederichs,  41  111.  158;  Mur-         *  Gilman  v.  Moody,  43  N.  H.  239. 
dock  V.  Ford,  17  Ind.  52;  Harris?;.  Har-         ^  Koevenig  v.  Schmitz   (Iowa),  32  N. 
Ian,  14  Ind.  439;  Marine  Bank  ?;.  Inter-  W.  Rep.  320. 

national    Bank,    9    Wis.  57 ;   Roberts   v.  ^  Jones  v.  Phelps,  2  Barb.  (N.  Y.)  Ch. 

Mansfield,  32  Ga.  228.  440 ;  Rhoades    v.  Canfield,   8   Paige  (N. 

According  to  other  authorities  this  cir-  Y'.),  545;  New  York  Chemical  Manuf.  Co. 

cumstance  is  no  evidence  to  determine  the  v.  Peck,  6  N.  J.  Eq.  (2  Halst.)  37  ;  Decker 

fact  of  priority.     Gilman  v.  Moody,  43  N.  v  Boice,  19  Hun   (N.  Y.),  152;  Freeman 

H.  239 ;  Granger  v.  Crouch,  86  N.  Y.  494.  v.  Schroeder,  43  Barb.  (N.  Y.)  618;  S.  C. 

2  Gwathmeys  v.  Ragland,  Rand.  (Va.)  29   How.  Pr.   263;   Beasley  v.   Henry,  6 
466.  Bradw.  (Ill)  485;  Sparks  v.  State  Bank, 

3  §§  1699-1707 ;  Collera  v.  Huson,  34  7  Blackf.  (Ind.)  469 ;  Bank  of  S.  C.  u. 

498 


NEGLIGENCE   AS   AFFECTING  PRIORITY.  [§  608. 

ties,  the  want  of  notice  on  the  part  of  the  assignee  makes  no  dif- 
ference, but  the  mortgage  continues  subject  to  the  equity  of  this 
arrangement.!  But  such  an  agreement  itself,  when  in  writing,  is 
not  entitled  to  record,  and  therefore,  if  recorded,  is  not  notice  to 
subsequent  purchasers  ;  -  and  in  that  case  the  record  of  it  would 
not  be  constructive  notice  to  an  assignee  of  the  deferred  mort- 
gage. But  if  such  assignee  had  knowledge  of  the  agreement,  he 
would  take  subject  to  the  equities  thereby  conferred.^ 

A  mortgagee  has  an  unquestionable  right  to  waive  his  priority 
in  favor  of  a  subsequent  mortgagee.^  If  a  prior  mortgagee  re- 
lease his  mortgage  in  order  to  enable  the  mortgagor  to  raise 
money  upon  the  same  property,  with  which  to  make  improve- 
ments thereon,  such  mortgagee  cannot  afterwards  be  heard  to 
object  that  the  money  was  raised  by  the  second  mortgagee  upon 
discount  of  other  paper  of  the  mortgagor,  or  that  the  mortgagor 
failed  to  expend  the  money  as  he  had  agreed.^ 

A  mere  admission  by  one  of  two  mortgagees  whose  mortgages 
were  executed,  delivered,  and  recorded  on  the  same  day,  that 
there  is  no  priority  of  one  mortgage  over  the  other,  although 
made  bj^  a  writing  signed  by  him,  does  not  preclude  his  after- 
wards claiming  a  priority  in  time  for  his  own  mortgage,  because 
such  admission  is  like  a  parol  declaration,  subject  to  be  explained 
or  contradicted.*^  But  such  writing  would  be  admissible  in  evi- 
dence to  show  that  the  deeds  took  effect  simultaneously.^  But  an 
agreement  as  to  priority  may  be  proved  by  parol.^ 

Without  any  agreement,  there  may  be  facts  and  circumstances 
which  will  entitle  one  of  two  mortgages  recorded  at  the  same 
time  to  an  equitable  priority  over  the  other ;  ^  and  on  the  other 
hand,  although  one  mortgage  may  have  been  recorded  before 
another,  there  may  be  facts  which  will  entitle  the  two  mortgages 

Campbell,  2  Rich.  (S.  C.)  Eq.  179;  Rigler  Y.),  233;  Frost  v.  Yonkers  Sav.  Bk.  70 

V.  Light,  90  Pa.   St.  235  ;  Poland  v.  La-  N.  Y.  553  ;  Mutual  Life  Ins.  Co.  v.  Sturges, 

raoille  Valley  II.  R.  Co.  52  Vt.  144;  Leh-  33   N.   J.   Eq.   328;  Poland    i;.   Lamoille 

man  v.  Godl.erry  (La.),  4  So.  Rep.  316.  Valley  R.  R.  Co.  .52   Vt.  144;   Bank  v. 

1  Conover  i-.  Van  Mater,  18  N.  J.  481  ;  Moore,  94  N.  C.  734. 

Freeman  v.  Schroeder,  43   Barb.  (N.  Y.)  &  Darst  v  Bates,  95  111.  493.     See  Hen- 

618;    S.  C.  29   How.   Pr.  263;    Cable  v.  drickson  u.  Woolley,  39  N.  J.  Eq.  307. 

Ellis,  86  111.  525.  «  Beers  v.  Broome,  4  Conn.  247.     See 

•^  Gillig  V.  Miiass,  28  N.  Y.  191.  Maze  v.  Burke  (Pa.),  12  Phila.  335. 

*  Bank  of  Savin[,'.s  in  N.  Y.  v.  Frank,  ^  Beers  v.  Ilawlcy,  2  Conn.  467. 
45  N.  Y.  Superior  Ct.  404.  ^  Maze  v.  Burko  (Pa),  su/ira. 

*  Cla.son  V.  Shepherd,  6  Wis.  369 ;  Tay-  "  StafTord  i;.  Van    Ronsselacr,   9    Cow 
lor  i;.  Wing,  84  N.  Y.  471;  23  Ilun    (N.  (N.  Y.)  316. 

491) 


§  609.]  NOTICE   AS   AFFECTING   PRIORITY. 

to  stand  upon  an  equality.  An  instance  of  the  latter  kind  oc- 
curs when  a  trustee,  having  two  funds,  loans  them  to  the  same 
person,  upon  two  distinct  mortgages,  without  the  intention  of  giv- 
ing one  priority  to  the  other.^  Moreover,  the  mortgage  first  re- 
corded, and  therefore  primd  facie  the  prior  lien,  may  be  shown 
to  have  been  conditionally  recorded  ;  and  a  second  mortgage,  re- 
corded before  the  condition  was  complied  with,  may  be  entitled 
to  precedence.^ 

It  is  no  ground  for  giving  priority  to  a  junior  mortgage,  that 
the  money  received  upon  it  was  used  in  conserving  the  mortgaged 
property,  or  in  improving  it  in  any  waj''.  Although  a  portion  of 
a  line  of  railway  subject  to  a  mortgage  be  wholly  constructed  by 
money  raised  on  a  second  mortgage,  yet  this  fact  gives  the  latter 
no  priority  over  the  former.  The  prior  mortgage,  although  given 
before  the  road  is  built,  attaches  as  fast  as  it  is  built,  and  to  all 
property  covered  by  the  terms  of  the  mortgage,  as  fast  as  it  comes 
into  existence.^ 

609.  A  mortgage  executed  before  the  commencement  of 
a  building  erected  on  the  land  is  paramount  to  a  mechanic's 
lien  for  work  and  materials  furnished  for  the  building.*  If  a 
mortgagee,  while  in  possession,  erects  a  house  on  the  premises,  a 
mechanic's  lien  for  this  work  is  subject  to  the  mortgage.^  A 
mortgage  for  the  purchase  money  has  priority  over  a  mechanic's 
lien  which  attached  to  a  building  on  the  property  while  it  was 

1  Ehoades  v.  Canfield,  8  Paige  (N.  Y.),  it  necessary  for  a  railroad  company  to 
545.  borrow  in  small  parcels  as  sections  of  the 

2  Freeman  v.  Schroeder,  43  Barb.  (N.  road  were  completed,  and  trust  deeds 
Y.)  618.  could  be  safely  given  thereon.     The  prac- 

3  Galveston  K.  E.  v.  Cowdrey,  11  Wall,  tice  of  the  country  and  its  necessities  are 
459.  "  Had  the  first  mortgage,"  says  Mr.  coincident  with  the  rule."  See,  also,  Wil- 
Justice  Bradley,  "  been  given  before  a  link  v.  Morris  Canal  &  Banking  Co.  3 
shovel  had  been  put  into  the  ground  to-  Green  (N.  J.)  Ch.  377,  402. 

wards  constructing  the  railroad,  yet  if  it  *  §  479a;  Hershee  v.  Hershey,  15  Iowa, 

assumed  to  convey  and  mortgage  the  rail-  185;  Jessup  v.  Stone,  13  Wis.  466;  Jean 

road,  which  the  company  was  authorized  v.  Wilson,  38  Md.  288 ;  Lyle  v.  Ducomb, 

bylaw  to  build,  together  with  its  super-  5  Binn.  (Pa.)  585;    Hoover  v.  Wheeler, 

structure,    appurtenances,    fixtures,    and  23  Miss.  314 ;  Folsom  r.  Cragen  (Colo.), 

rolling  stock,  these  several  items  of  prop-  17  Pac.   Rep.   515;    Ryder  v.    Cobb,   68 

erty,  as  they  came  into  existence,  would  Iowa,  235.     In  Tritch  v.  Norton  (Colo.), 

become  instantly  attached  to  and  covered  15  Pac.  Rep.  680,  there  was  a  new  com- 

by  the  deed,  and  would  have  fed  the  es-  mencement  under  a  new  contract  after  an 

stoppel  created  thereby.  No  other  rational  intervening  mortgage. 

or  equitable  rule  can  be  adopted  for  such  ^  Ferguson  v.  Miller,  6  Cal.  402. 
cases.     To  hold  otherwise  would  render 

500 


NEGLIGENCE  AS   AFFECTING  PRIORITY.  [§  609. 

under  contract  for  sale  to  the  mortgagor,  and  before  the  deed  and 
mortgage  were  executed.^ 

Even  subsequent  liens  may  have  priority.  Lien  laws  in  force 
at  the  time  of  the  execution  of  a  mortgage  enter  into  and  become 
a  part  of  the  contract ;  and  if  these  laws  provide  that  certain  liens 
shall  be  paramount  over  all  other  incumbrances,  whether  prior  or 
subsequent,  a  mortgagee  takes  his  mortgage  subject  to  such  liens 
as  may  afterwards  be  acquired  under  the  statute.^ 

Municipal  assessments  for  improvements,  which  are  declared  by 
statute  to  be  a  lien,  may  be  paramount  to  a  mortgage  of  the  prem- 
ises, whether  the  mortgage  be  prior  or  subsequent  to  the  assess- 
ment.^ 

1  See  §  466 ;  Rees  v.  Ludington,  13  Wis.        2  Warren  v.  Sohn  (Ind.),  13  N.  E.  Rep. 
276.  863. 

3  Hand  v.  Startup,  38  N.  J.  Eq.  115. 

501 


CHAPTER  XIV. 


VOID   AND  USURIOUS  MORTGAGES. 


Void  Mortgages. 

I.  Want    or  failure    of   consideration, 

610-616. 
II.  Illegal  consideration,  617-622. 

III.  Mortgages  executed  on  Sunday,  623. 

IV.  Fraudulent  mortgages,  624-632. 


Usury. 

I.  What  mortgages  are  usurious,  633- 

649. 
II.  Compound  interest,  6.50-655. 
III.  Conflict  of  laws,  656-663. 


Introductory.  —  In  this  chapter  it  is  proposed  to  treat  briefly 
of  some  of  the  circumstances  under  which  a  mortgage  duly  exe- 
cuted and  recorded  may  be  declared  defective  or  void.  These  cir- 
cumstances are  inherent  in  the  transaction  itself,  and  in  some  form 
vitiate  the  consideration  of  the  mortgage.  For  the  most  part, 
they  are  the  same  vices  which  invalidate  any  contract.  Want  or 
failure  of  consideration,  and  fraud  or  usury  in  it,  are  not  matters 
peculiar  to  mortgages ;  and  it  is,  of  course,  impossible  to  treat 
at  length  of  these  matters,  which  are  themselves  the  subjects  of 
general  treatises  under  the  titles  of  Contracts,  Frauds,  and  Usury. 
Only  adjudications  relating  especially  to  mortgages  are  presented  ; 
and  these  not  fully  on  those  points  which  are  common  to  all  con- 
tracts. The  subject,  however,  opens  one  inquiry  not  presented 
in  other  contracts,  and  that  is,  whether  the  law  of  the  place  where 
the  mortgaged  land  is  situated,  when  the  contract  has  been  exe- 
cuted in  another  state  or  country,  should  govern  as  to  the  law  of 
usury  applicable  to  it;  or  should  govern,  too,  as  to  other  statutes 
which  may  invalidate  the  contract ;  and,  therefore,  this  part  of 
the  subject  has  been  examined  more  fully  than  its  importance 
would  seem  to  justify,  except  upon  the  principle  that  the  impor- 
tance of  questions  treated  of  should  be  determined  by  the  relative 
difficulty  or  uncertainty  attending  them. 
502 


WANT   OF   CONSIDERATION.  [§  610. 


PART  I. 

VOID    MORTGAGES. 

I.    Want  or  Failure  of  Consideration. 

610.  Consideration.  —  In  general  the  same  defences  may  be 
made  to  an  action  on  a  mortgage,  the  statute  of  limitations  ex- 
cepted, that  may  be  made  to  an  action  on  the  debt,  —  as  that  it 
was  given  for  an  illegal  consideration,  or  was  obtained  by  duress 
and  fraud.^  A  mortgage,  like  every  other  contract,  must  be 
founded  on  a  valuable  consideration.  The  consideration  need  not 
be  one  moving  directly  from  the  mortgagee  to  the  mortgagor  j 
but  any  benefit  to  the  mortgagor  or  to  a  stranger,  or  damage  or 
loss  to  the  mortgagee,  rendered  or  sustained  at  the  request  of  the 
mortgagor,  is  sufficient.^  An  agreement  to  extend  the  time  of 
payment  of  a  debt  is  a  sufiicient  consideration. ^  In  a  mortgage 
of  indemnity  the  liability  of  the  mortgagee  to  loss  or  damage  is  a 
sufficient  consideration  for  the  mortgage.*  A  liability  to  loss  on 
the  part  of  the  mortgagee  is  a  consideration  for  a  mortgage  given 
to  secure  him  against  it,  as  much  as  is  a  direct  benefit  to  the  mort- 
gagor, of  whatever  nature  it  may  be.^ 

If  the  consideration  is  valuable  it  need  not  be  adequate.  If 
there  be  no  fraud  or  imposition,  a  mortgage  deliberately  made  for 
the  least  consideration,  with  full  isnowledge  by  the  mortgagor  of 
all  the  circumstances,  is  valid.  A  recital  in  the  mortgage  of  a 
consideration  of  one  dollar,  the  receipt  of  which  is  acknowledged 
by  the  mortgagor,  ^^r/wc^  facie  shows  a  valuable  and  real  consid- 
eration, and  its  actual  payment  ;  and  in  absence  of  opposing 
proof,  such  a  consideration  is  sufficient  to  support  the  mortgage.^ 

In  Maryland,  under  a  provision  of  statute  that  no  mortgage 
shall  be  valid  except  as  between  the  parties,  unless  there  be  in- 
dorsed thereon  an  oath  or  affirmation  of  the  mortgagee  that  the 

1  See  §§  64,  70,  and  chapters  xxxii,  di-  3  Pennsylvania  Coal   Co.  v.  Blake,  85 

vision  3,  and  xxix,  division  5;  Vinton  y.  N.  Y.  226.     Sec  §  459. 

Kinf,',    4   Allen    (Mass.),  562  ;    Bush    v.  *  Simpson  v.  Robert,  35  Ga.  180. 

Cooper,  26  iMiss.  599  ;  Atwood  i;.    P^isk,  ^  Iladen  v.  Buddcnsick,  4  IIuu  (N.  Y.). 

101  Mass.  363,  366,  per  Ames,  J.  649 ;  49  How.  Tr.  241. 

'^  I  Selwyn's    N.  P.   43;    Ma<,'riider   v.  "  Lawrence  r.  McCaimont,  2  How.  426  ; 

State  Bank,  18  Ark.  9;  Popplo  v.  Day,  Boiling  v.  Munchus,  65  Ala.  558;  Grim- 

12.'J   Ma.',H.   520;    Parsons   v.   Clark,    132  ball  u.  Masiiu,  77  Ala.  553. 
Mass.  509  ;  Harlan  v.  Harlan,  20  Pa.  St. 
303 ;  Sykes  v.  Laflerry,  27  Ark.  407. 

603 


§  611.]  VOID   MORTGAGES. 

consideration  in  said  mortgage  is  true  and  bond  fide  as  therein  set 
fortli,^  the  want  of  such  affidavit  is  fatal  to  tlie  validity  of  the 
mortgage  when  it  is  assailed  by  a  creditor,  or  by  a  subsequent 
hond  fide  purchaser.^  One  claiming  under  the  mortgagor  with 
notice  stands  in  no  better  position  in  this  respect  than  the  mort- 
gagor himself.^ 

As  already  noticed,  a  preexisting  debt  is  a  sufficient  considera- 
tion to  support  a  mortgage  as  between  the  parties,*  though  it  is 
not  in  some  states  sufficient  to  make  the  mortgagee  a  purchaser 
for  value  so  as  to  protect  him  against  the  rights  of  third  persons.^ 

611.  It  is  not  necessary  that  any  consideration  should  pass 
at  the  time  of  the  execution  of  the  mortgage.  That  may  be 
either  a  prior  or  a  subsequent  matter.  Mortgages  are  very  fre- 
quently given  to  secure  existing  debts,  in  which  case,  though  the 
consideration  is  generally  altogether  a  past  one,  the  mortgages  are 
valid.^  Moreover,  the  renewal  of  a  note,  or  extension  of  the  time 
of  payment  of  a  debt,  is  a  sufficient  consideration  for  a  mortgage 
by  a  third  person  to  secure  such  debt.' 

Sometimes,  however,  a  mortgage  is  made  for  the  purpose  of 
raising  money  by  subsequent  negotiation  of  the  mortgage,  or  of 
bonds  secured  by  it,  in  which  case  the  consideration  is  subsequent, 
and  the  mortgage  has  no  validity  until  it  is  transferred  to  some 
one  for  value,  or  the  bonds  are  negotiated,  and  it  is  then  subject 

1  Code  1860,  art.  24,  §  29 ;  Stat.  1846,  agent  of  the  mortgagee,  cannot  be  con- 
ch. 291.  See  §  366.  This  affidavit  may  strued  as  meaning  that  he  made  oath  that 
be  made  at  any  time  before  the  mortgage  he  was  the  agent.  Such  a  mortgage  does 
is  recorded,  before  any  one  authorized  to  not  comply  with  the  statute  and  is  fatally 
take  the  acknowledgment  of  a  mortgage,  defective.  Milholland  v.  Tiffany,  64  Md. 
and   the  affidavit  shall  be  recorded  with  4.55. 

the  mortgage.     Code  1860,  art.  24,  §  29,         -  Cockey  v.  Milne,  16  Md.  200. 
p.  136.  3  Phillips  V.  Pearson,  27  Md.  242. 

The   affidavit   may  be  made  by  one  of         *  §  458  ;  Evans  v.  Pence,  78  Ind.  439. 
several  mortgagees,  or  by  an  agent  of  a         ^  §  458. 

mortgagee,  who  shall,  in  addition   to  the         ^  Wright  v.  Shumway,  1  Biss.  23  ;  Ev- 

above  affidavit,  make  affidavit,  to  be  in-  ans  v.  Pence,  supra ;  Wright  v.  Bundy, 

dorsed  on  the  mortgage,  that  he  is  such  11  lud.  398;  Cooley  ?'.  Hobart,  8  Iowa, 

agent,   which   affidavit  is  proof  of  such  358  ;  Usina  t;.  Wilder,  58  Ga.  178  ;  Moore 

agency ;  and  the  president  or  other  offi-  v.  Fuller,  6  Oreg.  272  ;  Duncan  v.  Miller, 

cer  of  a  corporation,  or  the  executor  of  64  Iowa,  223,  226,  quoting  text ;  Magru- 

the  mortgagee,  may  make  such  affidavit,  der  v.  State  Bank,  18  Ark.  9;  Adams  v. 

lb.  art.  20,  §  30,  p.  137.     If  the  certificate  Adams  (Iowa),  30  N.  W.  Rep.  795. 
does  not  show  that  the  agent  made  oath         ^  Magruderi'.  State  Bank,  stipra ;  Bank 

that  he  was  the  agent  of  the  mortgagee,  of    Muskingum    v.     Carpenter,    Wright 

the  declaration  of  the  justice  of  the  peace  (Ohio),  729. 
that  the  affiant  appeared  before  him  as  the 

504 


WANT   OF   CONSIDERATION.  [§  612. 

to  any  incumbrance  intervening  before  the  record  of  it ;  ^  but 
upon  the  negotiation  of  the  mortgage,  or  of  the  bonds  secured  by 
it,  the  mortgage  takes  effect  in  favor  of  the  holder  of  it  or  of  the 
bonds.^ 

612.  "Want  of  consideration,  or  the  failure  of  it,  is  a  good 
defence  for  the  mortgagor  or  his  grantee  in  good  faith  to  an  action 
upon  the  mortgage.^  A  mortgage  for  a  fixed  sum,  founded  on  no 
consideration  except  an  undertaking  to  furnish  goods  which  were 
never  furnished,  cannot  be  enforced,  except  in  the  hands  of  a  bond 
fide  assignee  for  value.*  A  mortgage  given  for  future  credit,  if 
no  advances  are  made  upon  it  and  no  further  credit  is  given,  is 
without  consideration.  If  taken  for  that  purpose  it  cannot  be 
enforced  for  a  different  purpose.^  The  sum  named  in  the  deed  as 
the  consideration  is  of  no  importance  when  in  terms  the  mortgage 
secures  future  advances.^  It  is  security  for  the  advances  actually 
made  upon  it,  aud  for  nothing  further.  When  given  to  secure 
future  advances,  or  the  value  of  goods  to  be  purchased,  it  is  valid 
to  the  extent  of  the  goods  sold  or  the  advances  made  on  account 
of  tlie  mortgage,  although  the  mortgagor  be  in  fact  insolvent  at 
the  time,  and  becomes  bankrupt  shortly  afterwards.'^ 

Whatever  may  be  the  recitals  or  statements  in  a  mortgage  as 
to  the  consideration,  either  party  to  it  may  show  the  truth  in 
regard  to  it.^ 

When  a  mortgage  has  been  intrusted  to  an  agent  for  the  pur- 
pose of  raising  money,  and  the  agent  uses  it  for  another  purpose 
either  wholly  or  in  part,  as,  for  instance,  to  secure  a  judgment 
against  other  persons,  such  use  is  a  misappropriation  of  it,  such 
as  will  invalidiite  the  security,^  unless  the  assignee  be  entitled  to 
the  protection  accorded  to  a  bond  fide  holder  of  negotiable  paper. 
If  an  agent  who  is  authorized  only  to  receive  a  conveyance   of 

1  See  §  86  ;  Schafer  v.  Reilly,  50  N.  Y.     LanRford  (N.  Y.),  14  N.  E.  Rep.  502,  re- 
61  ;  De  Lancey  v.  Stearns,  66  N.  Y.  157  ;     versing  35  Hun,  667. 

Cady  I'.  Jennings,  17  Hun  (N.  Y.),  213  ;  *  Fisher  v.  Meister,  24  Mich.  447. 

Muliison's  Estate,  68  Pa.  St.  212  ;  John-  o  McDowell  v.  Fisher,  25  N.  J.  Eq.  93  ; 

son  V.  McCurdy,  83  Pa.  St.  282.  Mitzner  v.  Kusscl,  29  Mich.  229 ;  Fisher 

2  Wood  V.  Condit,  34  N.  J.  Eq.  434 ;  v.  Meister,  24  Mich.  447. 
Thompson  v.  Humboldt   Safe  Deposit  &  6  Miller  v.  Lockwood,  32  N.  Y.  293. 
Trust  Co.  (Pa.)  9  Atl.  Rep.  511  ;  Roberts  "  Marvin  v.  Chambcns,  12  Blatchf.  495. 
V.  Bauer,  35  La.  Ann.  453.  8  Wimberly  v.  Worthani  (Miss.),  3   So. 

3§   1297;    Ilannan    i;.    Hannan,    123  Rep.  459. 

Mass.  441  ;    Wearse   v.  Peirco,    24  Pick.  "  Graver  i-.  Wilson,  14  Abb.  (N.  Y.)  Pr. 

(Mass.)  141  ;    Smith   v.   Newton,  38   111.  N.  S.  374;  Davis  v.  Ikchstein,  69  N.  Y. 

230  ;  Conwell  v.  Clifford,  45    Ind.   392  ;  440. 
I'rown   V.  Witts,  57  Cal.  304  ;  Brigga  v. 

605 


§§  613,  614.]  VOID  MORTGAGES. 

lands  to  his  principal  takes  a  conveyance  to  himself  and  makes 
a  mortgage  to  one  having  notice  of  the  fact,  it  is  void  as  against 
the  principal.!  An  ofi&cer  or  agent,  who  takes  a  mortgage  to 
himself  to  secure  the  payment  of  a  debt  to  his  principal,  holds  it 
by  implication  of  law  as  trustee  for  the  principal.^ 

613.  A  mortgage  under  seal  implies  consideration  at  com- 
mon law,  and  none  need  be  proved,  and  it  is  good  if  it  is  shown 
that  none  was  given.  Neither  courts  of  law  nor  equity  will  allow 
the  consideration  to  be  inquired  into  for  the  sake  of  declaring  the 
instrument  void  for  want  of  consideration ;  but  they  will,  for  the 
purpose  of  ascertaining  what  is  due  upon  it.^  In  New  Jersey  it 
is  provided  by  statute  that  the  defence  of  fraud  in  the  considera- 
tion of  a  deed  may  be  made  as  fully  as  if  the  instrument  were 
not  under  seal  ;  *  and  in  New  York  a  seal  affords  only  presump- 
tive evidence  of  a  sufficient  consideration  ;  this  presumption  may 
be  rebutted  in  the  same  manner  and  to  the  same  extent  as  if  the 
instrument  were  not  under  seal.^ 

A  mortgage  imports  a  consideration,  so  that  the  burden  is  upon 
the  party  who  sets  up  the  want  of  consideration  to  prove  that  it 
was  made  without  consideration  or  was  procured  by  fraud.*^  There 
is  also  a  presumption  that  the  consideration  stated  in  the  mort- 
gage is  correctly  stated,  and  very  convincing  proof  is  required  to 
rebut  this  presumption.'^ 

614.  A  mortgage  may  be  made  by  way  of  gift,  when  the 
rights  of  creditors  are  not  thereby  interfered  witli.^  When  ex- 
ecuted and  delivered  it  is  as  valid  as  if  it  were  based  upon  a  full 
consideration.  It  is  not  open  to  the  objection  that  it  is  a  volun- 
tary executory  agreement,  but  may  be  enforced  according  to  its 
terms  as  an  executed  conveyance.^ 

1  Wisconsin  Bank  v.  Morley,  19  Wis.  Graver  v.  Wilson,  U  Abb.  N.  S.  374; 
62.  Gray   v.   Barton,   55   N.   Y.   68 ;    Best  v. 

2  Rood  V.  Winlow,  Walk.  (Mich.)  340.  Tbiel,  79  N.  Y.  15;  Torry  v.  Black,  58 
In  this  case  the  mortgage  was  to  a  county  N.  Y.  185. 

commissioner,  the  debt  being  due  to  the  ^  Gomraercial  Exchange  Bank  v.  Mc- 

county.  Leod,  67  Iowa,  718. 

3  Farnum  v.  Burnett,  21  N.  J.  Eq.  87;  ^  Wiswall  v.  Ayres,  51  Mich.  324. 
Calkins  v.  Long,   22  Barb.    (N.  Y.)  97;  »  Gale  w.  Gould,  40  Mich.  515. 
Parker  v.  Parmele,  20  Johns.  (N.  Y.)  130,  9  Campbell  v.  Tompkins,  32  N.  J.  Eq. 
134;    Maxwell  i;.  Hartmann,  50  Wis.  660.  170;    Bucklin   v.  Buci^lin,   1  Abb.   App. 

*  New  Jersey:  Laws  1871,  p.  8;  and  Dec.  (N.  Y.)  242;  Brooks  v.  Dalrymple, 
see  Feldman  v.  Gamble,  26  N.  J.  Eq.  494,  12  Allen  (Mass.),  102;  Peabody  v.  Pea- 
496.  body,  59  Ind.  556. 

6  New  York:    3    R.   S.   1875,  p.   672; 
606 


WANT   OF   CONSIDERATION.  [§§  615,  616. 

But  the  fact  that  a  mortgage  is  given  without  consideration 
may  have  an  important  bearing  on  any  disputed  question  con- 
cerning the  delivery  or  recording  of  it.^ 

615.  To  support  a  mortgage  made  for  the  accommodation 
of  another,  there  must  be  a  consideration;  but  it  is  sufficient  that 
this  consideration  arises  upon  the  subsequent  negotiation  of  the 
mortgage  by  the  mortgagee.  In  states  where  a  preexisting  debt 
is  not  regarded  as  a  valid  consideration,  if  the  debt  of  a  third  per- 
son, which  is  secured  by  assigning  the  mortgage,  be  already  in- 
curred, there  must  be  a  new  and  distinct  consideration  for  the 
obligation  incurred  by  the  mortgagor,  as  surety  or  guarantor  of 
that  debt.  But  if  the  debt  secured  be  incurred  at  the  same  time 
that  the  mortgage  is  given,  and  this  collateral  undertaking  enters 
into  the  inducement  to  the  creditor  for  giving  the  credit,  then  the 
consideration  for  such  contract  is  regarded  as  consideration  also 
for  the  collateral  undertaking  by  way  of  mortgage.^ 

A  mortgage  made  for  the  accommodation  of  another,  upon  the 
understanding  that  the  money  should  be  realized  in  a  particular 
manner,  is  not  fraudulently  misappropriated  though  the  money 
be  obtained  in  a  way  different  from  that  which  w^as  intended,  pro- 
vided it  be  negotiated  so  that  the  substantial  purpose  for  which  it 
was  designed  is  attained.  It  is  not  material  that  it  be  negotiated 
in  the  precise  manner  contemplated,  unless  the  interest  of  the 
party  making  it  be  prejudiced  by  the  manner  in  which  it  is 
used.3 

616.  A  mortgagor  may  be  estopped  to  deny  a  consideration 
for  his  mortgage.  He  is  not,  however,  estopped  from  show- 
ing a  failure  or  want  of  consideration  for  the  note  secured  by  the 
mortgage  as  against  the  mortgagee,  except  by  his  own  repre- 
sentations, or  those  made  by  others  with  his  knowledge  and  con- 
sent.* But  this  defence  cannot  be  taken  against  an  assignee  for 
value  before  maturity.^  Such  mortgage,  though  void  between 
the  original  parties,  is  valid  in  the  hands  of  a  bond  fide  assignee 
without  notice  of  the  illegal  consideration  for  which  it  was  given.^ 

1  Brigham  v.  Brown,  44  Mich.  59.  ^  Cornell  v.  Ilichens,  11  Wis.  353;  Stil- 

2  Davidson  v.  King,  51  Ind.  224.     See     well  v.  Kellogg,  14  Wis.  461. 

§458.  «  Cazet  v.  Fiiki,  9  Gray   (Mass.),  329; 

8  .larobsen  v.  Dodd,  32  N.  J.  Eq.  403  ;  Brigham  v.  Potter,  14  liray  (Mass.),  522  ; 

Duncan  v.  Gilttert,  29  N..J.  L.  521  ;  Wood  Taylor  v.  Pago,  G  Allen  (Mass.),  86;  Earl 

V.  Condit,  34  N.  J.  Eq.  434.  v.  Cluto,  2  Abb.  Apj).  Dec.  (N.  Y.)  1,  and 

*  Jones  V.  Jones,  20  Iowa,  388;  Wearse  cases  cited.     In  North  Carolina  it  is  pro- 

V.  Pelrce,  24  Pick.  (Mass.)  141.  vided  by  statute  that  no  couvoyanco  or 

507 


§  616.]  VOID   MORTGAGES. 

It  may  thus  happen  that  the  mortgagee  may,  in  effect,  give  a 
better  title  than  he  himself  holds.  "  In  the  case  of  a  conveyance 
of  real  estate  to  defraud  creditors,  the  grantee  cannot  hold,  but 
one  who  takes  it  from  him  vt^itliout  notice  may.  But  the  law 
goes  further  in  favor  of  commerce,  and  gives  a  high  degree  of 
character  and  honor  to  bills  of  exchange  and  promissory  notes  in 
the  hands  of  an  indorsee,  without  actual  or  constructive  notice  of 
anything  affecting  their  validity  or  credit."  ^  But  this  rule  does 
not  apply  to  notes  which  are  by  statute  made  absolutely  null  and 
void,  as  notes  made  in  violation  of  statutes  against  usury  and 
gaming  sometimes  are.^ 

A  certificate  made  by  a  mortgagor  at  the  time  of  giving  the 
mortgage  that  there  is  no  defence  to  it,  estops  him  as  against  a 
purchaser  of  the  mortgage  from  setting  up  fraud  or  want  of  con- 
sideration." A  married  woman  is  estopped  by  such  a  certificate 
equally  with  any  other  mortgagor."* 

A  mortgagor  may  be  estopped  from  denying  the  validity  of  his 
mortgage  by  reason  of  representations  made  with  his  knowledge 
and  assent  representing  its  validity  or  based  upon  the  assumption 
of  its  validity.  Thus,  where  a  trustee  of  a  savings  bank,  to  make 
up  a  deficiency  in  its  assets  caused  by  a  loss  for  which  the  trustees 
were  supposed  to  be  personally  liable,  executed  a  mortgage  which 
was  assigned  to  the  bank,  he  was  not  allowed  to  set  up  the  de- 
fence of  want  of  consideration,  inasmuch  as  the  mortgage  was  with 
his  knowledge  and  assent  reported  to  the  banking  department, 
and  represented  to  the  depositors  of  the  bank  as  a  portion  of  its 
assets,  and  the  bank  was  upon  the  strength  thereof,  and  of  other 
similar  securities,  permitted  to  continue  business.^ 

A  note  and  mortgage  deposited  in  escrow,  and  afterwards 
fraudulently  taken  and  put  in  circulation,  without  the  terms  and 
conditions  of  the  deposit  having  been  complied  with,  are  doubtless 
void  in  the  hands  of  a  purchaser  or  assignee  for  value  without 

mortgage,  made  to  secure  the  payment  of  Kendall   v.   Robertson,  12  Cush.   (Mass.) 

a  debt,  shall  be  void  in  the  hands  of  a  pur-  156. 

chaser  for  value  without   notice,  for  the  3  Schenck  v.  O'Neill,  23  Hun  (N.  Y.), 

reason  that  consideration  of  the  debt  was  209;  Hutchison   v.  Gill,  91  Pa.    St.  253. 

forbidden  by  law.     Battle's  Revisal  1873,  The  court  in  the  latter  case  remark,  that 

ch.  50,  §  5.     This  statute  applies  to  usuri-  it  is  unnecessary  to  say  what  would  be 

ous  mortgages.     Coor  v,  Spicer,  65  N.  C.  the  effect  of  actual  fraud  in  procuring  the 

401.  "no  defence"  paper. 

1  Per  Shaw,  C.  J.,  in  Cazet  v.  Field,  ■*  Smyth  v.  Munroe,  19  Hun  (N.  Y.), 
9  Gray  (Mass.),  329.  550;  Payne  v.  Burnham,  62  N.  Y.  69. 

2  Bowyer   v.   Barapton,  2    Stra.  1155;  ^  -q^^^  j,.  Thiel,  79  N.  Y.  15. 

608 


ILLEGAL   CONSIDERATION.  [§  617. 

notice.  In  such  case  the  mortgage  never  has  a  legal  existence, 
and  the  rules  of  commercial  paper  have  no  application  to  the  note 
accompanying  it,  although  it  be  negotiable  in  form.^ 

II.  Illegal  Consideration. 

617.  Illegality  of  consideration  avoids  a  mortgage,  whether 
it  consist  in  a  violation  of  the  common  law  or  of  a  statute.^  A 
mortgage  given  to  secure  a  debt  made  illegal  by  statute,  as,  for 
instance,  a  debt  incurred  for  intoxicating  liquors  illegally  sold  to 
the  mortgagor,  cannot  be  enforced ;  and  such  a  mortgage  is  in- 
valid, although  not  given  to  the  seller  of  the  liquors,  but  at  his 
request  to  a  creditor  of  his,  who  knew  that  the  consideration  was 
illegal.^  But  if  the  mortgage  be  given  for  an  illegal  considera- 
tion, and  the  consideration  not  being  performed  the  mortgagee 
enters  to  foreclose,  and  keeps  possession  till  foreclosure  is  com- 
plete, he  then  has  an  absolute  title,  and  the  value  of  the  land  is 
applied  by  operation  of  law  to  the  payment  of  the  debt  secured 
by  the  mortgage.  The  land  is  then  irretrievably  gone,  unless  the 
law  be  such  that  the  illegal  consideration,  when  paid,  can  be  re- 
covered back,  not  merely  in  money  but  in  land.  It  has  been  held 
that  a  payment  in  land  for  intoxicating  liquors  illegally  sold  could 
not  be  recovered  back,  and  therefore  that  upon  the  foreclosure  of 
a  mortgage  for  such  a  debt,  the  land  cannot  be  recovered  by  the 
mortgagor.* 

A  mortgage  by  a  citizen  of  Tennessee,  executed  to  a  citizen  of 
Kentucky  after  the  proclamation  of  the  President  declaring  the 
State  of  Tennessee  to  be  in  a  state  of  insurrection,  and  forbid- 
ding all  intercourse  with  its  inhabitants,  was  held  void,  although 
the  land  was  situate  in  the  State  of  Kentucky.^  A  mortgage 
given  in  Tennessee  during  the  civil  war,  in  consideration  of  a 
loan  in  Confederate  Treasury  notes,  was  after  the  war  held  void, 
on  the  ground  that  the  consideration  of  the  contract  was  illegal, 
being  notes  issued  by  an  unlawful  confederation  of  states.  Such 
contracts  are  against  public  policy,  and  the  courts  will  not  lend 
their  aid  to  enforce  them.^     But  on  the  contrary,  such  a  mort- 

1  §  87 ;  Chipman  v.  Tucker,  38  Wis.  43  ;  ^  Gilbert  v.  Holmes,  64  111.  548. 

S.  C.  20  Am.  Ilep.  1 ;  Andrews  v.  Thayer,  •'  Baker  v.  Colling,  9  Allen  (Mass.),  2.')3. 

30  Wis.  228  ;  Walker  v.  Ebert,  29   Wis.  ''  McLaiighlin  v.  Cosgrovc,  99  Mass.  4. 

194  ;    Tisher  v.   Beckwitli,   30   Wis.   55  ;  •''•  Hyatt  v.  James,  2  Bush  (Ky.),  4G3. 

Bnrson    v.    Huntington,    21    Mich.   415;  '>  Stillmaii  v.  Loouey,  3  Cold.  (Tenn.) 

Powell   V.    Conant,  :v.\   Mich.  396;   Cres-  20. 

singer  v.  Deaseuburg,  42  Mich.  580.  509 


§§  618,  619.]  VOID  MORTGAGES. 

gage  was  sustained  in  Alabama,  on  the  ground  that  it  was  valid 
under  the  de  facto  government  existing  when  it  was  executed.^ 

618.  Contrary  to  public  policy.  —  If  land  be  conveyed  to  one 
absolutely  as  security  for  a  sum  of  money  to  be  due  him  upon 
his  doing  an  unlawful  act,  as,  for  instance,  procuring  witnesses  to 
testify  to  a  certain  state  of  facts  in  behalf  of  the  grantor,  the 
transaction  is  not  a  mortgage.  The  title  is  not  divested  upon  the 
grantor's  failure  to  perform  the  illegal  stipulation,  but  is  absolute 
in  him,  and  the  grantor  cannot  recover  it  either  in  law  or  in 
equity  .2 

A  mortgage  executed  in  consideration  that  the  mortgagee 
would  use  his  efforts  to  obtain  a  nolle  prosequi  to  an  indictment 
pending  against  the  mortgagor,  is  against  public  policy  and  void.^ 
So  is  one  given  in  composition  of  a  felony,  or  of  a  promise  not 
to  prosecute  for  a  crime  of  lower  degree  than  a  felony.^  A  note 
and  mortgage  given  in  lieu  or  in  renewal  of  a  note  and  mortgage, 
void  for  this  reason,  are  equally  void,  even  in  the  hands  of  an 
assignee  for  value  but  with  notice  of  the  illegality  of  the  consid- 
eration.^ A  mortgage  given  by  a  cashier  of  a  bank  to  a  surety  on 
his  bond  for  the  amount  paid  by  the  surety  in  settlement  of  a  civil 
liability  growing  out  of  the  cashier's  defalcations,  there  being  no 
agreement  not  to  prosecute  the  cashier  criminally,  does  not  con- 
travene public  policy.^ 

A  mortgage,  or  a  deed  in  the  nature  of  a  mortgage,  given  to 
secure  the  performance  of  a  contract  contrary  to  the  policy  of  the 
law,  will  not  be  enforced  by  a  court  of  equity  ;  such,  for  instance, 
is  a  contract  which  is  subject  to  the  objection  of  champerty.'^ 

A  mortgage  given  upon  lands  held  by  a  settler  under  the  pre- 
emption act,  before  he  has  entered  the  lands  at  the  land  office,  is 
void  under  the  act  of  Congress  forbidding  any  conveyance  before 
such  entry. ^ 

619.  Who  may  take  advantage  of  the  illegality.  —  As  a 
general  rule  contracts  prohibited  by  statute  are  void,  and  courts 
will  neither  enforce  them  nor  aid  in  the  recovery  of  money  paid 
in  pursuance  of  them.     "  The  meaning  of  the  familiar  maxim, 

1  Scheibley.Bacho,41  Ala.  423;  Micou  Atwood  v.  Fisk,  101  Mass.  363  ;  Pearce  v. 
V.  Ashur:,t,  55  Ala.  607.  Wilson,  111  Pa.  St.  14. 

2  Patterson  v.  Donner,  48  Cal.  369.  ^  Pierce  v.  Kibbee,  51  Vt.  559. 

3  Wildey  v.  Collier,  7  Md.  273  ;   Crow-         ^  Moog  v.  Strang,  69  Ala.  98. 
der  V.  Reed,  80  Ind.  1.  '  Gilbert  v.  Holmes,  64  111.  548. 

*  Collins  V.  Blantern,  2  Wils.  341,  350  ;         »  §  176 ;  Brewster  v.  Madden,  15  Kans. 

249.      As  to   mortgage   of    cemetery  lot, 
510  Lautz  V.  Buckingham,  4  Lans.  (N.  Y.)  484 


ILLEGAL   CONSIDERATION.  [§  619. 

In  fari  delicto  'potior  est  conditio  defendentis^  is  simply  that  the 
law  leaves  the  parties  exactly  where  they  stand  ;  not  that  it  pre- 
fers the  defendant  to  the  plaintiff,  but  that  it  will  not  recognize 
a  right  of  action,  founded  on  the  illegal  contract,  in  favor  of  either 
party  against  the  other.  They  must  settle  their  own  questions 
in  such  cases  without  the  aid  of  the  courts."  ^  The  principle  in 
such  cases  is  the  same  in  equity  as  at  law  :  while  the  courts  will 
not  aid  the  mortgagee  to  enforce  payment  of  an  illegal  mortgage, 
they  will  not  aid  the  mortgagor  to  obtain  a  cancellation  of  the 
incumbrance.  Both  parties  are  left  without  remedy  when  the 
contract  is  one  that  is  prohibited  as  immoral  or  against  public 
policy .2  When  the  illegal  consideration  has  been  paid  to  one  of 
two  persons  interested  in  it,  the  court  will  not  aid  the  other  to 
recover  his  share  of  it ;  it  does  not  enforce  the  sentiment  of 
"  Honor  among  thieves."  ^ 

In  a  recent  case  in  Nevada  this  principle  was  carried  to  the 
extent  of  declaring  void  a  mortgage  given  for  a  full,  adequate, 
and  legal  consideration,  merely  because  the  mortgagee  had  the 
mortgage  given  to  a  non-resident  of  the  state  for  the  purpose  of 
enabling  him  to  escape  taxation  upon  the  amount  of  the  loan. 
Although  the  revenue  laws  of  the  state  contained  no  prohibi- 
tion of  such  a  contract,  the  mortgage  was  nevertheless  declared 
illegal,  as  against  the  policy  of  the  law,  and  the  court  refused,  for 
that  reason  only,  to  enforce  it  against  the  mortgagor.*  And  it 
was  held,  moreover,  that  it  was  immaterial  that  the  mortgagee 
afterwards  paid  the  full  amount  of  taxes  upon  the  money  loaned. 
The  fraud,  it  was  said,  consisted  in  the  turpitude  of  the  motive 
which  influenced  the  mortgagee  at  the  time  of  the  execution  of 
the  mortgage.^ 

1  Atwood  V.  Fisk,  101  Mass.  363,  per  iquity ;  all  writers  upon  our  law  agree 
Mr.  Justice  Ames.  in  this,  no  polluted  hand  sliall  touch  the 

2  James  v.  Roberts,  18  Ohio,  548;  Sny-  pure  foundations  of  justice  ;  whoever  is  a 
der  V.  Snyder,  51  Md.  77.  See,  however,  party  to  an  unlawful  contract,  if  he  hath 
Sackner  v.  Sackner,  39  Mich.  39.  In  Cox  once  paid  the  money  .stipulated  to  be  paid 
V.  Wightman,  4  Hun  (N.  Y.),  799,  the  in  pursuance  thereof,  he  shall  not  have 
principle  was  applied  to  a  case  where  a  the  help  of  a  court  to  fetch  it  back  again ; 
mortgage  had  been  assigned  for  the  pur-  you  sliall  not  have  a  right  of  action  when 
pose  of  escaping  ta.xation.  The  assignor,  you  come  into  a  court  of  justice  in  this 
or  his  admiiiistnitor,  was  not  allowed  to  unclean  manner  to  recover  it  back.  Procul 
get  back  the  mortgage  and  bond,  though  0!  procul  este  pro/a ni."  Collins  v.  Blan- 
transfcrreil  without  consideration.  tern,  2  Wils.  341,  S.'iO. 

3  Woodworth  v.  Bennett,  43  N.  Y.  273.  *  Drexler  v.  Tyrrell,  15  Ncv.  114. 

In  the  language  of  Lord  Chief  Justice  ^  But  the  cases  cited  in  sn])|jort  of  the 
Wilmot,  "  You  shall  not  stipulate  for  in-     decision  are  cases   in  wiiich  the  consider- 

511 


§  619.]  VOID  MORTGAGES. 

Gaming  contracts,  contracts  made  on  Sunday,  contracts  of 
champerty  and  maintenance,  contracts  made  in  composition  of 
felony,  and  many  others  of  like  nature,  might  be  mentioned  as 
examples.  But  sometimes  contracts  are  prohibited  for  the  mere 
protection  of  one  of  the  parties  against  an  undue  advantage  which 
the  other  party  is  supposed  to  possess  over  him.  In  such  cases 
the  parties  are  not  regarded  as  being  equally  guilty,  and  so  the 
rule  is  not  deemed  applicable,  though  both  have  violated  the  law.^ 
As  an  example  of  this  kind,  a  usurious  contract  is  mentioned, 
which  may  be  void  as  to  the  mortgagee  while  valid  as  to  the 
mortgagor. 

In  accordance  with  this  distinction,  a  law  providing  that  school 
funds  shall  be  loaned  only  upon  unincumbered  real  estate  does 
not  render  void  a  mortgage  taken  in  violation  of  this  statute  by 
the  officer  charged  with  making  the  loan.  The  mortg^igor  can- 
not claim  that  such  a  mortgage  is  illegal  and  cannot  be  enforced 
against  him.^  And  so  under  the  national  banking  law  a  mort- 
gage for  a  loan  upon  real  estate  security,  though  impliedly  pro- 
hibited, is  valid  between  the  parties.^ 

A  statute  providing  that  a  trustee,  before  entering  upon  the 
discharge  of  his  duties,  shall  give  a  bond  for  the  faithful  discharge 
of  his  duties,  does  not  prevent  the  legal  estate  vesting  in  him 
under  a  mortgage  or  deed  of  trust  regularly  executed.^ 

ation  of  the  contract,  as  between  the  par-  ^  Deming  v.  State,  23  Ind.  416.  See 
ties  themselves,  was  either  illegal  or  con-  Eagiiet  v.  Roll,  7  Ohio,  77 ;  «§.  C  4  lb. 
travened  the  policy  of  the  law.  In  the  419;  Cowles  i;..Raguet,  14  Ohio,  38;  Mc- 
case  before  the  court,  however,  there  was  Quade  v.  Rosecrans,  36  Ohio  St.  442. 
nothing  illegal  in  the  contract  as  between  An  important  element  in  this  case  was 
the  parties.  It  was  a  contract  they  were  that  Raguet  not  only  agreed  not  to  prose- 
not  prohibited  from  making,  and  there  cute,  but  agreed  to  use  his  influence  to 
was  a  full  and  complete  consideration  for  prevent  a  prosecution.  The  Ohio  cases  go 
it.  The  only  taint  in  the  transaction  was  further  than  this  general  rule  would  war- 
the  intended  fraud  upon  the  revenue  laws  rant,  because  they  hold  that  in  an  action 
of  the  state.  For  this  intended  fraud  the  by  a  mortgagee  against  the  mortgagor  to 
court  upheld  the  mortgagor  in  refusing  recover  possession  of  the  mortgaged  lands, 
payment  of  the  mortgage;  they  upheld  the  fact  that  such  mortgage  was  given  to 
him  in  a  monstrous  injustice,  when  the  compound  a  felony  is  no  defence.  Wil- 
revenue  laws  of  the  state  provided  proper  liams  v.  Englebrecht,  37  Ohio  St.  383. 
and  ample  punishment  for  an  evasion  of  ^  Deming  v.  State,  supra.  And  see 
them  by  criminal  prosecution.  The  de-  Mann  v.  Best,  62  Mo.  491. 
cision  is  regarded  as  wrong  in  principle.  ^  National  Bank  v.  Matthews,  98  U.  S. 
This  decision  is  also  regarded  as  incorrect  621;  6\  C.  19  Alb.  L.  J.  132;  13  West, 
by  Learned,  J.,  in  Nichols  v.  "Weed  Sew-  Jur.  176. 

ing  Machine  Co.  27    Hun  (N.  Y.),  200;  «  Gardner  v.  Brown,  21  Wall.  36. 
affirmed  97  N.  Y.  650. 

512 


ILLEGAL   CONSIDERATION.  [§§  620,  621. 

620.  The  mortgage  may  be  upheld  for  such  part  of  the 
consideration  as  was  free  from  the  taint  of  illegality,  when 
the  consideration  of  a  mortgage  is  made  up  of  several  distinct 
transactions,  some  of  which  are  legal  and  others  are  not,  and  the 
one  can  be  separated  with  certainty  from  the  other.^  In  equity 
a  mortgage  securing  a  debt  usurious  in  part,  but  valid  in  part, 
may  be  upheld  for  the  latter,  although  in  terms  the  statute  of 
usury  makes  the  obligation  void  altogether.  Thus,  where  the 
maker  of  such  a  mortgage  comes  into  equity,  and  asks  that  such 
a  mortgage  be  surrendered  as  a  cloud  on  the  title  to  his  lands, 
and  that  the  court  will  so  direct,  although  it  cannot  require  him 
to  pa}^  the  usurious  debt,  or  any  part  of  it,  it  may  require  him 
to  pay  the  other  part  of  it  which  at  law  and  in  equity  he  owes. 
The  court  will  require  him  to  do  equity  before  it  will  administer 
the  relief  asked  for.'-^ 

A  mortgage  fraudulently  made  to  include  a  sum  not  due  or 
which  had  been  paid,  the  consideration  being  entire,  and  the  pur- 
pose of  the  transaction  being  to  defraud  creditors,  is  absolutely 
void.3  But  if  the  sum  secui'ed  be  made  up  in  part  of  a  sum 
inadvertently  included  and  without  fraudulent  intent,  then  the 
mortgage  may  be  valid  for  the  actual  debt  secured,  and  void  as 
to  the  rest.* 

When  part  of  the  consideration  of  a  note  and  mortgage  is  the 
suppression  of  a  criminal  prosecution  against  the  mortgagor,  he 
can  avail  himself  of  this  fact  aa  a  defence  to  a  suit  to  enforce 
either  of  them,  although  the  prosecution  is  for  an  embezzlement 
of  funds,  by  which  the  mortgagor  not  only  committed  a  crime 
but  incurred  a  debt.  The  effect  upon  the  mortgage  in  such  case 
is  the  same  as  if  the  whole  consideration  had  been  illegal.  The 
illegal  part  cannot  be  separated  from  the  legal,  but  the  illegality 
taints  the  wiiole.^ 

621.  A  mortgage  may  be  valid  in  part  and  void  in  part.^ 

'  Robinson   v.   Bland,   2   Burr.    1077;  v.  Carpenter,  54  Vt.  153;   41  Am.  Rep. 

Feldman  v.  Gamble,  26  N.   J.   Eq.  494;  837. 

Corbett    v.    Woodward,    5    Sawyer,    403;  ^  Williams  y.  Fitzhii};h,  si(/>n(. 

Williams  v.  Fit/.hiit-h,  37   N.  Y.  444,  ap-  »  McQuade  v.   Rosecraiis,  30   Oiiio  St. 

plied  10  usury ;    McCrancy  v.  Alden,  46  442. 

Barb.  (N.  Y.)  272;    Cook  v.  Barnes,  36  *  Wecden  v.  Ilawcs,  10  Conn.  50. 

N.  Y.  520;  Carleton  v.  Woods,  28  N.  H.  <>  Atwood  v.  Fisk,  101  Mass.  363,  366, 

290;  Carradine  I'.  Wilson,  61    Miss.  573;  per  Ames,  J. 

Yundt  V.  Rolierts,  5  S.  &  R.  (Pa.)  139  ;  8  j^eeds  v.  Cameron,  3  Sum.  488  ;  John- 
Warren  V.  Chapman,  105  Mass.  87  ;  Shaw  son  v.  Richardson,  38  N.  II.  353  ;   Rood  v. 

VOL.  I.             33  513 


§  622.]  VOID   MORTGAGES. 

A  mortgage  of  land  and  slaves,  executed  while  slavery  was  rec- 
ognized, was  vitiated  by  the  abolition  of  slavery  only  as  to  the 
lien  upon  the  slaves.^ 

Where  a  bond  of  defeasance  was  assigned  by  a  debtor  to  a  cred- 
itor, who  paid  the  debt  to  secure  which  the  conveyance  was  made, 
whereupon  the  land  was  conveyed  to  him,  and  he  gave  the  debtor 
a  new  bond  conditioned  for  the  reconveyance  of  the  land  upon  the 
payment  of  the  amount  of  both  debts,  the  transaction,  so  far  as 
the  debt  of  the  second  creditor  was  secured,  was  void  under  the 
insolvent  laws ;  but  the  conveyance  being  a  valid  security  for  the 
first  debt,  the  land  was  a  valid  security  in  the  hands  of  the  second 
creditor  for  the  amount  paid  by  him  to  the  first  creditor.^ 

A  mortgage  given  by  a  third  person  at  the  solicitation  of  an- 
other to  secure  his  debts  for  a  specific  purpose,  as,  for  instance, 
the  purchase  price  of  certain  goods  about  to  be  sold  him,  if  fraud- 
ulently made  to  cover  in  part  an  existing  indebtedness,  is  void  as 
to  such  part  of  it,  though  valid  as  to  the  part  used  for  the  purpose 
intended.  Although  the  mortgagee  has  taken  such  mortgage  in 
good  faith,  if  he  has  not  put  himself  in  any  worse  position  in 
regard  to  the  old  indebtedness,  and  if  he  has  not  done  anything 
or  parted  with  anything  in  reliance  upon  the  mortgage,  he  can- 
not claim  that  the  surety  should  suffer  for  the  fraud  by  reason  of 
negligence  in  executing  the  mortgage  which  rendered  the  fraud 


possible.^ 

A  mortgage  made  without  fraudulent  intent  for  a  larger  amount 
than  the  mortgagor's  actual  indebtedness  is  not  fraudulent,  but 
may  be  enforced  to  the  extent  of  such  actual  debt.* 

622.  The  burden  of  proof  is  upon  the  party  who  sets  up  the 
defence  of  want  of  consideration  or  illegality  of  it,  to  make  it  out 
by  clear  and  strong  proof .^  A  mortgage  in  due  form  and  duly 
executed  implies  a  valid  consideration. 

Evidence  of  the  payment  of  interest  upon  a  mortgage  is  admis- 
sible to  show  its  validity  when  this  is  disputed.^ 

Winslow,   2   Dougl.    (Mich.)    68;    S.   C.  »  Smith  r.  Osborn,  33  Mich.  410. 

Walli.   (Mich.)   340;   McMurray  r.  Con-  *  Adams  r.  Niemann,  46  Mich.  135. 

nor,  2  Allen  (Mass.),  205.  5  gtuart  v.  Phelps,  39  Iowa,  14 ;  Feld- 

1  Lavillebeuvre  y.  Frederic,  20  La.  Ann.  man  v.  Gamble,  26  N.  J.  Eq.  494;  Brig- 
374.  ham  v.  Potter,  14  Gray  (Mass.),  522. 

2  Judd  V.  Flint,  4  Gray  (Mass.),  557.  6  Floyd  Co.  v.  Morrison,  40  Iowa,  188. 

514 


MORTGAGES  EXECUTED    ON   SUNDAY.  [§  623. 

III.   Mortgages  executed  on  Sunday. 

623.  Mortgage  for  debt  contracted  on  Sunday.  —  The  stat- 
utes forbidding  the  transaction  of  business  on  Sunday  have  the 
effect  to  render  void  all  contracts  executed  upon  that  day.^  It 
has  sometimes  been  said  that  such  contracts,  being  immoral  and 
illegal  only  as  to  the  time  they  are  entered  into,  may  be  affirmed 
upon  a  subsequent  day,  and  thus  made  valid.^  But  it  seems 
incorrect  to  say  that  a  mere  ratification  can  impart  legal  efficacy 
to  a  contract  which  has  no  legal  existence.'^  The  logical  theory 
would  seem  to  be  that  nothing  but  an  express  promise  subse- 
quently made,  founded  upon  the  consideration  emanating  from 
the  illegal  contract,  will  avail  to  support  an  action  having  that 
consideration  for  its  basis.  Upon  this  theory  it  was  held  that 
although  a  promissory  note  made  and  delivered  on  Sunday  for  a 
loan  of  money  made  at  the  time  is  illegal  and  cannot  be  enforced, 
yet  the  obligation  to  return  the  money  is  a  sufficient  considera- 
tion to  support  a  mortgage  subsequently  given  to  secure  it.  The 
mortgage  constitutes  a  new  promise  founded  on  such  obligation, 
and  having  no  taint  of  illegality,  such  as  the  note  had,  it  may  be 
enforced.'* 

But  a  mortgage  executed  on  Sunday  without  the  knowledge 
of  the  mortgagee,  and  dated,  acknowledged,  and  delivered  on  the 
following  day,  is  not  void.  The  mortgagor  is  estopped  from  show- 
ing that  the  instrument  was  executed  on  a  day  other  than  that  of 
which  it  bears  date.^ 

When  a  deed  of  land  was  executed  and  delivered  on  Sunday, 
to  indemnify  the  mortgagee,  and  under  an  oral  agreement  that 

1  Under    the   Massachusetts  statute  of  *  "  The    parties    cannot    legalize    that 

1791,  prohibiting  the  doing  of  any  man-  which  the  law  has  declared  illegal.     It  is 

ner  of  labor,  business,  or  work,  between  competent  to  them  to  impart  new  efficacy 

the  midnight  preceding  and  the  sunset  of  to  a  voidable  act,  but  they  have  no  power 

the  Lord's   day,  and   declaring  void   the  to  give  life  to  an  act  which,  from  reasons 

(execution  of  any  civil  process  from  the  of  public  policy,  has  been  ordained  by  the 

midnight   preceding  to  the  midnight  fol-  legislative  authority  to  be  absolutely  void." 

lowing  that  day,  it  was  held  that  a  mort-  I'er  Chief  Justice  Beasley,  in  Reeves  v. 

gage    executed,    acknowledged,    and    re-  Butcher,  31  N.  J.  L.  224. 

corded,  after  sunset   on  Sunday  evening,  *  Gwinn  u.  Simes,  61  Mo.  335.     In  Har- 

was  not  void.     Tracy  v.  Jenks,  I.*)  Pick,  rison  v.  Colton,31  Iowa,  IG,  it  is  held  that 

(Mass.)  4C.') ;  Mcader  v.  White,  G6  Me.  90.  a  contract  made  on  Sunday  may  be  after 

-  Adams  v.  Gay,  19  Vt.  358,  per  Ked-  wards  ratified.     See  Ileiler  v.  Crawford, 

field,  J.     See  Tucker   v.   West,  29  Ark.  37  Ind.  279. 

38G,  for  a  review  of  tlie  Sunday  laws  of  ^  Wilson  v.  Winter  (C.  C.  Wis.  1881), 

many  of  the  states.  6  Fed.  Kep.  IG. 

616 


§  624.]  VOID  MORTGAGES. 

he  should  hold  the  land  in  trust  foi*  the  mortgagor  after  satisfy- 
ing liis  claim,  in  accordance  with  which  agreement  a  declaration 
of  trust  was  afterwards  executed,  it  was  held  that  the  fact  that 
the  deed  was  executed  and  delivered  on  Sunday  did  not  entitle 
the  grantee  to  hold  the  land  discharged  of  the  trust.^  The  rule, 
that  no  action  based  on  a  contract  made  on  Sunday  can  be  main- 
tained to  enforce  its  obligations  in  favor  of  either  party,  cannot 
be  so  applied  as  to  enlarge  the  interest  conveyed  by  the  grantor, 
or  to  defeat  his  equitable  title. 

IV.  Fraudulent  Mortgages. 

624.  A  mortgage  obtained  by  fraud  is  void,  and  a  discharge 
of  it  may  be  decreed  in  equity.^  When  a  deed  of  land  has  been 
procured  by  fraud,  and  the  grantee  has  conveyed  it  to  a  purchaser 
in  good  faith,  so  that  the  land  itself  is  beyond  the  reach  of  the 
gi'antor,^  yet,  if  such  purchaser  has  given  a  mortgage  for  a  portion 
of  the  purchase  money  to  the  party  who  fraudulently  obtained 
the  deed,  he  may  in  equity  be  compelled  to  transfer  the  mortgage 
to  the  party  defrauded.  It  is  an  established  doctrine,  that  when 
the  legal  estate  has  been  acquired  by  fraud,  the  taker  may  in 
equity  be  regarded  as  trustee  of  the  party  defrauded,  who  may 
recover  the  estate  or  its  avails  when  these  can  be  distinctly  identi- 
fied.* A  bill  to  set  aside  a  mortgage  procured  by  fraud  may  be 
filed  by  one  of  several  mortgagors  who  have  secured  the  several 
notes  of  each  by  a  joint  mortgage  of  one  tract  of  land;^  or  sev- 
eral mortgagors  may  join  as  plaintiffs  in  a  bill  to  obtain  a  can- 
cellation of  a  note  and  mortgage,  though  the  note  secured  was 

1  Faxon    v.    Folvey,    110    Mass.    392.  not   interfere  to  undo   what   the  parties 
"  The  apparent  title  conveyed,"  says  Mr.  have  done,   by  setting  aside  their  deeds. 
Justice  Colt,  "  was  qualified  by  the  trust  Neither  party  can  now  assert  rights  incon- 
imposed  upon  it,  as  effectually  as  if  the  sistent  with  the  conveyances.     See  Hall  v. 
terms  of  the  trust  were  contained  in  the  Corcoran,  107  Mass.  251,  and  cases  cited  ; 
deed  itself.     Neither  party  to  the  transac-  Myers  v.  Meinrath,  101  Mass.  366. 
tion,  nor  those  claiming  under  them,  can  '^  Mason  v.  Daly,  117  Mass.  403;  War- 
be  permitted  to  take  advantage  of  the  al-  temberg  v.  Spiegel,   31   Mich.   400;   and 
leged  illegal  act.    The  title,  such  as  it  was,  see  Richardson  v.  Barrick,  16  Iowa,  407  ; 
passed  to  the  grantee,  and  was  held,  as  Terry  v.  Tuttle,  24  Mich.  206 ;  Wright  v. 
we  have  found,  in  trust.     The  purpose  of  Morgan,  4  Bax.  (Tenn.)  385  ;  Silver  Val. 
the  trust  declared  was  neither  immoral,  Min.  Co.  v.  Baltimore,  G.  &  S.  M.  &  S. 
contrary  to  the  statutes,  nor  contrary  to  Co.  (N.  C.)  6  S.  E.  Rep.  735. 
public  policy;  the  only  illegality  charged  ^  Jordan  v.  McNeil,  25  Kans.  459. 
13  in  the  time  when,  by  the  conveyance  *  Cheney  v.  Gleason,  117  Mass.  557. 
and    agreement,    the  trust   was    created.  ^  Moulton  v.  Lowe,  32  Me.  466. 
Under  such  circumstances  the   law  does 

516 


FRAUDULENT   MORTGAGES.  [§  625. 

executed  by  only  one  of  tliem.^  It  has  been  held  to  be  fraud  in 
a  creditor  to  induce  his  debtor  to  secure  an  old  debt  by  mortgage 
upon  the  condition  of  advancing  a  further  sum,  and  when  he  has 
obtained  the  security  to  refuse  to  make  the  advance,  and  a  court 
of  equity  will  annul  the  conveyance.  In  such  case  the  mortgagee 
cannot  claim  that  there  is  no  loss,  and  that  therefore  the  rtiort- 
gage  is  damnum  absque  injuria.  The  mere  existence  of  the  mort- 
gage is  itself  an  injury,  and  an  action  to  enforce  it  a  greater.^ 
But  the  better  view  is  that  such  a  transaction  does  not  afford 
ground  for  cancelling  the  mortgage  in  equity,  though  it  might 
support  an  action  at  law  for  the  injury  sustained  by  reason  of  the 
breach  of  agreement.^ 

The  fact  that  the  mortgagor  is  in  possession,  and  can  maintain 
his  possession  against  the  mortgagee  at  law,  does  not  prevent  his 
maintaining  a  bill  to  set  aside  a  fraudulent  mortgage.* 

A  party  seeking  to  avoid  his  contract  upon  the  ground  of  fraud 
can  do  so  only  by  making  prompt  complaint.^ 

A  mortgage  given  to  secure  a  forged  note  is  void.  Thus  a 
mortgage  given  by  a  wife  upon  her  separate  property  for  the 
accommodation  of  her  husband's  firm  is  rendered  void  by  the 
forgery  of  her  name,  as  a  joint  maker  with  her  husband,  of  the 
note  intended  to  be  secured,  even  in  the  hands  of  an  innocent 
assignee.^ 

Whether  a  mortgage  obtained  by  a  creditor  as  security  for  a 
preexisting  debt,  under  a  promise  to  make  further  advances,  when 
the  creditor  had  no  intention  of  keeping  his  promise,  is  fraudu- 
lent, is  a  question  upon  which  the  cases  are  in  conflict ; '  but  if 
the  creditor  intended  to  make  the  advances  and  refused  to  do  so, 
on  some  reasonable  ground,  tlie  mortgage  cannot  be  avoided  on 
the  ground  of  fraud.*^ 

625.  A  fraudulent  intent  on  the  part  of  the  mortgagee  in 
obtaining  the  mortgage  must  be  shown  to  render  it  void.'-*  To 
have  this  effect,  it  is  necessary  that  there  should  be  something 
mor(i  than  mere  folly  on  the  part  of  the  mortgagor.    A  mortgagee 

1  Bowman  v.  Gormy,  23  Kans.  306.  Murphy,  60  Ala.  288  ;  the  latter  case  hold- 

2  Gross  V.  McKee,  53  Miss.  536.  ing   that  sucli    breach   of    promise   is  no 
•*  Johnson  v.  Murphy,  CO  Ala.  288.              ground  for  declaring  the  mortgage  void. 

*  Marston  v.  Brackctt,  9  N.  H.  336.  8  Petty  v.  Grisard,  45  Ark   117. 

6  Wright  V.  Peet,  36  Mich.  213.  "  See  §§  1299,  1492  ;  Clarke  v.  Forbes, 

«  Morsman    v.    Werges    (C.   C.    Iowa,  'J  Neb.  476;  Murphy  v.  Moore,  23  Huu 

1 880),  3  Fed.  Kep.  378.  (N.  Y.),  95. 
''  Gross  V.    McKee,  supra ;   Johnson  v. 

517 


§  626.]  VOID   MORTGAGES. 

may  meet  an  allegation  that  a  mortgage  was  obtained  through  his 
false  and  fraudulent  representations,  by  evidence  that  the  mort- 
gagor executed  the  mortgage  without  his  solicitation.  The  weight 
to  be  given  to  the  evidence  is  a  question  for  the  jury.i  A  fraud- 
ulent misrepi'esentation  as  to  the  value  of  property  sold  by  the 
mortgagee,  in  payment  of  which  he  has  taken  a  mortgage,  does 
not  avoid  the  mortgage  if  there  was  any  value  at  all  in  the  prop- 
erty sold.  The  property  which  was  the  subject  of  the  sale  and 
mortgage  must  first  be  restored  to  the  vendor,  or  a  reconveyance 
tendered,  before  the  mortgage  can  be  rescinded .^ 

Fraudulent  intent  on  the  part  of  one  of  two  mortgagees  will 
invalidate  the  mortgage,  although  the  mortgage  secured  separate 
debts  and  the  other  mortgagee  did  not  share  in  or  know  of  such 
fraudulent  intent.^ 

The  representation  of  a  mortgagee  that  he  would  not  enforce 
the  mortgage  is  no  defence  to  it,  because  such  a  parol  promise 
cannot  be  offered  in  evidence.* 

The  mere  fact  that  a  mortgagor  was  unable  to  read,  and  that 
the  mortgage  was  not  read  to  him,  does  not  enable  him,  in  the 
absence  of  proof  of  fraud  on  the  part  of  the  mortgagee,  to  object 
that  the  instrument  contains  an  unauthorized  stipulation,  espe- 
cially when  it  was  drawn  by  his  own  agent.^ 

626.  A  mortgage  obtained  by  duress  is  void.  The  duress 
must  be  something  more  than  the  exercise  of  undue  influence.^ 
A  mortgage  obtained  through  threats  of  prosecution,  whether 
groundless  or  not,  is  void,  and  a  court  of  chancery  will  restrain 
its  collection,"  or  will  order  it  to  be  cancelled,  as  a  cloud  on  the 
title.^  Relief  may  be  granted  against  a  mortgage  extorted  by  a 
son  from  his  parents  by  oppressive  means,  and  for  an  inadequate 

1  Blackwell  i;.  Cuinmings,  68  N,  C.  121.  see  Lightfoot  v.  AYallis,  12  Bush   (Ky.), 

2  Sanborn  v.  Osgood,  16  N.  H.  112.  498. 

3  Adams  v.  Niemann,  46  Mich.  135.  »  Schoener  v.  Lessauer  (N.  Y.),  13  N.  E. 
*  Catlin  V.  Fletcher,  9  Minn.  85.  Rep.  741,  reversing  36  Hun,  100. 

5  Wilson  V.  Winter  (C.  C.  Wis.  1881),  A  mortgage  executed   by  a  wife  upon 

6  Fed.  Kep.  16  ;  Montgomery  v.  Scott,  9  her    property    to    secure    a   debt    of    the 

S.  C.  20 ;  30  Am.  Rep.  1  ;  Leslie  v.  Mer-  husband,   under  the  inducement  of  false 

rick,  99  Ind.   180;   McAlarney  v.   Paine  and  fraudulent  charges  of  embezzlement 

(Pa.),  10  Atl.  Rep.  20;  Stewart  v.  Whit-  against  the  husband,  and  threats  to  insti- 

lock,  58  Cal.  2.  tute  criminal  proceedings  against  him,  is 

0  Moog  V.  Strang,  69  Ala.  98;  Gabbey  void.     Singer  Manufacturing  Co.  v.  Raw- 

V.  Forgeus  (Kans.),  15  Pac.  Rep.  866.  son,  50  Iowa,  634.     It  is  immaterial  that 

^  James    v.    Roberts,     18    Ohio,    548;  the  property  was  purchased  by  the  hus- 

Eyster   v.   Hatheway,   50   111.   521  ;    and  band  with   money  of  the  party  making 

518 


FRAUDULENT  MORTGAGES.  [§  626. 

consideration,  while  he  practically  occupied  the  position  of  guar- 
dian over  them  and  their  property.^  A  mortgage  executed  by  a 
wife  on  her  separate  propert}',  to  secure  a  debt  of  her  husband, 
under  his  threat  to  abandon  her  if  she  refused,  may  be  avoided 
by  her  if  the  mortgagee  was  aware  of  such  threat  at  the  time  the 
mortgage  was  executed.^  It  is  even  held  that  a  mortgage  ob- 
tained from  a  married  woman  by  duress  on  the  part  of  the  hus- 
band is  void,  although  the  mortgagee  took  no  part  in  procuring 
it,  on  the  ground  that  he  allowed  the  husband  to  act  as  his  agent, 
and  is  bound  by  his  acts.^  But  a  married  woman  cannot  set  up 
the  invalidity  of  her  signature  to  a  mortgage  of  her  homestead 
on  the  ground  that  not  being  able  to  read  she  relied  on  the  rep- 
resentations of  her  husband  that  the  instrument  was  a  note  and 
was  of  no  consequence ;  *  for  it  was  gross  negligence  in  her  not 
to  require  the  instrument  to  be  read  to  lier.^  A  married  woman 
as  well  as  any  one  else  may  be  estopped  by  her  deliberate  con- 
duct.s 

The  fraud  or  duress  of  a  husband  in  procuring  his  wife's  release 
of  homestead  does  not  invalidate  the  mortgage  unless  the  mort- 
gagee had  knowledge  of  or  shared  in  the  wrongful  acts  of  the  hus- 
band.' But  where  her  separate  acknowledgment  is  made  essen- 
tial to  a  conveyance  of  her  separate  estate,  if  she  executes  a 
mortgage  during  her  minority  she  cannot  ratify  it  by  paying  inter- 
est or  doing  any  like  act  after  coming  of  age.  She  can  only  ratify 
it  in  the  way  she  could  originally  execute  it,  that  is,  by  making 
a  separate  acknowledgment  of  the  deed  as  required  by  statute. 
Doubtless  she  would  be  estopped  in  case  she  had  deliberately  de- 
ceived the  mortgagee  by  falsehood ;  but  otherwise  her  deed 
would  be  voidable  and  could  be  confirmed  only  in  the  manner 
indicated.^  A  mortgage  given  under  threats  by  the  creditor  of  a 
criminal  prosecution  for  a  felony  unless  the   debt  be  secured,  is 

the  threats,  and  fraudulently  conveyed  to  ^  Roach  i'.  Karr,  18  Kans.  529;  Fiickee 

the  wife.  v.  Donner,  35  Mich.  151. 

1  Bowe  V.  Bowe,  42  Mich.  195.  6  Norton  v.  Nichols,  35  Mich.  148  ;  Le- 

2  Line  v.  Blizzard,  70  Ind.  23.  As  to  febvre  v.  Dutruit,  51  Wis.  326  ;  Ed<.?ell  v. 
what  threats  and  commands  on  the  part  Ilagens,  53  Iowa,  223;  Van  Sickles  v. 
of    the   husband   amount    to   duress,    see  Town,  53  Iowa,  259. 

Gabbey  v.  Forgeus  (Kan.s.),  15  Pac.  Rep.  '  ^'^tna  Life  Ins.  Co.  v.  Franks,  aupra; 

866.  Edgcll  V.  Ilagens,  sM;)ra ;  Moog  v.  Strang, 

»  Central   Bank  of  Frederick  r.  Cope-  69  Ala.  98. 

land,  18  Md.  30.'').  »  ledger  Building   As.so.   v.  Cook  (Pa. 

*  ^Ctiia    Life    Ins.    Co.    v.    Franks,    53  1879),  7   Reiiuiter,  409;  ^'.  C.  19  Alb.  L. 

Iowa,  618.  J.  28;  Williams  v.  Baker,  71  Pa.  St.  476. 

619 


§  626.]  VOID   MORTGAGES. 

not  void  if  the  debt  was  actually  due,  and  the  debtor  was  in  duty 
bound  to  pay  or  secure  it.  The  giving  of  the  mortgage  in  such 
case  is  not  the  compounding  of  a  felony. ^  But  if  a  mortgage  be 
given  without  consideration,  under  threats  of  a  groundless  prose- 
cution, a  court  of  equity  will  grant  relief  and  restrain  the  collec- 
tion of  it.^ 

Although  the  general  rule  is  that  one  person  cannot  avoid  an 
obligation  by  reason  of  duress  to  another,  there  are  exceptions  to 
this  in  case  the  duress  be  of  the  husband  or  wife,  or  of  parent  or 
child.  Thus  a  father  may  avoid  a  mortgage  which  he  has  been 
induced  to  sign  by  threats  of  the  prosecution  and  imprisonment  of 
his  son.^ 

To  avoid  a  mortgage  on  account  of  duress  by  imprisonment,  it 
must  appear  that  the  imprisonment  was  unlawful,  and  that  it  was 
executed  in  order  to  obtain  a  release  from  it.  "  If  I  be  arrested 
upon  good  cause,  and  being  in  prison  or  under  arrest,  I  make  an 
obligation,  feoffment,  or  any  other  deed  to  him  at  whose  suit  I 
am  arrested,  for  my  enlargement,  and  to  make  him  satisfaction, 
this  shall  not  be  said  to  be  by  duress,  but  is  good  and  shall  bind 
me."^  A  mortgage  given  to  a  county  to  secure  the  payment  of  a 
sum  of  money,  as  the  condition  of  a  pardon,  is  not  void  as  being 
given  under  duress.'^  And  so  a  mortgage  given  by  a  defaulting 
county  treasurer,  to  secui*e  the  amount  of  his  debt  to  the  county, 
is  a  voluntary  obligation  and  valid.*" 

A  mortgage  given  for  a  legal  debt,  but  with  the  motive  not  to 
incur  the  risk  of  offending  a  wealthy  and  influential  friend,  who 
might  prove  highly  serviceable  to  the  mortgagor  and  his  family, 
is  not  given  under  duress.''  A  mortgage  given  in  consequence  of 
threats  made  by  the  creditor  to  resort  to  legal  proceedings  to  col- 
lect a  valid  debt  is  not  given  under  duress.^ 

Whether  the  use  of  a  criminal  prosecution  to  obtain  securities 
renders  them  absolutely  void  and  incapable  of  being  enforced,  or 
voidable  only  so  that  they  may  be  confirmed  by,  subsequent  acts 

1  Plant  V.  Gunn,  2  Woods,  372.  In  the  reporter's  note  to  this  case  many 

2  James  v.  Roberts,  18  Ohio,.  548.     See     authorities  are  citei}. 

Raguet  V.  Roll,  7   Ohio,  76;    Cowles    v.  ^  Rood   v.   Winslow,  2  Doug.    (Mich.) 

Raguet,  14  Ohio,  38.  68. 

3  Harris  v.  Carmody,  131  Mass.  51.  6  Oconto  County  7j.  Hall,  42  Wis.  59  ; 
*  1  Shep.  Touch.  62 ;  and  see  Watkins  State  Bank  of  Bay  City  v.  Chapelle,  40 

V.  Baird,  6  Mass.  506 ;   Plant  v.  Gunn,     Mich.  447. 

supra;  Smillie  v.  Titus,  32  N.  J.  Eq.  51.         '^  Dolman  i;.  Cook,  14  N.  J.  Eq.  56. 


520 


8  Snyder  v.  Braden,  58  Ind.  143. 


FRAUDULENT  MORTGAGES.  [§  627. 

of  ratification,  depends  upon  the  circumstances  of  the  case,  and 
particularly  upon  the  question  whether  the  prosecution  was  insti- 
tuted for  the  sole  purpose  of  extorting  the  securities,  or  was  jus- 
tifiable in  itself  and  not  necessarily  instituted  for  that  purpose,  or 
conducted  in  an  oppressive  manner,  and  there  was  just  considera- 
tion for  the  securities  if  properly  obtained.  Thus  a  wife,  having 
left  her  husband  on  the  ground  of  his  adultery,  with  the  purpose 
of  remaining  away  from  liim  and  of  filing  a  bill  for  separate 
maintenance,  made  a  criminal  complaint  and  procured  his  arrest 
for  the  crime.  The  guilt  of  the  husband  was  unquestionable, 
and  he  settled  the  prosecution  by  giving  to  a  trustee  a  mortgage 
for  the  benefit  of  the  complainant  conditioned  for  the  payment  of 
a  certain  sum  semi-annually  during  her  life.  The  wife  afterwards 
filed  a  bill  for  divorce  without  making  ciaim  to  any  allowance 
and  obtained  a  decree.  The  husband  made  the  semi-annual  pay- 
ment for  about  two  years,  but  then  refused  to  make  further  pay- 
ments, and  a  bill  was  filed  to  foreclose  the  mortgage.  Upon  the 
question  whether  the  mortgage  was  void,  or  voidable  only,  and  so 
confirmed  by  the  payments,  the  Supreme  Court  of  Michigan  was 
evenly  divided,  the  disagreement  turning  largel}^  upon  the  mo- 
tives of  the  criminal  prosecution.^ 

627.  Except  under  bankrupt  and  insolvent  laws,  a  mort- 
gage made  with  the  intent  to  prefer  one  creditor  to  another 
is  valid  ;  ^  although  a  mortgage  made  with  the  intent  upon  the 
part  of  the  mortgagor  to  hinder,  delay,  and  defraud  his  creditors 
is  void  at  common  law  and  by  statute,  generally,  except  in  case 
the  mortgagee  did  not  participate  in  or  have  knowledge  of  such 
intent.^  Such  mortgage  can  be  declared  void  as  to  him  only  upon 
proof  of  bis  knowledge  of    the  fraudulent  intent.*     A  mortgage 

1  Lyon  V.  Waldo,  36  Mich.  345.    Graves     Gage  v.  Parry,  69  Iowa,  609  ;  29  N.  W. 
and  Campbell,  J.I.,  holding  the  mortgage     Kep.  822. 

void,  and  Cooley,  C.  J.,  and  Marston,  J.,  Pennsylvania  :  Benson  v.  Maxwell,  14 

holuing.  it  voidable  only,   and  cured   by  Atl.  Hep.  161. 

ratification  ;  able  opinions  being  delivered  Mississippi:  Estes  v.  Gunter  (U.  S.),  7 

on  each  side.  Su]).  Ct.  Kcp.  1275. 

2  See  Jones  on  Chattel   Mortgages,  §§  ^  Price  r.  Masterson,  35  Ala.  483;  State 
.333-551.  V.  Nauert,  2  Mo.  App.  295;  Preusser  v. 

Massachusetts:  Giddings  v.  Scars,  115  Ilenshaw,   49    Iowa,    41  ;    McMaster    v. 

Ma-1.  '><):>.  Campbell,  41  Midi.  513  ;  Thorpe  v.  Thorpe, 

Iowa:    Southern    White    Lead    Co.  w.  12  S.  C.  154. 

IlaMH,  33  N.  W.   Rep.  657;  Perry  v.  Ve-  *  Hall  v.  lIeydon,41  Ala.  242  ;  Tickner 

zina,  63  Iowa,  25;   18  N.   VV.    Hep.   657;  i>.  Wiswiill,  9  Ala.  305;  Wiley  jx  Knight, 

Aulman  v.  Aulman,  32  N.  W.  Kcp.  240;  27  Ala.  336  ;  Farrand  v.  Cuton  (Mich.), 

37  N.  W.  Kep.  199. 

521 


§  627.]  VOID   MORTGAGES. 

made  with  the  intent  to  defraud  the  mortgagor's  creditors,  even 
though  it  is  founded  on  a  perfect  consideration,  if  taken  by  the 
mortgagee  with  knowledge  of  the  fraudulent  purpose,  and  with 
the  view  of  aiding  the  execution   of  it,  is  void   as  to  creditors.^ 
But  a  mortgage  for  money  loaned,  made  with  the  intent  on  the 
part  of  the  mortgagee  to  aid  the  mortgagor  in  an  attempt  to  de- 
feat a  prior  mortgage  which  was  made  without  consideration  with 
the  intent  to  defraud  the  mortgagor's  creditors,  has   priority  of 
such  prior  mortgage,  the  second  mortgagee  being  to  the  extent  of 
his  loan  a  bond  fide  purchaser  entitled  to  avoid  the  prior  fraudu- 
lent  mortgage,  though  the   mortgagor  himself  could  not  avoid  it.^ 
It  is  incumbent  upon  the  mortgagee  to  show  that  the  mortgage 
was  made  for  a  valuable  and  adequate  consideration ;  and  when 
that  appears,  the  burden  of  proving  a  fraudulent  intent  on    his 
part  rests  with  the  creditors  who  assail  the  transaction.     Proof  of 
the  embarrassed  condition  of  the  mortgagor  at  the  time,  and  of 
the  mortgagee's  relationship  to  him,  is  insufficient  to  establish  a 
fraudulent  intent ;  ^  as  is  also  the  fact  that  the  mortgagor  imme- 
diately afterwards  executed  a  general  assignment  in  favor  of  his 
creditors.*     When  the  object  of  a  mortgage  is  solely  to  secure  a 
debt  to  the  mortgagee,  it  is  not  fraudulent  at  common  law,  al- 
thono-h  both  the  debtor  and  creditor  knew  that  the  effect  of  it 
would  be  to  put  the  property  out  of  the  reach  of  other  creditors.^ 
A  mortgage  given  by  a  husband  to  secure  a  bond  fide  debt  to  his 
wife's  separate  estate  is  not  fraudulent  as  to  other  ci-editors,  though 
he  was  in  failing  circumstances  when  he  gave  it,  provided  there  is 
no  intent  to  hinder,  delay,  or  defraud  other  creditors.^ 

A  mortgage  is  not  rendered  fraudulent  as  to  creditors  by  a  stip- 
ulation that  the  mortgagor  shall  have  the  privilege,  upon  regular 
payment  of  the  interest,  of  postponing  the  date  of  payment  of  the 
debt  from  year  to  year,  in  all  not  to  exceed  five  years,  and  that 
upon  these  terms  he  may  remain  in  possession  of  the  property.^ 
If  one  of  the  purposes  of  making  a  mortgage  was  to  put  the 

1  Moore  v.  Williamson  (N.  J.),  15  Atl.         *  Lyon  v.  McHvaine,  24  Iowa,  9  ;  Lamp- 
Rep.  587  ;  Green  v.  Tantum,  19  N.  J.  Eq.     son  v.  Arnold,  19  lb.  479. 

105  ;  21  N.  J.  Eq.  364.  ^  Giddings  v.  Sears,  115  Mass.  505. 

2  Hill  V.  Ahern,   135  Mass.  158.     See,  ^  Benson  v.  Maxwell  (Pa.),  14  Atl.  Rep. 
however,  dissenting  opinion  by  Devens,  J.  161;  Gerald  v.   Gerald    (S.  C.),  6  S.  E. 

3  Troy  V.  Smith,  33   Ala.  469  ;  Craw-  Rep.  290  ;    Southern  White-Lead  Co,  v. 
ford  V.  Kirksey,  55  Ala.  282  ;  Bamfield  v.  Haas  (Iowa),  33  N.  W.  Rep.  657. 
Whipple,  14  Allen  (Mass.),  13 ;  Thorpe  v.  ^  Keagy  v.  Trout  (Va.),  27  Cent.  L.  J. 
Thorpe,  12  S.  C.  154.  407. 

522 


FRAUDULENT   MORTGAGES.  [§  627. 

property  oat  of  the  reach  of  the  mortgagor's  creditors,  although 
the  principal  purpose  of  the  parties  was  to  secure  a  bond  fide  debt 
of  the  mortgagor,  it  is  nevertheless  void  as  to  his  creditors.^ 

The  circumstance  that  a  mortgage  is  made  in  the  form  of  an 
absolute  conveyance  by  a  debtor  in  failing  circumstances  to  a 
creditor  is  no  evidence  of  an  intention  to  defraud  other  creditors.^ 
But  in  Alabama  such  a  conveyance  is  fraudulent  and  void  as 
against  existing  creditors,  although  there  may  have  been  no  ac- 
tual intent  to  defraud.  An  equity  of  redemption  is  property 
which  is  capable  of  being  subjected  to  the  payment  of  debts,  in 
courts  of  law  and  of  equity  ;  and  a  transaction,  whereby  an  em- 
barrassed debtor  conceals  its  existence  from  his  creditors,  must 
hinder  and  delay  them.^ 

Neither  is  a  mortgage  fraudulent  as  to  creditors  because  it  is 
given  for  a  greater  sum  than  is  due,  but  in  fact  to  cover,  in  part, 
future  advances,  although  it  does  not  express  upon  its  face  that 
the  excess  is  for  future  advances.*  It  would  be  fraudulent,  how- 
ever, if  not  given  in  good  faith,  and  the  securing  of  future  ad- 
vances be  onl}'^  a  pretence,^  or  if  given  for  a  very  large  sum  upon  a 
large  amount  of  property,  when  in  fact  the  debt  was  very  small.^ 

A  mortgage  executed  by  a  debtor  in  failing  circumstances,  set- 
ting out  a  present  indebtedness,  may  be  set  aside  for  fraud  upon 
proof  that  the  recited  indebtedness  is  a  pretence,  and  that  the  real 
debt  was  wages  for  services  largely  to  be  performed  in  the  future.'^ 

ff  given  to  secure  existing  liabilities,  a  mortgage  is  not  void  as 
to  creditors  because  it  does  not  specify  the  amount  secured  ;  ^  nor 
because  the  sum  secured  was  made  up  in  part  by  an  allowance  of 
interest  not  recoverable  at  law  upon  the  debt,^  or  that  it  includes 
debts  due  to  other  persons  which  the  mortgagee  verbally  promises 
to  pay.^'' 

1  Crowninshield  v.  Kittridge,  7  Met.  Rogers,  71  Ind.  459 ;  Hughes  v.  Sliiill,  33 
(Mass.)  520;  Robinson  v.  Stewart,  10  N.  Kans.  127.  See  Jones  on  Cliiittcl  Mort- 
Y.   189;  Schmidt  v.   Opie,  33  N.  J.  Eq.     gages,  §  339. 

138;  Holt  u.  Creamer,  34  N.  J.  Eq.  181  ;         ''  Tully  i>.  Harloe,  s«/ira  ;  Farguson  v. 

Heintze  v.  Bentley,  lb.  562  ;  Farguson  v.  Johnston,  supra. 

Johnhton,  36  Fed.  Rep.  134  ;  Cannon  v.         ^  Hubbard  v.  Turner,  2  McLean,  519. 

Yoiiug,  89  N.  C.  264  ;  Perry  v,  Hardison         "  Perry  v.  Hardison,  supra. 

(N.  C),  5  S.  E.  Rep.  230.  »  Youugs  v.  Wilson,  27   N.  Y.  351,  re- 

2  Doswtll   V.   Adler,  28  Ark.   82,   and  versing  5.  C.  24  Barb.  (N.  Y.)  510. 
cases  cited.  **  Spencer  v.  Ayrault,  10  N.  Y.  202. 

^  Sims  V.  Gaines,  64  Ala.  392  ;  Camj)-  '"  Carpenter  f.  Muren,  42  Barb.  (N.  Y.) 
bell  V.  Davis,  4  So.  Hep.  140.  300. 

*  Tully  V.  llurloe,  35  Cal.  302  ;  Goff  v. 

523 


§§  628,  629.]  VOID  mortgages. 

628.  A  mortgage  may  be  fraudulent  with  reference  to  a 
particular  creditor  of  the  mortgagor,  as,  for  instance,  against  a 
meclianic  who  was  induced  to  delay  the  signing  of  a  contract  for 
the  building  of  certain  houses  until  the  landowner  had  executed 
and  recorded  a  mortgage  without  consideration  to  a  third  person, 
with  the  intention  that  the  mortgagee  should  enter  under  it  and 
defeat  the  lien  of  the  mechanic.  The  mechanic,  in  such  case,  is 
entitled  to  maintain  a  bill  to  restrain  an  assignment  .of  the  mort- 
gage, and  to  compel  its  cancellation,  even  before  the  houses  are 
completed  and  the  money  under  the  contract  has  become  due. 
The  priority  of  lien  to  which  the  mechanic  is  entitled  may  be 
secured  to  him  beforehand,  for  his  security  is  impaired  by  the 
fraudulent  mortgage,  and  he  is  exposed  to  the  chance  that  the 
mortgage  may  pass  into  the  hands  of  a  bona  fide  assignee  for 
value. 1 

When  an  existing  mortgage  is  exchanged  under  a  false  pre- 
tence that  the  title  is  to  be  cleared,  and  before  giving  the  new 
mortgage  in  exchange  the  mortgagor  makes  another  mortgage 
with  the  purpose  of  giving  it  priority,  even  if  this  be  an  honest 
mortgage,  but  given  to  secure  an  old  debt,  the  mortgagee  in  this 
is  in  no  position  to  object  to  the  restoration  of  the  old  mortgage 
in  behalf  of  the  original  mortgagee.^ 

629.  Fraudulent  preferences. — A  mortgage  given  to  secure 
a  debt  to  a  creditor  who  has,  with  others,  executed  a  composition 
with  a  debtor  to  accept  a  portion  of  their  claims  in  satisfaction, 
under  a  secret  arrangement  whereby  the  debt  of  such  creditor 
is  to  be  paid  in  full,  is  a  fraud  upon  the  other  creditors,  and  is 
void.3 

But  a  mortgage  made  with  the  intent  to  give  the  mortgagee  an 

1  Hulsmau  v.  Whitman,  109  Mass.  411.     shall  operate  as  a  transfer  of  the  property 
Mortgage  by  husband  to  defeat  collec-     for  the  benefit  of  creditors  generally.    G.  S. 

tion  of  judgment  for  alimony.     Dugan  v.  ch.  44,  art.  2,  §  1.     This  statute  does  not 

Trisler,  69  Ind.  55.3.  prohibit  the  executing  of  a  mortgage  to  se- 

2  See  §  967;  Eggeman  v.  Harrow,  37  cure  a  debt  created  simultaneously  by  one 
Mich.  436.  in  failing  circumstances.     But  a  mortgage 

2  Feldman  v.  Gamble,  26  N.  J.  Eq.  494,  given  by  one  knowing  that  he  is  insolvent, 

and  cases   cited ;  Lawrence  v.  Clark,  36  iu  order  to  prefer  a  creditor,  to  secure  an 

N.  Y.  128.  existing  debt,  together  with  a  debt  incurred 

See  Jones   on   Chattel   Mortgages,   §§  simultaneously  to  a  creditor  who  knows 

356-366.  the  debtor's  condition  and  aids  in  carrying 

In  Kentucky  it  is  provided  by  statute  out  the  arrangement,  is  a  conveyance  for 

that  every  mortgage  made  by  a  debtor  in  the   benefit   of   creditors  generally  under 

contemplation  of  insolvency,  and  with  the  the  statute.    McCann  v.  Hill,  4  S.  W.  Rep. 

design  to  prefer  one  creditor  over  another,  337. 

524 


FRAUDULENT  MORTGAGES.  [§  630. 

unlawful  preference,  is  not  affected  by  tliat  fact  if  such  intent 
was  not  carried  out.^ 

A  mortgage  made  with  the  intent  to  pi-efer  contrary  to  law  is 
void  against  the  assignee  in  bankruptcj'^  of  the  mortgage,  although 
the  property  be  a  homestead,  and  exempted  from  execution.^ 

To  render  a  mortgage  made  by  an  insolvent  debtor  void  as  a 
preference  under  the  bankrupt  law,'^  it  was  necessary  for  the  as- 
signee to  show  affirmatively  that  the  mortgagee  had  reasonable 
cause  to  believe  that  the  mortgagor  was  insolvent  at  the  time  he 
executed  the  mortgage,  and  that  it  was  made  with  intent  to  de- 
feat the  bankrupt  law.* 

Though  a  mortgage  be  fraudulent  and  void  as  to  a  creditor, 
the  mortgagor  cannot  avoid  it.^  Such  a  mortgage  conveys  the 
property,  and  is  binding  between  the  parties.^  Although  the 
mortgjigee  has  participated  in  the  fraudulent  intent,  it  is  voidable 
only  at  the  election  of  the  creditors.  If  they  do  not  intervene, 
the  conveyance  stands.^  The  mortgagor  will  not  be  heard  to 
allege  his  own  fraud. ^ 

630.  Who  may  take  advantage  of  the  fraud.  —  A  creditor 
of  the  mortgagor,  after  levying  execution  on  the  equity  of  re- 
demption and  purchasing  it  at  the  sheriff's  sale,  may  prove  that 
a  second  mortgage,  or  a  release  of  the  equity  to  the  second  mort- 
gagee by  the  mortgagor,  is  fraudulent  and  void  by  reason  of  fraud 
practised  on  the  mortgagor,  although  the  mortgagor  himself  has 
made  no  attempt  to  avoid  it.^  So  may  a  purchaser  of  the  equity 
of  redemption,  upon  execution  sale,  maintain  an  action  to  set 
aside  a  deed  on  account  of  fraud.^^  A  subsequent  judgment  cred- 
itor may  show  that  a  prior  mortgage  was  executed  fraudulently 
and  without  consideration,  in  an  action  by  the  mortgagee  against 
the  owner  and  such  judgment  creditor  to  foreclose  the  mortgage ; 
and  the  mortgage  may  in  such  suit  be  subjected  to  the  priority  of 
the  judgment.^^ 

The  right  to  impeach  a  mortgage  as  fraudulent  and  void  as  to 

1  Corbett  v.  Woodward,  5  Sawyer,  403.         «  Tarkburst  v.  McGraw,  24  Miss.  134. 

2  Beals  V.  Clark,  13  Gray  (Mass.),  18.  7  Harvey  v.  Varncy,  98  Mass.  118,  and 
=»  Bankrupt  Act  of   March   2,    1867,  §     cases  cited  ;  Upton  w.  Craig,  .57  111.  2.'-)7. 

35;  14  Stat,  at  Large,  534.     See  Jones  on  »  Per  Siiaw,  C.  J.,  in  Dyer  v.  Homer, 

Chattel  Mortgages,  §  360.  22  Pick.  (Mass.)  253. 

■«  Barbour  v.  Priest,  103  U.  S.  29.3.  9  Van    Deusen    v.     Frink,     15     Pick. 

6  Sec  §  626;  Stores  v.  Snow,  I    Root  (Mass.)  449;  Ashby  v.  Ashby  (La.),  1  So. 

(Conn.),  181  ;    sec   Abbe  v.    Newton,  19  Bej).  282. 

Conn.  20 ;    Salmon   v.   Bennett,   1   Conn.  i'  Matson  v.  Capclle,  62  Mo.  235. 

.525;  Bonesteci  v.  Sullivan,  104  Pa.  St.  9;  n   Kelly  v.  Lcniiian,  56  Ind.  448. 

Gill  V.  Henry,  95  Pa.  St.  388.  525 


§§  630  a,  631.]  void  mortgages. 

creditors  of  the  mortgagor  does  not  pass  to  his  assignee  by  a  vol- 
untary general  assignment  in  trust  for  the  benefit  of  his  creditors 
subsequently  executed,  and  unaffected  by  any  statute  in  force  at 
the  time,  for  the  assignee's  relations  to  the  creditors  are  solely 
those  created  by  the  instrument  of  assignment.^ 

A  subsequent  incumbrancer  cannot  set  up  in  defence  to  a  fore- 
closure suit  that  the  mortgage  was  intended  to  hinder,  delay,  and 
defraud  the  mortgagor's  creditors.  It  is  only  his  creditors  who 
have  a  right  to  claim  that  the  mortgage  is  fraudulent  for  this 
reason.^  Neither  can  such  subsequent  incumbrancer  set  up  the 
defence  that  the  mortgage  is  void  as  against  public  policy,  on  the 
ground  that  it  was  made  in  an  attempt  to  escape  taxation.  Even 
if  the  mortgagor  could  avail  himself  of  these  defences,  a  subse- 
quent incumbrancer  has  no  right  to  insist  upon  them  for  his  own 
benefit.^ 

630  a.  A  conveyance  by  a  debtor  to  a  trustee  to  sell  the 
property  and  pay  his  debts  to  his  creditors  named,  or  to  all 
his  creditors,  with  a  reservation  of  the  surplus  to  himself,  is  in 
effect  a  mortgage.*  The  debtor's  reservation  of  the  surplus  does 
not  make  the  mortgage  fraudulent ;  but  if  the  mortgage  covers  all 
the  property  of  the  debtor,  the  transaction  amounts  to  an  assign- 
ment for  the  benefit  of  creditors,  and  its  validity  then  depends 
upon  the  conformity  of  the  conveyance  with  the  statutes  regulat- 
ing such  assignments.^ 

631.  A  mortgagor  is  not  estopped  from  setting  up  the  in- 
validity of  his  mortgage,  unless  there  has  been  some  fraud, 
misrepresentation,  or  concealment  on  his  part.^  But  he  is  estop- 
ped from  setting  up  any  defence  which  is  inconsistent  with  repre- 
sentations made  by  him  in  obtaining  the  loan  which  the  mortgage 
was  given  to  secure,  when  the  lender  has  relied  upon  these  repre- 
sentations in  making  the  loan  and  taking  the  mortgage.'^  Thus, 
if  a  mortgagor  induce  a  person   to  purchase  the  mortgage  by  a 

1  Flower  v.  Cornish,  19  Alb.  L.  J.  282;  Co.  49  Conn.  282;  Stafford  Nat.  Bank  v. 

S.  C.  25  Minn.  473.  Sprague,  17  Fed.  Kep.  784;  Union  Co.  v. 

■^  Nichols  V.    Weed    Sewing    Machine  Sprague,  14  R.  I.  452. 

Co.  27  Hun,  200;  affirmed,  97  N.  Y.  650.  *  Jones  on  Chattel  Mortgages,  §  352  a 

3  Nichols  i;.  Weed  Sewing  Machine  Co.  ^  Brewster  v.  Madden,  15   Kans.   249. 

supra.  See  Wilson  v.  Watts,  9  Md.  356. 

*  Jones  on  Chattel  Mortgages,  §§  352-  '^  Kelley  v.  Fisk   (Ind.),  11  N.  E.  Rep. 

355;    Austin  v.  Sprague  Manuf.  Co.  14  453;  Rogers  v.   Union  Cent.  L.  Ins.  Co. 

R.  I  464;  Chaffee  v.  Fourth  Nat.  Bank,  (Ind.)  12  N.  E.  Rep.  495. 
71  Me.  514;  De  Wolf  v.  Sprague  Manuf. 

526 


FRAUDULENT  MORTGAGES.  [§  632. 

statement  or  certificate  that  a  certain  sum  is  due  upon  it,  and 
that  there  is  no  offset  or  defence  to  it,  the  borrower  is  pi'echided 
from  claiming  that  this  sum  is  not  the  true  amount  due,  or  that 
the  mortgage  is  void,  either  wholly  or  in  part,  for  usury .^  But  if 
the  puix'haser  of  the  security  did  not  believe  the  existence  of  the 
facts  in  reference  to  which  the  estoppel  is  sought  to  be  inter- 
posed, and  did  not  act  upon  any  such  belief,  the  mortgagor  is  not 
estopped  to  show  the  real  facts  of  the  case.^  To  create  a  valid 
estoppel,  the  holder  of  the  mortgage  must  have  purchased  in  re- 
liance upon  the  truth  of  the  representations.  Therefore,  where 
a  mortgage  and  a  certificate  accompanying  it  that  the  mortgage 
was  given  "  for  a  good  and  valid  consideration  to  the  full  amount 
thereof,  and  that  the  same  is  subject  to  no  offset  or  defence  what- 
ever," were  both  procured  by  fr^ud,  and  the  purchaser  did  not 
rely  upon  the  truth  of  the  certificate,  but  upon  the  effect  of  it,  as 
a  matter  of  law,  to  protect  him,  it  was  held  that  the  mortgagor 
could  still  set  up  the  fraud  in  defence  to  the  mortgage.^ 

A  mortgage  made  to  aid  an  officer  in  the  settlement  of  his 
official  accounts  by  making  up  a  deficiency,  and  used  for  that  pur- 
pose, cannot  afterwards  be  repudiated  by  the  maker  as  invalid. 
He  cannot  complain  that  after  having  accomplished  its  purpose 
by  being  used  as  evidence  of  a  loan  with  his  consent,  it  is  held  to 
be  a  valid  obligation.^  He  is  estopped,  too,  from  denying  the 
official  character  of  the  grantee,  as  a  commissioner  of  the  school 
fund,  although  the  office  had  been  abolished.  The  mortgage  being 
intended  as  a  security  for  the  school  fund,  it  will  be  given  the 
effect  intended  by  the  parties,  and  the  maker  will  not  be  allowed 
to  deny  its  recitals.''' 

632.  A  mortgagor  is  not   allowed  to   invalidate    his  own 


^  Lesley  v.  Johnson,  41  Barb.  (N.  Y.)  ^  Eitel  v.  Bracken,  su})ra,  per  Curtis,  J. 
359;  Smyth  i;.  Munroe,  84  N.  Y.  354;  "  It  is  contrary  to  good  morals,  that  a  cer- 
Eitel  V.  Bracken,  38  N.  Y.  Superior  Ct.  7.  tKicate  containing  an  unadulterated  false- 
"  It  is  a  wise  and  just  restriction,  that  if  a  hood,  and  known  to  both  the  maker  and 
mortgagor  makes  a  false  fctatement,  orally  reci[)ient  to  be  simply  such,  should  be  sus- 
or  in  writing,  to  influence  the  purchase  of  tained  as  sufficient  to  jjrotect  the  latter  in 
the  security,  he  cannot  take  advantage  of  the  purchase  of  a  mortgage,  because  he 
it  as  against  an  innocent  purchaser.  The  believed  it  would  so  protect  him  as  a  mat- 
law  adjudges  him  to  be  estopped  from  ter  of  law,  and  would  not  have  bought  the 
profiting  by  his  own  fraud."  Per  Cur-  mortgage  without  it." 
tis,  J.  *  Floyd  Co.  ;;.  Morrison,  40  Iowa,  188. 

2  Eitel  r.  Bracken,  supra;  Van  Sickle  ''  Floyd  Co.  v.  Morrison,  su/jra. 
V.  Palmer,  2  T.  &  C.  (N.  Y.)  612;   Wil- 
cox i;.  Howell,  44  N.  Y.  398. 

527 


§  633.]  USURY. 

deed  by  showing  that  it  was  executed  by  him  for  the  purpose 
of  defrauding  his  creditors.  A  court  of  equity  will  not  lend  its 
aid  to  relieve  the  mortgagor  from  the  consequences  of  his  own 
fraudulent  act,  nor  will  it  aid  the  mortgagee  in  securing  him  in 
the  enjoyment  of  the  property,  where  its  interposition  is  neces- 
sary for  that  purpose.  The  mortgagee  is  left  to  his  legal  reme- 
dies, which  will  enable  him,  when  invested  with  the  legal  title, 
to  recover  the  possession  of  the  mortgaged  property.  So  far  as 
the  contract  is  executory,  he  is  without  remedy,  either  legal  or 
equitable.^ 

A  defence  to  the  enforcement  of  a  mortgage  for  the  want  of 
consideration  cannot  be  met  by  evidence  that  the  mortgage  was 
given  with  a  view  to  defraud  the  creditors  of  the  mortgagor. 
"  The  general  rule  of  policy  is^  In  pari  delicto  potior  est  conditio 
defendentis.  If  there  was  an  intent  to  defraud  creditors,  it  was 
an  intent  common  to  both  parties,  affecting  as  well  the  plaintiff's 
intestate  as  the  defendant.  It  is  the  plaintiff  who  is  the  actor,  and 
is  seeking  to  enforce  the  payment  of  these  notes.  It  may  well  be 
held,  that  the  defendant  would  not  be  permitted  to  show  that  the 
notes  were  made  to  delay  and  defeat  creditors  as  a  substantive 
ground  of  defence,  on  the  well  known  maxim.  Nemo  allegans  mam 
turpitudinem  audiendus  sit;  and  therefore  if  a  legal  consideration 
were  shown,  such  a  defence  could  not  avail.  But  independently 
of  this  ground,  he  shows  want  of  consideration,  and  it  is  the 
demandant  who  seeks  to  rebut  that  defence,  by  showing  that  the 
notes  were  given  as  well  to  defeat  creditors  as  without  considera- 
tion." 2 

PART  II. 

USURY. 

I.    What  Mortgages  are   Usurious. 

633.  Usury  laws  apply  to  mortgages  in  the  same  manner 
that  they  apply  to  contracts  in  general,  and  the  same  principles 
of  law  are  applicable  to  the  inquiry,  whether  they  are  usurious  or 
not.  The  subject  of  usury  is  of  less  importance  now  than  it  was 
formerly,  for  the  reason  that  within  a  few  years  the  usury  laws 

1  Brookover  v.  Hurst,  1  Met.  (Ky.)  141,  per  Shaw,  C.  J. ;  Briggs  v.  Langford 
665.  (N.  Y.),  14  N.  E.  Rep  502. 

2  "Wearse  v.  Peirce,  24  Pick.    (Mass.) 

528 


WHAT   MORTGAGES    ARE   USURIOUS. 


[§  633. 


have  been  repealed  in  several  states,  and  in  others  they  have  been 
greatly  modified,  so  that  only  in  a  few  states  does  usury  now  in- 
validate a  contract.  A  brief  statement  of  the  laws  of  the  several 
states  with  reference  to  interest  and  usury  is  given  in  a  note  ; 
but  it  is  to  be  borne  in  mind  that  these  laws  are  at  present  sub- 
ject to  frequent  changes. ^     It  appears  that  in  the  states  of  Maine, 


1  Alabama  :    Eight    per   cent.      Usury 
forfeiis  interest,  i)ut  not  principal.     The 
defendant  recovers  full  costs.     Code  1886, 
§§  1750-1755.     Arizona  T.  :    Seven    per 
cent,  when  there  is  no  express  agreement, 
but  the   parties  may  contract  in  writing 
for  any  rate.     K.  S.  1887,  §§  2161,  2162. 
Arkansas  :  Six  per  cent.,  but  parties  may 
contract  for  any  rate  not   exceeding  ten 
per  cent.    Usury  renders  the  contract  void 
both  as  to  principal  and  interest.     Dig.  of 
Stats.  1884,  §  4732.    California  :    Seven 
per  cent.,  but  the  parties  may  contract  for 
any  rate,  sim])le  or  com])Ound.    2  Codes  & 
Stats.  1885;  Civ.  C.  §§  1917-1920.     Colo- 
rado :  Ten  per  cent.,  but  parties  may  stip- 
ulate in  writing  lor  a  higher  rate.     G.  L. 
1883,   §§    1706-1708.      Connecticut:    Six 
jier  cent.     Payments  in  excess  of  that  rate 
cannot  be  set  off  or  recovered  back.    G.  S. 
1888,  §§  2941-2943.     Dakota  T.  :  Seven 
per  cent.,  but  parties  may  contract  for  a 
liigher  rate  not  exceedit  g  twelve  percent. 
Usury  forfeits  all   interest.      But  in  the 
counties  of  Lawrence,  Pennington,  Cus- 
ter, Mandan,  and  Forsytiie  the  rate  is  un- 
limind.     Civ.   Code   188.3,  §§  1097-1102. 
Delaware  :  Six  per  cent.     Usury  forfeits 
a   sum  equal   to   the   whole   loan.     K.  C. 
1874,  ch.  63,  §  1.     District  of  Columbia: 
Six  per  cent.     Parties  may  stipulate  in 
writing  for  a  rate  not  exceeding  ten  per 
cent.     U>ury  forfeits  a  sum  equal  to  the 
wliole  interest,  to  be  recovered  within  one 
year.     K.  S.  1875.  §§  713,  717.     Florida: 
Kight  per  cent.,  but  any  rate  may  be  agreed 
upon.     Dig.  Laws  1881,  ch.   123.     Geor- 
gia :  Seven  per  cent.,  but  parties  may  con 
tract  in  writing  fur  any  rate  not  exceed- 
ing eight  ])i'r  cent.     Interest  in  excess  is 
f.^rfeiied.    Code  1882,  §§  20.50,  2051,  2057. 
Titles  made   as  part   of   a  u.siirious  con- 
tract are  void  ;  II).  §  2057  f\  but  a  mort- 
gage passes   no  title,  an<l  is  not  void  for 
VOL.  I.  34 


usury.    Hodge  v.  Brown,  7  S.  E.  Rep.  282. 
Idaho  T. :  Ten  per  cent.    Parties  may  con- 
tract in  writing  for  any  rate  not  exceed- 
ing one  and  one  half  per  cent,  per  month. 
Usury  forfeits  ten  per  cent,  per  annum  of 
tiie  amount  of  the  contract  to  the  school 
fund.     R.    S.   1887,  §§    1263-1266.     Illi- 
nois :  Six  per  cent.,  but  parties  may  con- 
tract in  writing  for  any  rate  not  exceeding 
eight  per  cent.     Usury  forfeits  the  entire 
interest.     Corporations  cannot   interpose 
this  defence.     R.  S.  1874,  and  R.  S.  1880, 
ch.  74  ;   Laws   1875,  p.  85  ;  Laws  1879, 
p.  184.     Indiana  :  Six  jjsr  cent.,  hut  par- 
ties may  contract  in  writing  for  any  rate 
not  exceeding  eiglit.     U.-^ury  forfeits  the 
excess.    R.  S.  1888,§§  5198,  5201.    Iowa  : 
Six  per  cent.,  but  parties  nu»y  agree  in 
writing  for   a    rate    not    exceeding   ten. 
Usury  forfeits  ten  per  cent,  on  tlie  con- 
tract to  the  school  fund,  and  only  the  prin- 
cipal  can  be  recovered.     Code  1873,  and 
R.  Code   1880,  §§  2077,  20S0.    Kansas : 
Seven  per  cent.,  but  parties  nuiy  contract 
in  writing  for  not  exceeding  twelve  per 
cent.     Payments  in  excess  are  accounted 
as  payments  on  the  ])rincii)al.     Dassler's 
St.  1885,  ch.  51.    Kentucky  :  Six  per  cent., 
but  parties  n)ay  contract  in  writing  not 
exceeding  eight  per  cent.    Upon  the  death 
of  a  promisor  in  a  contract  for  a  higher 
rate  than  six  per  cent.,  or  after  judgment, 
the  rate  is  six  per  cent.     Usury  forfeits 
the  entire  interest.     G.   S.    1885,  cii.   60, 
art.  1,2.   Louisiana:  Five  per  cent.    Kigtit 
))er  cent,  may  be  scipulated.     Usury  for- 
feits the  entire  interest.     It.  S.  1884,  §;> 
1883,   1884.     Maine:    Six  j)cr  cent.,   but 
the  parlies  may  agree  in  writing  for  any 
rate.     R.  S.  1883,  cli.  45.     See  Limlsay  v. 
Hill,    66    Me.    212.     Maryland  :    Six  per 
cent.    Usury  forfeits  liie  (•x<(-s.    R.  Code 
1878,  art.  36,  §§  1-5.    MassachusettB  :  Six 
])ercent.,  but  jjarlics  may  contract  in  writ- 


§  633.] 


USURY. 


Massachusetts,  Rhode  Island,  South  Carolina,  Florida,  California, 
Colorado,  Nevada,  and  in  the  territories  of  Utah,  Arizona,  Mon- 


ing  for  auy  rate.  P.  S.  1882,  ch.  77,  §  3. 
Michigan  :  Seven  per  cent.,  but  parties 
may  contract  in  writing  for  not  exceeding 
ten  per  cent.  Usury  forfeits  the  excess, 
but  it  cannot  be  recovered  after  a  volun- 
tary payment.  A  purchaser  in  good  faith 
of  negotiable  paper  is  not  affected  by  the 
usury.  Howell's  Annot.  Stats.  1882,  §§ 
1594-1596.  Minnesota:  Seven  per  cent. 
Parties  may  agree  in  writing  upon  any 
rate  not  exceeding  ten  per  cent.  A  con- 
tract for  more  is  usurious,  and  makes  void 
all  inslrumcnts  except  negotiable  paper  in 
the  bands  of  bond  Jide  purchasers.  G.  S. 
1878,  cli.  23,  §§61-64  ;  Laws  1879,  ch.  66; 
Jordan  v.  Humphrey,  31  Minn.  495;  Beal 
V.  White,  28  Minn.  6.  This  exceptitn  is 
not  ap])licable  to  mortgages  securing  such 
paper.  Scott  v.  Au.stin,  32  N.  W.  Rep. 
89 ;  S.  C.  lb.  864.  Mississippi  :  Six  per 
cent.  Parties  maj'  contract  in  writing  for 
any  rate  not  exceeding  ten  per  cent. 
Usury  forfeits  all  interest.  R.  Code  1880, 
ch.  41.  Missouri:  Six  per  cent.,  but  par- 
ties may  contract  in  writing  for  any  rate 
not  exceeding  ten.  Usury  forfeits  in- 
terest above  that  rate  to  the  common 
schools.  R.  S.  1879,  ch.  41,  §§  2723-2728. 
Montana  T.  :  Ten  per  cent.,  but  parties 
may  stipulate  for  any  rate.  Comp.  Stats. 
1887,  ch.  73.  Nebraska:  Seven  percent., 
but  parties  may  contract  for  a  rate  not 
exceeding  ten,  and  this  may  be  taken 
in  advance.  Usury  forfeits  all  interest. 
Comp.  Stats.  1885,  ch.  44.  Nevada  :  Ten 
per  cent.,  but  parties  may  contract  in 
writing  for  any  other  rate.  G.  S.  1885, 
§§  4903,  4904.  New  Hampshire:  Six  per 
cent.  Usury  forfeits  three  times  the  ex- 
cess. Principal  and  legal  interest  may  be 
recovered.  G.  S.  1867,  ch.  213  ;  Acts  1S72, 
ch.  12,  §  3  ;  G.  L.  1878,  ch.  232,  §§  3,  4. 
New  Jersey:  Six  per  cent.  Usury  forfeits 
all  interest.  Rev.  1877,  p.  519;  Supp.  to 
Rev.  1886,  p.  398.  New  Mexico  T. :  Six 
per  cent.,  in  absence  of  a  written  agree- 
ment. Taking  more  than  twelve  per  cent, 
is  usury,  and  the  penalty  is  a  fine  and  for- 
feiture of  double  the  amount  of  illegal  in- 

530 


terest  taken.  Comp.  Laws  1884,  §§  1732- 
1739.  New  York:  Six  per  cent.  Usury 
makes  void  the  contract ;  but  no  corpora- 
tion can  plead  the  defence.  It  is  also 
punishable  with  a  fine  of  one  thousand 
dollars,  or  six  months'  imprisonment,  or 
both.  Banks  are  exempt  from  these  pen- 
alties. 3  R.  S.  7th  ed.  pp.  2253-2256, 
1419.  North  Carolina:  Six  per  cent.,  but 
eight  per  cent,  may  be  stipulated  by  con- 
tract in  writing.  Usury  forfeits  the  entire 
interest,  and  twice  the  amount  of  interest 
paid  may  be  recovered.  Code  1883,  §§ 
3835,  3836  ;  Kidder  v.  Mcllhenny,  81  N.  C. 
123.  Ohio  :  Six  per  cent.  Parties  may 
contract  in  writing  for  not  more  than  eight 
per  cent.  Judgments  bear  interest  at  rate 
of  the  contract.  R.  S.  1880,  §§  3179- 
3183.  Oregon  :  Eight  per  cent.,  but  par- 
ties may  contract  for  ten  per  cent.  Usury 
forfeits  the  debt.  Annot.  Laws  1887,  §§ 
3587-3594.  Pennsylvania:  Six  per  cent. 
Usurious  interest  cannot  be  collected,  and, 
if  paid,  may  be  recovered  by  suit  brought 
within  six  months.  Negotiable  paper, 
taken  in  good  faith,  is  not  affected  by  the 
discount.  Obligations  of  railroad  and  ca- 
nal companies  not  within  the  law.  Bright- 
ly's  Purdon's  Dig.  1883,  pp.  926-928. 
Rhode  Island:  Six  per  cent.,  but  the  par- 
ties may  agree  upon  any  rate.  P.  S.  1882, 
ch.  142.  South  Carolina  :  Seven  per  cent. 
G.  S.  1882,  §  1288.  Tennessee:  Six  per 
cent.  Interest  above  six  per  cent,  cannot 
be  recovered,  or,  if  paid,  may  be  recovered. 
Code  1884,  §§  2699-2712.  Texas  :  Eight 
per  cent.  By  contract  twelve  per  cent, 
may  be  reserved.  The  excess  is  void. 
R.  S.  1879,  arts.  2976-2980.  Utah  T. : 
Ten  per  cent.  Parties  may  agree  upon 
any  rate.  Compiled  Laws  1876,  p.  170. 
Vermont  :  Six  i)er  cent.  Excess  cannot 
be  recovered,  or,  if  paid,  may  be  recovered 
back.  R.  L.  1880,  §§  1996-2000.  Vir- 
ginia :  Six  per  cent.  Usury  forfeits  all 
interest,  corporations  excepted.  Code 
1887,  ch.  130.  Washington  T. :  Ten  per 
cent.,  but  any  rate  may  be  agreed  upon. 
Code  1881,  §§  2368,  2369.    West  Virginia : 


WHAT    MORTGAGES   ARE   USURIOUS.  [§  634. 

tana,  Wyoming,  and  Washington,  there  are  no  usury  laws,  and 
the  parties  may  contract  in  writing  for  any  rate  of  interest;  that 
in  Connecticut,  Georgia,  Indiana,  Kansas,  Maryland,  Michigan, 
Minnesota,  Ohio,  Pennsylvania,  Tennessee,  Texas,  Vermont,  and 
West  Virginia,  all  that  is  left  of  former  stringent  provisions  is  a 
forfeiture  merely  of  the  usury  above  the  legal  interest ;  that  in 
Alabama,  Illinois,  Kentucky,  Louisiana,  Mississippi,  Nebraska, 
New  Jersey,  Virginia,  Wisconsin,  Dakota,  and  the  District  of  Co- 
lumbia, usury  forfeits  all  interest;  while  in  New  York,  Delaware, 
Arkansas,  and  Oregon,  usury  makes  void  the  security.  In  Mis- 
souri, Iowa,  Idaho,  New  Mexico,  and  North  Carolina,  usury  either 
works  a  forfeiture  of  a  fixed  percentage  or  of  twice  or  thrice  the 
interest  paid. 

634.  Intent  to  take  usury.  —  A  mortgage  given  to  secure  a 
just  debt  is  neither  invalid  as  against  the  mortgagor,  nor  fraudu- 
lent as  aoainst  his  creditors,  because  interest  has  been  calculated 
upon  the  debt  and  included  in  the  mortgage  in  excess  of  the 
strict  legal  right,  or  when  no  interest  at  all  was  collectible  at  law, 
if  the  allowance  was  just  and  equitable.^ 

But  if  a  mortgage  be  given  to  secure  a  preexisting  debt,  which 
was  tainted  with  usury,  the  mortgage  will  be  vitiated  by  usury 
of  the  original  indebtedness.^  A  mortgage  given  in  renewal  of 
one  that  is  tainted  with  usury  is  itself  affected  with  the  same 
taint.-^  And  the  consequences  of  the  usury  will  attend  the  new 
security,  even  when  this  is  given  by  a  third  person,  if  there  be 
no  other  consideration  than  the  original  usurious  debt.*  But  if 
the  usurious  mortgage  be  transferred  to  an  innocent  holder,  and 
he  receive  directly  from  the  mortgagor  a  new  one  in  its  stead,  the 
latter  cannot  be  impeaclied  on  account  of  the  usury  in  the  orig- 
inal mortgage.''     There  is  no  rule  of  law  which  makes  it  unlawful 

Six  percent.  The  excess canuot  be  recov-  Vickcry  r.  Dickson,  35  Barb.  (N.  Y.)  90; 
ered.  Corporations  cannot  plead  usury.  Thompson  r.  Berry,  3  Johns.  (N.  Y.  )Ch. 
Code  1887,  ch.  96.  Wisconsin :  Seven  per  39.5  ;  6\  C.  17  Johns.  436. 
cent.  Parties  may  contract  in  writin<,'  for  ^  McCraney  v.  Alden,  46  Barb.  (N.  Y.) 
ten  per  cent.  Usury  forfeits  all  interest;  272;  S.  C.  sub.  nom.  Cope  v.  Wheeler,  41 
compound  interest  not  computed  unless  N.  Y.  303.  See  lloyt  i-.  Brid<;ewater  Cop- 
expressly  agreed  upon  in  writing.  Treble  per  Mining  Co.  6  N.J.  Eq.  (2  Ilalst.)  253, 
the  excess  over  lawful  rate  is  recoverable  625. 

within  a  year.    (i.  S.  1878,  ch.  79,  §§  1688-  ■•  Exiey  f.  Berryhili  (Minn.),  33  N.  W. 

1692.     Wyoming   T.  :  Twelve   per  cent..  Hep.  567. 

but  any  rate  may  be  agreed  upon.     It.  S.  *  Kilncr  i-.   O'Brien,  14    Hun   (N.  Y.), 

1887,  §§  1310-1310.  414  ;  Sherwood  v.  Archer,  10  lb.  73;  and 

1  Spencer  v.  Ayrault,  10  N.  Y.  202.  sec  Jenkins  v.  Levi.M,  25  Kans.  479. 

2  Bell  V.  Lent,  24   Wend.  (N.  Y.)  230;  631 


§  635.]  USURY. 

or  usurious  in  one  to  loan  money,  to  be  used  by  the  borrower  in 
paying  a  usurious  debt  to  another,  if  this  loan  be  itself  free  from 
usury  .1 

Usury  to  affect  a  mortgage  must  relate  directly  to  the  mortgage 
debt.  A  valid  mortgage  is  not  affected  by  a  subsequent  usurious 
agreement.^  If  a  mortgage  not  affected  by  usury  be  assigned  as 
collateral  security  for  a  debt  of  the  mortgagee,  usury  taken  by  the 
assignee  on  the  latter  debt  cannot  be  set  up  as  a  defence  to  the 
mortgage.^ 

Inasmuch  as  usury  depends  upon  the  intent  with  which  it  is 
taken,  the  court  will  look  into  the  whole  transaction  to  determine 
what  the  intent  was,  not  only  into  the  acts  of  the  parties  at  the 
time  of  the  transaction,  but  subsequently.'^ 

A  stipulation  for  the  payment  of  interest  at  the  highest  rate 
allowed  by  law,  at  periods  shorter  than  a  year,  whether  semi- 
annually or  quarterly,  does  not  make  the  loan  usurious.^  Neither 
is  the  taking  of  interest  at  the  highest  rate  allowed  by  law,  in 
advance  for  a  whole  year,  usurious.^ 

Equity  will  interfere,  upon  a  proper  application,  to  prevent  the 
collection  of  usurious  interest  by  the  enforcement  of  a  mortgage, 
when  the  debtor  has  paid  or  tendered  all  that  either  law  or 
equity  can  require  him  to  pay.'^ 

A  mortgage  loan  may  be  usurious  in  part  and  valid  in  part ;  as, 
for  instance,  when  the  mortgage  covers  several  distinct  loans,  one 
of  which  was  usurious  in  consequence  of  the  payment  of  a  bonus, 
but  the  other  loans  were  not  usurious.  The  forfeiture  or  penalty 
in  such  case  will  be  confined  to  the  usurious  part  onl3\^ 

635.  Attorney's  fees.  —  A  provision  for  the  payment  of  dam- 
ages to  the  amount  of  five  or  ten  per  cent,  of  the  loan,  in  case 
of  a  sale  for  a  breach  of  the  condition,  may  not  be  usurious,^  al- 
though on  a  mortgage  for  a  large  amount  such  a  percentage  would 

1  Wilson  V.  Harvey,  4  Lans.  (N.  Y.)  ^  Meyer  v.  Muscatine,  1  Wall.  384  ; 
507.  Mowry  v.  Bishop,  5  Paige  (N.  Y.),  98. 

2  Allison  V.  Schmitz,  31  Hun  (N.  Y.)  6  Tiiolen  v.  Duffy,  7  Kans.  405,  and 
106.  cases  cited. 

3  Stevens  v.  Reeves,  33  N.  J.  Eq.  427.  ">  Waite  v.  Ballou,  19  Kans.  601. 

*  Bardwell   v.   Howe,   Clarke    (N.  Y.),  »  Mahn  v.  Hussey,  28  N.  J.  Eq.  546. 

281 ;  Stelle  v.  Andrews,  19  N.  J.  Eq.  409.  9  See  §  359;  Siegel  v.  Drumm,  21  La. 

See  Fox  v.  Lipe,  24  Wend.  (N.  Y.)   164;  Ann.  8;  Gambril  v.  Doe,  8  Blackf,  (Ind.) 

Guggenheimer  u.  Geiszler,  81  N.  Y".  293;  140;    Billingsley  v.  Dean,   11    Ind.   331; 

Knickerbocker  L.  Ins.  Co.  v.  Nelson,  78  Ruling  v.   Drexell,  7  Watts  (Pa.),  126; 

N.  Y.  1S7  ;  White  v.  Lucas,  46  Iowa,  319  ;  Munter  v.  Linn,  61  Ala.  492. 
Dozier  v.  Mitchell,  65  Ala.  511. 

632 


WHAT   MORTGAGES   ARE   USURIOUS.  [§§  636,  637. 

be  unreasonable, 1  and  the  court  would  allow  only  a  reasonable 
sum  to  be  collected.^  It  is  in  effect  only  a  stipulation  to  allow 
compensation  for  extra  and  incidental  trouble  and  expense  in  con- 
sequence of  the  sale ;  and  a  provision  for  the  payment  of  the 
expenses  of  foreclosure,  and  a  reasonable  attorney's  fee,  is  gener- 
ally held  valid  and  not  obnoxious  to  the  usury  laws.^  Whenever 
the  stipulation  is  for  the  payment  of  something  which  the  court 
can  see  is  a  valid  and  legitimate  charge  or  expense,  it  will  be 
upheld  ;  but  if  the  stipulation  be  so  indefinite  that  the  court  can- 
not tell  whether  the  payment  was  intended  to  be  for  something 
legal  or  illegal,  it  will  not  be  upheld.  Accordingly  it  has  been 
held  that  a  stipulation  for  the  payment,  in  case  of  foreclosure,  of 
the  costs  "  and  fift}'^  dollars  as  liquidated  damages  for  the  fore- 
closure of  the  mortgage,"  is  invalid,*  If  this  phrase  was  designed 
to  cover  attorney''  fees,  if  it  was  only  designed  to  cover  a  legiti- 
mate charge  or  expense,  why  did  the  parties  not  say  so  ?  If  the 
damages  were  for  usurious  interest,  of  course  they  could  not  be 
allowed.^ 

636.  An  agreement  to  pay  the  taxes  on  the  mortgage  debt,^ 
or  the  insurance  premiums  on  the  mortgaged  property,"  in  addi- 
tion to  interest,  is  held  not  to  be  usurious. 

637.  Exchange.  —  When  no  place  of  payment  is  named  in 
the  mortgage,  the  debt  is  generally  payable  to  the  mortgagee 
wherever  he  may  be  found.  If  made  payable  at  the  place  of  resi- 
'denee  of  the  mortgagor,  for  his  accommodation,  it  is  not  usurious 
for  him  to  allow  the  mortgagee  the  difference  of  exchange  be- 
tween the  two  places ;  unless  it  appear  that  this  allowance  was 
a  mere  device  on  the  part  of  the  mortgagee  to  evade  the  usury 
laws,  and  to  obtain  more  than  legal  interest  for  the  use  of  his 
money.^ 

A  mortgage  given  in  the  United  States,  at  a  time  when  gold 

1  Daly  v.  Maitland,  88  Pa.  St.  384;  .S'.  Thomasson  v.  Townsend,  10  Bush,  114; 
C.  13  West.  Jur.  204.  KMng  v.  Thompson,  12  lb.  310. 

2  Munter  v.  Liun,  61  Ala.  492.  *  Foote    v.    Spraj^ue,    13    Kaus.    155  ; 

3  Weatherby  v.  Smith,  30  Iowa,  131  ;  6\  Tholen  v.  Duffy,  7  Ivans.  405. 

C.  6  Am.  Rep.  663 ;  Paiham  v.  Fulliain,  ^  Foote  v.  Sprague,  sit/nu,  per  Valen- 

5  Cold.  (Tenn.)  497 ;  Clawson  u.  Munson,  tine,  J.;   and   see    Kurtz   c.   Spouable,  6 

55  111.394.     Ill  Kentucky,  however,  it  is  Kans.  395 ;  Tholen  r.  UutYy,  supra. 

held    tiiat   a    provision    for    the    jiaymeut  '•  Banks  r.  MeClelliiii,  24  Md.  62. 

of  an  att<jrney's   fee    upon  foreelosuie  is  '  New  Enj^land  Mortj^age  Security  Co. 

against  public   policy,  and   also    usurious  r.  Gay,  33  Fid.  Ke]i.  036. 

in    it.s    nature,  and    cannot    be    enforced.  *   Williams  ;;.   Ilaiice,  7  Paij^e  (N.  Y.), 

581. 

633 


§  638.]  USURY. 

was  at  a  premium,  in  settlement  of  a  debt  due  and  payable  in  a 
foreign  country  where  gold  was  the  basis  of  the  currency,  is  not 
usurious  by  reason  of  including  the  current  premium  on  gold.^ 

638.  A  mortgage  to  a  building  and  loan  association  is  not 
usurious  when,  under  the  articles  of  association,  in  addition  to 
monthly  payments  of  interest,  the  mortgagor  is  bound,  both  by 
the  mortgage  and  as  a  member  of  the  association,  to  pay  certain 
fines  and  impositions.^  But  when  special  privileges  as  regards 
the  taking  of  usury  are  conferred  upon  such  an  association,  a  loan 
will  not  be  held  to  be  within  its  operation  unless  it  strictly  con- 
forms with  the  terms  of  the  law.'^  A  member  of  the  association 
who  has  given  to  it  a  mortgage  to  secure  a  loan  made  to  a  fellow- 
member,  is  liable  to  the  same  extent  as  he  would  be  if  the  loan 
had  been  made  to  himself,  and  cannot  plead  usury  to  an  action 
upon  the  mortgage.^  But  a  loan  by  such  an  association  to  a  per- 
son not  a  member  of  the  association  is  not  exempt  from  the  pro- 
visions of  the  interest  laws  of  the  state  where  the  contract  is 
to  be  performed.  If  the  borrower  from  such  an  association  has 
signed  no  written  articles  of  membership,  and  there  are  no  re- 
citals of  membership  in  the  note  or  mortgage,  he  is  not  estopped 
to  deny  such  membership,  and  whether  he  is  a  member  or  not  is 
a  question  to  be  determined  like  any  other  issue  of  fact.^ 

The  appointment  of  a  receiver  of  such  an  association,  being 
equivalent  to  a  dissolution  of  the  corporation,  the  weekly  dues 

1  Oliver  v.  Shoemaker,  35  Mich.  464.  holder,  with  legal  interest.     Link  v.  Ger- 

'^  Silver  v.  Barnes,  6  Bing.  N.  C.  180;  mantow^n  Building  Asso.  89  Pa.  St.  15. 

lied  Bank  Mut.  Build.  &  Loan  Asso-  v.  As  to  statement  of  account  between  the 

Patterson,    17   N.   J.  Eq.  223;   Building  association    and    mortgagor,   see   Peter's 

Loan  &  Savings  Asso.  v.  Vandervere,  11  Building  Association  y.  Jaecksch,  51  Md. 

N.  J.  Eq.  (3  Stockt.)  382,  where  reasons  198;    McCahan    v.    Columbian   Building 

are  stated  ;  Massey  v.  Citizens'  Building  Asso.  40  Md.  226.      ' 

Asso.  22   Kans.  624;    Shannon  v.  Dunn,  s  Birmingham  v.  Md.  Land  &  Perma- 

43  N.  H.  194;  Citizens'  Mut.  Loan  Asso.  nent  Homestead  Asso.  45  Md.  541;  "Wil- 

V.  Webster,   25   Barb.   (N.  Y.)   263  ;  He-  liar  v.  Bait.  Butchers'  Loan  &  Annuity 

kelnkoemper  v.  German  Building  Asso.  22  Asso.  lb.  546. 

Kans.  549;  and  see  Ocmulgee  Building  &  ^  John.ston  v.  Elizabeth,  &c.  Asso.   104 

Loan   Asso.   v.   Thomson,    52    Ga.   427 ;  Pa.  St.  394. 

Hagerman    v.    Ohio    Building    Asso.   25  5  Building  Association  v.  Thompson,  19 

Ohio  St.  186.     Contra,  Citizens^  Security  Kans.  321.     See,  also,  Lincoln  Building 

&  Land  Co.  v.  Uhler,  48  Md.  455.  &  Saving  Asso.  v.  Graham,  7  Neb.  173; 

In  Pennsylvania  a  building  association  Wolbach  v.  Lehigh  Building  Association, 

can   recover  on    its    mortgage   only   the  84  Pa.  St.  211  ;  Juniata  Building  &  Loan 

money   actually   advanced    to    its    stock-  Asso.  v.  Mixell,  84  Pa.  St.  313. 

534 


WHAT   MORTGAGES   ARE   USURIOUS.  [§  639. 

or  instalments  which  a  mortgagor  has  conti*acted  to  pay  should 
be  computed  only  down  to  the  time  of  the  appointment. ^ 

639.  When  there  has  been  an  absolute  conveyance  of  land, 
with  an  agreement  to  repurchase  within  a  fixed  time,  at  a  price 
exceeding  that  paid  for  it,  and  interest,  the  transaction  may  be  a 
conditional  sale,  in  which  case  it  is  not  affected  with  usury.  If, 
however,  the  ti'ansaction  be  a  mortgage,  it  is  usurious.  As  al- 
ready noticed,  such  a  transaction  is  closely  observed  by  the  courts 
in  order  to  prevent  the  creditor  from  depriving  the  debtor  of  the 
right  of  redemption,  which  should  attach  to  it  as  a  mortgage. 
The  transaction  is,  moreover,  suspicious,  for  the  reason  that  it 
easily  affords  a  read}^  cloak  for  usur}'.  It  will  not  be  sustained 
as  a  conditional  sale,  unless  it  clearly  appears  that  it  was  in  good 
faith  intended  as  such,  and  not  as  a  contrivance  to  cover  usury .^ 

But  if  the  deed  was  made,  not  as  a  security  but  as  a  sale  in 
payment  of  a  debt,  and  the  grantee  subsequently  by  virtue  of  a 
new  agreement  reconveyed  the  land  to  the  grantor  for  the  amount 
originally  paid  for  it  with  usurious  interest  thereon,  it  is  held  that 
the  usury  in  such  case  does  not  avoid  the  deed  because  it  was 
not  a  part  of  the  original  transaction.^ 

In  a  mortgage  any  agreement  to  pay  more  than  the  sum  loaned 
and  lawful  interest  is  usury  ;  and  usury  is  constituted  not  only 
by  the  pa5nnent  of  money,  but  by  any  arrangement  whereby  the 
lender  derives  a  profit  or  advantage  beyond  the  interest  allowed 
by  law.*  Wliere  the  laws  make  usurious  contracts  void,  any 
transaction  which  is  in  effect  a  mortgage,  though  called  a  sale  by 
the  parties,  and  is  usurious  in  effect,  is  rendered  invalid.^  The 
intent  is  deduced  from  the  fact.  If  the  mortgagee  knowingly 
and  voluntarily  take  or  reserve  a  greater  interest  than  is  allowed 
by  law,  his  security  is  thereby  rendered  void  ;  though  it  is  not  if 
taken  by  mistake  or  accident.  But  aside  from  mistake  or  acci- 
<lent,  evidence  will  not  be  allowed  to  show  that  the  mortgagee  did 
not  intend  to  violate  the  statute.*" 

'  Peter's      Uiiildin<^       Association      v.  <  Gleason  v.  Biiiko,  stipra. 

.laecksch,  51  Md.  198  ;  Low  Street  Build-  6  j^ope  v.  Marslmll,  supra. 

ine:  Asso.  y.  Zucker,  48  Md.  449.  o  Fiedler   v.    Darrin,     50    N.    Y.    437. 

2  Gleason  v.   Burke,  20  N.  J.  Eq.  300;  "The  plaintiff  doul>tless  hoped    ajul    in- 

McLaren  i-.  Clark  (Oa.),  7  S.  K.  Rep.  230;  tended   to  cover  u|)  liis  tracks,  to  conceal 

I'oj)e  V.  Marsliall  (Oa.),  4  S.  E.  llcp.  116;  his  loan    and    the  reservation   of  usurious 

.Morrison  r.  .Markliain  (Ga.),  1  S.  E.  Ucp.  interest,  under  the  weak  {,niisc  of  a  pur- 

425.  chase   and   resale,   and    could   well   have 

*  Barfield   i;.   Jeflerson    (Ga.),   2  S.  E.  sworn   that   he  did  not   intend  to  bring 

Kep.  554.  535 


§§  640,  641.]  USURY. 

In  wliatevei-  way  the  transaction  may  be  disguised,  if  it  be  in 
fact  a  loan  at  a  usurions  rate  of  interest,  the  security  taken  will  be 
declared  void.^  The  attempt  is  sometimes  made  to  conceal  usury 
under  the  guise  of  rent ;  as  where  a  mortgage  was  given  to  secure 
a  loan  of  83,000,  without  any  agreement  about  interest ;  but  the 
mortgagee  leased  the  mortgaged  premises  to  the  mortgagor  at  an 
annual  rent  of  '"1270,  which  was  held  to  be  an  agreement  for 
usurious  interest.^ 

640.  The  grantor  is  not  entitled  to  any  of  the  penalties 
or  forfeitures  given  by  the  statute  for  usury,  even  when  it  is 
shown  that  this  form  of  the  transaction  was  used  for  the  purpose 
of  covering  up  a  usurious  rate  of  interest  agreed  upon  between 
the  parties,  although  a  court  of  equity  will  allow  a  debtor  to  re- 
deem, when  to  secure  a  loan  of  money  he  has  made  an  absolute 
conveyance  of  land,  and  taken  an  agreement  to  repurchase.  The 
debtor  is  entitled  to  a  conveyance  upon  the  payment  of  the  origi- 
nal loan  with  legal  interest ;  but,  having  put  the  transaction  into 
such  a  form  that  he  is  obliged  to  ask  a  court  of  equity  for  relief 
from  the  letter  of  the  contract,  which  he  could  not  obtain  at  law, 
the  court  will  impose  terms  upon  him  to  do  equity.^ 

641.  Sale  of  mortgage.  —  Although  a  valid  mortgage  once  is- 
sued may  be  sold  at  a  discount  without  involving  the  purchaser 
in  any  of  the  consequences  of  taking  usurious  interest,*  yet,  if  the 
mortgage  be  made  without  consideration  and  for  the  purpose  of 
being  sold,  inasmuch  as  the  subsequent  sale  gives  it  vitalit}'',  and 
is  really  the  issuing  of  it,  a  sale  at  a  discount  has  the  same  effect 
in  rendering  it  void  as  has  the  taking  of  a  bonus  by  the  mort- 
gagee.^ It  would  seem,  however,  that  one  purchasing  a  mortgage 
at  a  discount  from  the  mortgagor's  agent,  in  whose  name  the  mort- 

himself    within   the  condemnation  of  the  *  §832;   Whiter.   Turner,  1   Ilnn  (N. 

law.     But  he  did  in  fact  loan  his  money  Y.),  623  ;  Wyeth  v.  Branif,   14  Ilun    (N. 

at  an   illegal  interest,  and  has  failed   in  Y.),  537  ;  reversed,  84  N.  Y.    627  ;  Dowe 

his  attempt  to  evade   the  consequences."  v.  Schutt,  2  Den.  (N.  Y.)   621  ;  Lovett  v. 

Per  Allen,  J.  Dimond,  4  Edw.  (N.  Y.)  22  ;  Mix  v.  Mad- 

1  Fitzsimons  v.  Baum,   44  Pa.  St.  32;  ison  Ins.  Co.   11   Ind.    117;    Dunham  v. 

Birdsall  v.  Patterson,  51  N.  Y.  43;  An-  Cudlipp,  94  N.  Y.  129;    Smith    v.  Cross, 

drews  v.  Poe,  30  Md.  486.  90  N.  Y.  549 ;    Sickles   v.   Flanagan,    79 

■^  Gordon  v.  Hobart,  2   Story,  243;  and  N.  Y.  224. 

see   Gaither  v.   Clark   (Md.),  8  Atl.  Rep.  &  Vickery  v.  Dickson,  62  Barb.  (N.  Y.) 

740  ;  Morrison  v.  Markham  (Ga.),  1  S.  E.  272 ;  and  see  Walter  v.  Lind,  16  N.  J.  Eq. 

Rep.  425;  Grand  Order  of  O.  F.  Ass'n  v.  445;  Brooks   v.    Avery,    4    N.   Y.    225; 

Merklin  (Md.),  5  Atl.  Rep.  544.  Sickles  v.  Flanagan,  supra.     See  Culver  v. 

3  Ileacock  v.  Swartwout,  28  111.  291.  Bigelow,  43  Vt.  249. 

536 


WHAT    MORTGAGES   ARE   USURIOUS.  [§  642. 

gage  stood,  without  knowledge  of   the  agency,  would  not  incur 
any  liability  for  usury. 

Where  the  mortgagee's  agent  withheld  payment  of  the  money 
loaned  for  three  or  four  months,  and  then  paid  only  a  part,  l)ut 
afterwards  collected  interest  on  the  full  amount  of  the  morto-ao-e, 
and  it  appeared  that  the  acts  of  the  agent  were  the  acts  of  the 
mortgagee,  it  was  held  that  the  penalty  of  usury  had  been  in- 
curred.^ 

Where  a  vendor  of  land  agreed  to  take  a  mortgage  for  a  part 
of  the  purchase  money,  and  in  anticipation  of  the  trade  arranged 
to  sell  the  mortgage  at  a  discount,  and  merely  to  save  the  trouble 
of  a  transfer  had  the  mortgage  made  directly  to  the  purchaser  of 
the  mortgage,  it  was  held  the  transaction  was  not  usurious,  the 
evidence  showing  that  it  was  not  a  contrivance  to  evade  the  usury 
laws.^  * 

A  sale  of  mortgage  bonds  issued  by  a  corporation  authorized 
to  borrow  money  on  such  terms  as  its  directors  may  determine, 
for  less  than  their  face  value,  does  not  render  the  bonds  or  mort- 
gage void  for  usury .3 

On  the  other  hand,  a  sale  of  mortgage  securities  at  a  premium 
by  the  mortgagee  does  not  subject  him  to  an  action  for  the  recov- 
ery of  the  premium  on  tlie  ground  of  usury .^ 

642.  If  the  agent  of  the  mortgagee,  in  making  the  loan, 
exacts  a  payment  to  himself  by  way  of  commission  for  making 
the  loan,  the  agent  having  special  and  limited  authority,  the  loan 
is  not  necessarily  nor  usually  rendered  usurious.^  The  brokerage 
in  excess  of  legal  interest  cannot  affect  the  principal,  when  it  is 
paid  without  his  knowledge  and  he  derives  no  benefit  from  it.^ 
It  has  been  attempted,  however,  to  establish  the  rule,  that  such 
brokerage  makes  the  mortgage  usurious,  unless  it  be  taken  by 
virtue  of  an  independent  agreement  between  the  borrower  and 
the  broker.     If,  for  instance,  the  borrower  pays  to  the  broker  a 

1  Barr  v.  African,  &c.  Church   (N.  C),  66  N.  Y.  544 ;  Rogers  i'.  Biu-kingliam,  33 

10  All.  Rep.  287.  Conn.  81 ;    E.slava  v.  Cranipton,  Gl   Ala. 

'•^  Armstrong  v.  Freeman,  9  Neb.  11.  507  ;  Thillips  v.  llobcrts,  90  111.  952  ;  Jen- 

•*  Trader's    Nat.     Bank     v.    Lawrence  nings  v.  Hunt,  G  Bradw.  (III.)  523. 

Mannf.  Co.  (N  C.)  3  S.  E.  Rep.  363.  «  Gray  v.  Van   Blarcom,  29   N.  J.  Eq. 

*  Culver  /•.  BiKclow,  43  Vt.  249.  454;  Conover  v.  Van  Mater,  18  N.  J,  E(j. 

^  Van  Wyck  !'.  Waiters,  81  N.  Y.  352  ;  481;    Muir  w.   Newark   Savings   Inst.   16 

10  Ilun,  20'J  ;   Guggenheimer  v.  Griszler,  N.  J.  Eq.  537;  Spring  v.  Reed,  28  N.J. 

81  N.  Y.  293;  Condity.  Baldwin, 21  N.Y.  Eq.  345;    Manning   v.   Young,  lb.   568; 

219;  Bell  v.  Day,  32  N.  Y.  165;  Wyeth  New  I<:ngland  Mortgage  Security  Co.  v. 

V.  Branif,  14  Hun  (N.  Y.),  .537;  reversed,  Gay,  33  Fed.  Rej).  G3G. 

84  N.  Y.  C27  ;  Mut.  L.  Ins.  Co.  v.  Kashaw,  537 


§  642.]  USURY. 

premium  in  excess  of  legal  interest,  though  the  latter  had  been 
instructed  by  his  principal  to  loan  at  lawful  interest,  and  no  part 
of  the  premium  was  received  by  the  lender,  but  the  borrower  has 
no  knowledge  that  it  is  all  retained  by  the  agent,  the  loan  is  con- 
sidered usurious.!  gul;  i\^q  latest  and  best  considered  decisions 
affirm  the  rule  as  first  stated.^  These  decisions  are  based  upon 
the  principle  that  the  lender  did  not,  either  expressly  or  impliedly, 
authorize  the  agent  to  do  an  illegal  act ;  and  therefore  the  wrong- 
ful act  of  the  agent  in  extorting  a  bonus  for  himself  does  not 
affect  the  lender  so  long  as  he  does  not  participate  in  the  extor- 
tion or  in  the  results  of  it,  but  seeks  to  enforce  the  security  for 
the  precise  amount  he  loaned  with  lawful  interest. 

Upon  the  same  principle  a  bonus  received  by  one  trustee  in 
making  a  loan  upon  a  mortgage  for  a  trust  estate  does  not  avoid 
the  mortgage,  if  it  appears  that  the  bonus  was  taken  without  the 
authority  or  knowledge  of  the  other  trustees."^ 

If  an  attorney  take  a  mortgage  in  his  own  name  for  a  client, 
and  receive  from  the  mortgagor  a  sum  of  money  as  compensation 
for  examining  the  title  to  the  premises,  the  transaction  is  not 
thereby  made  usurious.* 

The  declarations  of  an  agent  of  the  mortgagor,  to  whom  a  mort- 
gage has  been  made  for  the  purpose  of  enabling  him  to  borrow 
money  for  the  mortgagor,  that  he  owned  the  mortgage,  and  that 
it  was  given  upon  a  previously  existing  indebtedness  to  him,  if 
false  and  unauthorized,  are  not  binding  upon  the  mortgagor,  and 
do  not  estop  him  to  deny  them  and  set  up  the  defence  of  usury.^ 

When,  however,  the  agent  is  the  lender's  general  agent,  having 
authority  to  loan  his  mone}^  in  such  sums  and  at  such  times  as 
he  pleases,  and  is  only  restricted  to  obtain  not  less  than  a  stipu- 
lated rate  of  interest,  if  the  agent  exacts  usury  upon  his  loans, 
the  principal  is  presumed  to  have  knowledge  of  such  exaction  and 
to  have  authorized  it ;  and  in  such  case,  unless  this  presumption 
is  rebutted,  the  transaction  will  be  held  usurious.*^  The  fact  that 
a  loan  agent,  who  is  in  the  habit  of  sending  applications  to  an  in- 

1  Estevez  v.  Purdy,  6  Hun  (N.  Y.),  46;  ^  Van  Wyck  r.  Walters,   16  Hun   (N. 

Tiedemann  v.  Ackermau,  16  lb.  307  ;  and  Y.),  209  ;  Stout  v.  Kider,  12  lb.  574. 

see  Algur  v.  Gardner,  54  N.  Y.  360.     The  *  Dayton  v.  Moore,  30  N.  J.  Eq.  543. 

doctrine   of   these  cases   in   criticised   in  "  New  York  Life  Ins.  &  Trust  Co-  v. 

Gray  v.  Van  Blarconi,  29  N.  J.  Eq.  454.  Beebe,  7  N.  Y.  364.    See,  however,  Ahern 

-  Estevez  v.  Purdy,  66  N.  Y.  446;  Jor-  v.  Goodspeed,  72  N.  Y.  108;  Piatt  v.  New- 
dan  V.  Humphrey,  31  Minn.  495.  comb,  27  Hun  (N.  Y.),  186. 

6  Stevens  v.  Meers,  11  111.  App.  138. 

638 


WHAT    MORTGAGES   ARE   USURIOUS.  [§  643. 

surance  company,  is  the  agent  of  such  company  for  the  purpose 
of  procuring  insurance,  does  not  constitute  him  the  general  agent 
of  the  company,  so  as  to  render  it  liable  for  usury  by  reason  of 
commissions  exacted  by  him.^ 

643.  The  burden  of  proof  that  the  mortgage  is  usurious  is 
usually  upon  the  mortgagor.  He  is  impeaching  his  own  obliga- 
tion formally  executed  under  seal,  and  must  establish  the  facts  to 
constitute  usury  beyond  a  reasonable  doubt.  An  even  balance  of 
testimony  is  not  sufficient ;  there  must  be  a  clear  preponderance.^ 
When  the  contract  is  upon  its  face  for  legal  interest  only,  usury 
can  be  established  only  by  proof  of  a  corrupt  agreement.  It  is  a 
defence  not  favored  in  equity  ;  and  especially  when  the  conse- 
quence is  to  forfeit  the  whole  debt,  the  defence  is  considered  un- 
conscientious.^ When  the  penalty  is  a  forfeiture  of  the  illegal 
interest,  or  of  all  interest,  even  although  the  defence  is  not  con- 
sidered unconscientious,  the  rule  of  evidence,  that  the  defence 
must  be  clearly  made  out,  is  applied  both  at  law  and  in  equity.* 

There  is  a  distinction  between  the  rights  of  a  mortgagor  when 
defending  on  the  ground  of  usury  and  his  rights  when  he  applies 
to  a  court  of  equity  for  relief  against  a  usurious  contract;  for 
while  in  the  former  case  he  may  avail  himself  fully  of  the  statute, 
in  the  latter  case  he  must  do  equity  befoi'e  he  can  obtain  equity, 
and  must  pay  the  debt  with  legal  interest.^ 

In  a  mortgage  for  purchase  money,  the  fact  that  the  sum  se- 
cured is  greater  than  that  named  in  the  consideration  of  the  con- 
veyance to  the  mortgagor,  with  interest,  is  no  evidence  that  the 
difference  is  usury .^ 

When,  at  the  time  of  an  agreement  for  a  mortgage  loan,  noth- 
ing is  said  as  to  the  rate  of  interest,  the  law  implies  it  to  be  that 
limited  by  statute  ;  and  to  increase  or  alter  it,  a  special  agree- 
ment is  necessary  ;  and  if  the  defence  of  usury  is  interposed,  the 
burden  of  sliowing  that  such  an  agreement  was  made  is  upon  the 
mortgagor.  Therefore  where  a  mortgagor  by  the  terms  of  his 
agreement  was  to  pay  tlie  attorney's  fees,  and  one  item  of  the  at- 
torney's bill  was  a  commission  for  obtaining  the  loan,  and  there 
was  no  foundation  for  the  charge,  which   was  intended  for  the 

1  Cox  V.  Ins.  Co.  113  111.  382;  Mnssa-  »  Conover  v.  Van  Mater,  IS  N.  J.  Eq. 

<husetts  Mut.  L.  Ins.  Co.  i;.  Boggs  (III.),  481. 

13  N.  K.  Rep.  t)50.  *  Conover  v.  Van  Mater,  supra. 

•^  Hotel   Co.    V.    Wa<le,    97    U.    S.    13;  ''  Clark  v.   Finlon,  90   111.  24. 5  ;  Tooke 

New  Encland   Mortgage  .Security  Co.  v.  v.  Newman,  7.5  111.  215. 

Oav,  .33  Fed.  Kep.  036.  «  Vesey  v.  Ockington,  IG  N.  II.  479. 

539 


§  644.] 


USURY. 


benefit  of  the  mortgagee,  and  was  in  fact  retained  by  him  against 
the  objection  of  the  mortgagor,  it  was  held  that  these  facts  did 
not  sustain  a  defence  of  usury,  as  there  was  no  agreement  or  in- 
tent on  the  part  of  the  mortgagor  to  pay  usury,  and  he  was,  in 
fact,  entitled  to  recover  the  amount  retained  by  the  mortgagee.^ 

Usury  must  be  specially  and  particularly  pleaded,  or  it  will  not 
be  considered  as  a  defence.^ 

644.  It  has  sometimes  been  held,  that  the  defence  of  usury 
is  so  exclusively  personal,  that  it  cannot  be  made  by  any  one 
but  the  mortgagor  or  his  privies  in  blood,  estate,  or  contract;  and 
that  a  subsequent  incumbrancer  or  purchaser  cannot  set  it  up  ;  ^ 


1  Guggcuheimer  v.  Geiszler,  81  N.  Y. 
293. 

2  Paddock  v.  Fish,  10  Fed.  Rep.  125; 
Whately  v.  Barker  (Ga.),  4  S.  E.  Rep. 
387  ;  Kilpatrick  v.  Henson  (Ala.),  1  So. 
Rep.  188. 

3  Wisconsin  :  Ready  v.  Huebner,  46 
Wis.  692;  Bensley  v.  Homier,  42  Wis. 
631.  Illinois  :  Darst  v.  Bates,  95  111.  493  ; 
Safford  v.  Vail,  22  111.  327 ;  Union  Nat. 
Bank  v.  International  Bank,  14  N.  E.  Rep. 
859.     Michigan:  Sellers   v.   Botsford,    11 


a  ruling  is,  that  the  purchaser,  under  such 
circumstances,  succeeds  to  all  the  relations 
of  his  vendor  in  respect  to  the  property, 
and  therefore  necessarily  acquires  the 
right  to  question  the  validity  of  the  usuri- 
ous security  in  protection  of  his  title." 

In  Union  Nat.  Bank  v.  International 
Bank,  supra,  in  which  it  was  held  that  a 
junior  mortgagee  not  in  possession  could 
not  set  up  this  defence,  Judge  Schotield 
reviewed  the  earlier  cases  in  Illinois,  and 
showed  that  the  question  had  never  before 


Mich.  59.     Alabama:  Baskins  v.  Caliioun,     been  adjudicated  in  that  state,  though  re- 


45  Ala.  582 ;  Fenno  v.  Sayre,  3  Ala.  458  ; 
McGuire  v.  Van  Pelt,  55  Ahi.  344  ;  Butts 
V.  B  rough  ton,  72  Ala.  294  ;  nor  by  mort- 
gagor's wife  claiming  under  a  subsequent 
voluntary   conveyance ;    Cain    i>.    Gimon, 


marks  had  been  made  upon  it,  which  were 
unnecessary  to  the  decision  of  the  cases 
in  which  they  were  made.  He  said : 
"  There  can  be  no  ground  for  pretending 
that  there  is   privity  between   the  mort- 


36  Ala.  168  ;  nor  by  a  terre-tenant  of  the     gagor  of  the  usurious  mortgage  and  the 


mortgaged  premises.  In  Hunt  v.  Acre, 
28  Ala.  580,  it  was  assumed  that  the  de- 
fence of  usury  might  be  set  up  by  the 
heirs  of  the  mortgagor. 

In  Ready  v.   Huebner,  supra,  Cole,  J., 


mortgagee  of  a  subsequent  and  junior 
mortgage,  other  than  by  contract  or  in 
estate;  and  we  think  it  quite  clear  that 
there  is  no  privity  in  either  of  these  re- 
spects.    It  is  enough  to  say,  on  the  ques- 


savs  :  "  It  is  true  there  is  a  class  of  cases     tion  of  privity  by  contract,  that  the  junior 


which  hold  that  the  purchaser  generally 
—  not  of  the  mere  equity'  of  redemption  — 
of  property  charged  with  an  usurious  lien 
or  claim  can  allege  the  usury  and  defeat 
the  claim,  when  the  conveyance  shows  that 
the  vendor  conveyed  the  property  dis- 
charged of  such  lien.  Newman  v.  Ker- 
shaw, 10  Wis.  333;  Ludington  v.  Harris, 
21  lb.  240  ;  Hartley  v.  Harrison,  24  N.  Y. 
170,  176;  BuUard  v.  Raynor,  30  lb.  197; 
Chamberlain  v.  Dempsey,  36  N.  Y.  144, 
149 ;  Williams  v.  Tilt,  lb.  319.     The  rea- 


mortgagee  was  neither  directly  nor  indi- 
rectly a  party  to  the  usurious  contract, 
and  he  derives  and  makes  claim  to  no 
right  through  or  resulting  from  it.  .  .  . 
But  it  would  seem  to  be  self-evident  that 
the  same  right  to  elect  to  plead  usury  to 
a  mortgage,  or  to  waive  the  usury  and 
affirm  the  entire  validity  of  the  mortgage, 
cannot  be  in  different  and  distinct  parties 
in  interest  at  the  same  time ;  for,  if  this 
were  not  so,  one  party  might  elect  to  do 
one   thing,   and    the    other   party   might 


son  given  in  some  of  these  cases  for  such     elect  to  do  directly  the  opposite,  and  thus 

540 


WHAT   MORTGAGES   ARE   USURIOUS. 


[§  644. 


nor  a  surety  avail  himself  of  usury  paid  by  bis  principal.^  But  tbe 
doctrine  more  generally  adopted  is  that  not  only  the  mortgagor, 
but  any  person  who  is  seised  of  his  estate  and  vested  with  liis 
rights,  unless  he  has  assumed  the  payment  of  the  mortgage,  may 
interpose  this  defence,  although  a  mere  stranger  cannot.^  Thus, 
a  voluntary  assignee  of  the  mortgagor  for  the  payment  of  his 
debts  may  set  up  usury  in  tbe  mortgage.^  So  may  a  judgment 
or  execution  creditor  of  the  mortgagor  ;  *  or  a  purchaser  of  the 
equitv  of  redemption,^  unless  he  has  assumed  the  payment  of  the 
mortgage,  or  bougbt  subject  to  it,*"  or  a  junior  mortgagee. ''  Any 
one  in  legal  privity  with  the  mortgagor,  unless  he  has  debarred 
himself  of  the  right  to  dispute  the  mortgage,  may  set  up  this 
defence ;  otherwise  the  property  would  be  practicall}'  inalienable 
in  the  hands  of  the  mortgagor,  unless  he  should  be  willing  to 
affirm  the  usurious  mortgage  by  selling  the  property  subject  to  it. 

one  election  would  nullify  the  otlier.   The  *  Carow  v.  Kelly,  59  Barb.  (N.  Y.)  239; 

equity  of  redemption  of  the  mortgagor  is  Thompson  v.  Van  Vcchten,  27  N.  Y.  568; 

the  light  to   redeem  from   the  first   and  Dix  v.  Van  Wyck,  2  Hill  (N.  Y.),  522. 

senior   mortgage,    either   by   paying    the  ^§746;  Green  r.  Kemp,  13  Mass.  515 ; 

amount  of  the  principal  debt  only,  or  by  Bridge    v.    Hubbard,    15   Mass.    96,   103; 

paying  that  amount  and   the  amount  of  Gunni.son  v.  Gregg,  20  N.  H.  100;  Spen- 

interest  usuriously  contracted  to  be  paid,  gler  v.  Snapp,  5  Leigh  (Va.),  478  ;  Shufelt 

as  he  shall  elect.     The  junior  mortgage,  v.   Shufelt,    9    Paige   (N.  Y.),    137,   145; 

conveying  a  lien  only  on  that  right,  does  Brooks  v.  Avery,  4  N.  Y.  225;  Berdan  v. 

not  cut  it  off,  but  leaves  it  still  to  be  ex-  Sedgwick,  44  N.  Y.  626 ;  Bullard  v.  Kay- 

ercised  by  the  mortgagor  until   he   shall  nor,  30  N.  Y.  197,  202;  Banks  v.  McClel- 

terminate  it  by  grant,  or  it  shall  be  termi-  Ian,  24  Md.  62 ;  M'Alister  v.  Jerman,  32 

nated  by  foreclosure.     The  junior  mort-  Miss.   142;  Doub  v.  Barnes,  1    Md.    Ch. 

gagce  does  not,  therefore,  occupy  the  same  127;    Maher   v.    Laufrom,    86    111.    513; 

relation   towards   the    property   that  the  Chaffe  v.  Wilson,  59  Miss.  42. 

mortgagor  did   before   he   executed  that  6  §§   744,   745,    1494.      See    Sands    v. 

mortgage;  and,  since  the  mortgagor  has  Church,  6  N.  Y.  347  ;  Ferris  v.  Crawford, 

not  parted  with  his  right  of  election  to  2   Dcnio   (N.  Y.),   595,   598  ;   Cleaver  v. 


plead  or  to  waive  tlie  defence  of  usury,  it 
is  impossible  tiiat  tiic  junior  mortgagee 
can  have  acquired  it." 

1  Lamoille  County  Nat.  Bank  v.  Bing- 
liam,  50  Vt.  105. 

-  Brolasky  v.  Miller,  9  N.  J.  Eq.  (1 
Stockt.)  807;  Westerfield  r.  Bried,  26  N. 
J.  Kq.  357 ;  Butts  v.  Brouglitou,  72  Ala. 
294;  Devlin  v.  Sh  mnon,  65  How.  (N.Y.) 
Pr.  148;  Mason  v.  Lord,  40  N.  Y.  476; 
Williams  r.  Tilt.  36  N.  Y.  319. 


Burcky,    17    111.   App.    92;    Stephens   v. 
Muir,  8  Ind.  352 ;  Wright  v.  Bundy,  1 1 
Ind.  398;  Valentine  v.  Fish,  45  111.462,* 
468,  per  Brecse,  J.     See,  however,  Parker 
V.  Sulouff,  94  Pa.  St.  527. 

"  Greene  v.  Tyler,  39  Pa.  St.  361  ;  Wa- 
terman V.  Curtis,  26  Conn.  241.  Contra, 
Powell  (•.  Hunt,  11  Iowa,  430;  Union 
Dime  Savings  Inst.  v.  Clark,  59  How. 
(N.Y.)  Pr.  342;  Gaither  i-.  Clark  (Md.), 
8  Atl.  IJej).  740.     A  junior  m  irtgngce  niny 


■'  Pearsall  v.  Kingsland,  3  Ivlw.  (N.  Y.)  contest  the  validity  of  the  prior  moilgage 

195.     But  a  purcliascr  at  a  sale  by  an  as  without  offering  to  redeem  and  making  a 

signce  in  bankrujacy  cannot  set  up  usury  tender.     Gaither  v.  Clark,  sujna. 
in  a  mortgage.     Nance  v.  Gregory,  6  Lea, 
343.  641 


§  645.]  USURY. 

But  the  owner  of  the  property  has,  of  course,  the  right  to  sell  the* 
property  as  though  such  void  mortgage  did  not  exist ;  and  the 
purchaser  necessarily  acquires  all  the  rights  of  his  vendor  to  ques- 
tion the  validity  of  the  usurious  incumbrance.^ 

A  mortgagor  may  waive  the  usury,  and  then  those  holding  can- 
not avail  themselves  of  this  defence.  Moreover,  any  one  claiming 
under  the  mortgagor  and  in  privity  with  him  may  remove  the 
taint  of  usury  as  to  both  himself  and  those  deriving  title  from 
him. 2  A  conveyance  by  the  mortgagor  subject  to  an  existing 
mortgage  imports  a  waiver,  and  his  grantee  cannot  set  up  usury. -^ 
But  a  sheriff  selling  the  mortgaged  land  on  execution,  or  on  fore- 
closure, does  not,  by  conveying  subject  to  a  prior  mortgage,  de- 
prive the  purchaser  of  the  right  to  set  up  the  defence,  for  he  has 
no  power  to  waive  the  usury ."* 

A  part  payment  of  the  mortgage  debt  under  an  agreement  with 
the  mortgagee  whereby  part  of  the  mortgaged  land  is  released,  is 
not  a  waiver  of  usury  in  the  mortgage.^ 

645.  A  mortgagor  may  be  estopped  from  setting  up  usury 
by  reason  of  having  executed,  after  the  making  of  the  mortgage, 
a  covenant  or  certificate  under  seal  that  the  mortgage  was  a  valid 
and  subsisting  lien  upon  the  premises  described,  unless  an  inno- 
cent third  party  is  thereby  induced  to  buy  the  mortgage,  relying 
upon  the  statement.  As  against  the  mortgagee  himself,  or  any 
assignee  who  knew  the  fact  of  usury,  it  is  without  effect. 

If  a  purchaser  has  notice  of  the  usurious  character  of  the  in- 
strument, he  is  not  protected  by  such  a  certificate,  although  he 
relied  upon  it  as  a  protection  in  law.^  The  mortgagor  may  in- 
troduce evidence  to  show  that  the  purchaser  never  believed,  nor 
acted  upon,  the  statements  as  true.  He  may  show  that  the  mort- 
gagee shared  in  a  very  large  fee  paid  his  attorneys  in  the  matter 
of  the  loan,  and  that  it  was  really  a  cover  for  usury.'' 

1  Per  Chancellor  Walworth,  in  Shufelt  toppel,  beinp;  founded  upon  principles  of 
V.  Shufelt,  9  Paige  (N.  Y.),  137,  145;  equity  and  justice,  is  only  applied  to  con- 
Reeder  v.  Martin,  58  Md.  215.  elude  a  party  by  his  acts  and  admissions, 

2  Warwick  v.  Uawes,  26  N.  J.  Eq.  548.  when  in  good  conscience  he  ought  not  to 
^  §  745.  be  permitted  to  gainsay  them ;  and  that 
*  Pinnell  v.  Boyd,  33  N.  J.  Eq.  600.  it  would  be  preposterous  to  hold  that  a 
5  Latrobe  v.  Hulbert  (C.  C.  Ohio,  1881),  party  is  estopped  from  claiming  that  the 

6  Fed.  Hep.  209.  very  instrument   supposed    to  estop   him 

^  Wilcox  V.  Howell,  44  N.  Y.  398  ;  Eitel  was  obtained  by  fraud. 
V.  Bracken,  38  N.  Y.  Superior  Court,  7.         '  Van  Sickle  v.  Palmer,  2  Thomp.  & 

In  the  former  case  the  court,  per  Earl,  C,  C.  (N.  Y.)  612. 
said   that   the   doctrine  of    equitable   es- 

542 


WHAT    MORTGAGES    ARE   USURIOUS.  [§  646. 

.  A  mortgagor  is  also  estopped  from  setting  up  usury  in  a  mort- 
gage as  against  one  whom  he  has  induced  to  purchase  it.^ 

646.  Usury  set  up  after  a  foreclosure  and  sale.  —  Under 
usury  laws  which  make  void  securities  affected  with  usury,  the 
question  arises,  What  limit  is  there  to  the  effect  of  the  statute  ? 
Does  a  foreclosure  of  the  mortgage  and  a  sale  of  the  mortgaged 
property  to  a  third  person  terminate  the  right  of  the  mortgagor 
to  avail  himself  of  the  usury,  or  do  the  consequences  of  it  still 
attend  the  property  so  that  the  purchaser's  title  may  be  rendered 
void  ?  If  the  effect  of  the  usury  survives  the  original  transaction, 
in  the  words  of  Lord  Kenyon,"^  "  it  might  affect  the  most  of  the 
securities  in  the  kingdom  ;  for  if,  in  tracing  a  mortgage  for  a 
century  past,  it  could  be  discovered  that  usury  had  been  commit- 
ted in  any  part  of  the  transaction,  though  between  other  parties, 
the  consequence  would  be  that  the  whole  would  be  void.  It 
would  be  a  most  alarming  proposition  to  the  holders  of  all  secu- 
rities." This  question  was  also  answered  by  an  early  case  in 
New  York,  in  which  Chief  Justice  Kent,  delivering  the  opinion 
of  the  court,  said :  "  The  principles  of  public  policy  and  the 
security  of  titles  are  deeply  concerned  in  the  protection  of  such  a 
purchaser.  If  the  purchase  was  to  be  defeated  by  the  usury  in 
the  oiiginal  contract,  it  would  be  difficult  to  set  bounds  to  the 
mischief  of  the  precedent,  or  to  say  in  what  sequel  of  transactions, 
or  through  what  course  of  successive  alienations,  and  for  what 
time  short  of  that  in  the  statute  of  limitations,  the  antecedent 
defect  was  to  be  deemed  cured  or  overlooked,  so  as  to  give  quiet 
to  the  title  of  tlie  bond  fide  purchaser.  The  inconvenience  to 
title  would  be  alarming  and  enormous.  Tiie  law  has  always  had 
a  regard  to  derivative  titles  when  fairly  procured  ;  and  though  it 
may  be  true,  as  an  abstract  principle,  that  a  derivative  title  cannot 
be  better  than  that  from  which  it  was  derived,  yet  there  are  many 
necessary  exceptions  to  the  operation  of  this  principle."  ^ 

After  a  foreclosure,  a  mortgage  contract  is  regarded  as  exe- 
cuted. So  long  as  the  contract  remains  executory,  the  mortgagor 
can  avail  himself  of  the  usury  ;  but  when  it  is  executed,  and 
others  have  in  good  faith  acquired  interests  in  the  property,  tlie 

'  Burnett  v.  Zacharias,  24  Iluii  (N.  Y.),  Y.)  285  ;  Mumford  v.  Am.  Life  lus.  Co.  4 

.•J04.     Sec,  also,  §  642.  N.  Y.  463,  485  ;  Tyler  v.  Mai^s.  MiU.  Ins. 

■^  Cuthbert  v.  Haley,  8  T.  R.  3'JO.  Co.  108  III.  58  ;  Perkins  i-.  Conant,  29  111. 

•'»  Jackion  v.  Henry,  10  Johns.  (N.  Y.)  184;  Carter  v.  Moses, 39  111.  539. 
185,  197;  Klliott  i-.  Wood,   53  Barh.   (N. 

543 


§  647.]  USURY. 

objection  can  no  longer  be  raised.  But  if  the  mortgagee  himself 
buy  the  property  directly  or  through  an  agent  at  the  foreclosure 
sale,  it  is  held  that  his  title  may  still  be  impeached  for  usury  in 
the  mortgage.  Being  a  party  to  the  usurious  contract,  his  situa- 
tion is  no  better  after  the  foreclosure  than  it  was  before.^ 

647.  A  bonus  paid  to  secure  the  extension  of  the  time  of 
payment  of  an  existing  mortgage  does  not  invalidate  the  mortgage 
as  a  security  for  the  original  debt.^  When  a  mortgage  is  free 
from  usury  in  its  inception,  no  subsequent  usurious  contract  in 
relation  to  it  can  affect  the  mortgage  itself.  It  is  only  the  sub- 
sequent contract  that  is  affected  by  the  usury.  The  mortgage, 
not  being  usurious  in  its  origin,  is  not  made  so  retrospectively 
by  the  receipt  of  usurious  interest  under  an  agreement  to  forbear 
demand  of  payment ;  though  the  penalty  of  the  statute  may  be 
incurred.'^  But  if  the  usury  goes  back  to  the  original  transaction, 
the  mortgage  is  rendered  void  by  the  usury .^  A  provision  of  the 
lex  loci  cowfraci^MS,  rendering  void  the  original  contract  when  extra 
interest  is  taken  for  the  forbearance  of  the  payment  of  money 
when  due,  will  not  be  enforced  in  a  foreign  state,  because  the  for- 
feiture is  in  the  nature  of  a  remedy.  The  lex  fori  determines 
the  remedy  ;  the  lex  loci  contractus,  the  validity  and  construction.'^ 

An  agreement  after  maturity  of  the  mortgage  debt  to  pay  a 
rate  of  interest  higher  than  is  allowed  by  law,  as  an  indemnity 
to  the  mortgagee  for  interest  paid  by  him  on  money  borrowed  in 

1  Jackson  v.  Dominick,   14  Johns.  (N.  567;  Scott  v.  Austin,  32  N.  W.  llep.  864. 

y.)   435;  Welsh  v.  Coley  (Ala.),  2    So,  Only  a  6o?ia^c?e  purchaser  for  value  with- 

Rep.   733 ;    McLaughlin   v.  Cosgrove,  99  out  notice  is  protected  under  such  a  sale. 

Mass.  4.     So  with  any  purchaser  who  has  Jordan  v.  Humphrey,  supra. 

notice  of  the  usury   at  the  time  of  sale.  ^  Terhune  y.  Taylor,  27  N.  J.  Eq.  80; 

Bisstll  «;.  Kellogg,  60  Barb.  (N.  Y.)  617;  Real  Estate  Trust  Co.  v.  Keech,  7  Hun 

S.  C.  65N.  Y.  432.     So  with  a  mortgagee  (N.  Y.),  253,  and  cases  cited;  Abrahams 

of  chattels  who  has  seized  the  property,  v.  Clausscn,    52   How.    (N.   Y''.)    Pr.  241  ; 

WethertU  v.  Stewart,  35  Minn.  496.     But  Langdon  v.   Gray,   lb.   387  ;  Donnington 

in  New  Jersey  it  is  held  that  a  subsequent  v.  Meeker,  II  N.  J.  Eq.  (3  Stockt.)  362; 

mortgagee  may  set  up    usury  under  his  Trusdell  v.  Jones,  23  N.  J.  Eq.  121  ;  aS.  C. 

petition  for  the  surplus  money  remaining  lb.  554  ;  Mahouey  v.  Mackubin,  54  Md. 

in  court  after  satisfying  prior  mortgages.  268. 

Hutchinson  v.  Abbott,  33  N.  J.  Eq.  379.  ^  Thompson   v.    Woodbridge,   8   Mass. 
In  Minnesota  the  foreclosure  of  the  usu-  256  ;  Lindsay  v.  Hill,  66  Me.  212;  Hawhe 
rious  mortgage,  and  sale  under  the  power  v.  Snydaker,  86  III.  197. 
to  one  not  a  io?ia  ^'c/e  purchaser,  does  not  *  Smith  v.  Hathorn,  88  N.  Y.  211,  re- 
prevent  the  granting  of  relief.    Jordan  v.  versing  25  Hun,  159. 
Humphrey,  31  Minn.  495  ;  18  N.  W.  Hep.  ^  Lindsay  v.  Hiil,  supra. 
450;  Exley  y.  Berryhill,  33  N.  W.  Rep. 

644 


WHAT   MORTGAGES   ARE   USURIOUS.  [§§  648,  649. 

another  state    at   such   higher  rate,  will  not  for  that  reason  be 
upheld.^ 

648.  If  a  payment  made  by  a  mortgagor  as  a  premium  for 
an  extension  of  the  time  of  payment  of  the  principal  debt 
is  void  for  the  purpose  for  which  it  was  made,  it  should  be  cred- 
ited as  a  payment  upon  the  mortgage  debt  as  of  the  time  when 
it  was  made.^ 

649.  Under  some  usury  lawrs  an  agreement  to  extend  the 
time  of  payment  of  a  mortgage  is  void  if  made  in  consider- 
ation of  a  usurious  payment  or  contract.-^  But  while  the  cases 
are  in  harmony  upon  this  point,  they  are  not  agreed  whether  it  is 
the  privilege  of  the  borrower  alone  to  take  advantage  of  the 
usurious  taint  of  the  contract ;  or  whether,  for  instance,  the  lender 
may  disregard  the  contract  and  proceed  before  the  expiration  of 
such  extension  to  enforce  pajmient  or  foreclose  the  mortgage.  On 
the  one  hand,  it  is  held  that  the  lender  cannot  wilfully  violate  the 
statute  against  usurj^  and  then  take  advantage  of  his  own  wrong 
by  repudiating  the  contract ;  that  the  borrower  or  his  surety,  or 
personal  representative,  can  alone  set  up  the  usury  ;  in  other 
words,  that  the  victim  of  the  usury,  and  not  the  usurer,  can  take 
advantage  of  the  statute.^  But  even  if  an  extension  made  upon 
a  usurious  payment  be  binding  at  the  election  of  the  mortgagor, 
if  upon  a  foreclosure  suit  he  requires  that  the  premium  paid  shall 
be  credited,  he  disaffirms  the  contract  for  extension.^  He  is  en- 
titled to  the  credit ;  but  having  received  that,  he  is  not  entitled 
to  the  extension,  so  as  to  prevent  the  whole  principal  from  being 
regarded  as  due. 

A  distinction  has  been  taken  between  a  contract  for  extension 
founded  upon  a  consideration  of  an  actual  payment  of  money 
made  at  the  time  of  the  contract,  and  one  made  upon  an  execu- 
tory contract  to  pay  usury  ;  and  it  is  held,  that  while  the  contract 
is  binding  upon  the  creditor  in  the  former  case,  it  is  not  binding 
in  the  latter ;  as,  for  instance,  when  the  consideration  for  the  ex- 
tension is  a  promissory  note  of  the  debtor.^ 

•  Eslava  V.  Lepretre,  21  Ala.  504.  La  Farge  i-.  Hcrter,  9  N.  Y.  241.     See, 
-  Laing   v.  Maniii,  26  N.  J.   Eq.  93  ;     however,  Church  v.  Maloy,  sujira. 

Trusdell  v.  Jones,  2.'J  N.  J.  Eq.  121,  554;         ''  Church  v.  Maloy,  su/ir<i. 
Nightingale  v.  Meginnis,  .34  N.  J.  L.  461  ;         ^  Billington  v.  Wagoner,  sit/ira  ;  Joues 

Patterson  v.  Clark,  28  (ja.  526.    See,  also,  v.  Trusdell,  supra,  ])cr  Cliief  Justice  Beas- 

Church  V.  Maloy,  70  N.  Y.  63.  ley.     See,  however,  Church  v.  Maloy,  su- 

^  Church  V.  Maloy,  siijira.  pra. 

*  Billington  v.  Wagoner,  33  N.  Y.  31  ; 

VOL.  I.  :J5  545 


§  650.]  USURY. 

Extension  of  the  time  of  payment  is  a  sufficient  consideration 
for  an  agreement  to  increase  the  rate  of  interest  upon  the  debt, 
and  when  the  arrangement  has  once  been  entered  upon  without  a 
definite  limitation  of  its  continuance  being  agreed  upon,  it  will  be 
presumed  that  the  increased  rate  of  interest  continues  as  long  as 
the  forbearance  is  granted.^ 

But,  on  the  other  hand,  the  rule  has  sometimes  been  declared 
to  be,  that  the  court  will  not  help  either  party  to  enforce  a  usuri- 
ous contract  while  it  remains  executory .^  A  promise  to  extend 
the  time  of  payment  of  a  mortgage  made  in  consideration  of  a 
note  for  a  usurious  premium  is  void  ;  and  the  mortgagee  may 
foreclose  it  before  the  expiration  of  the  extended  time  upon  his 
giving  up  the  usurious  note.  The  usurious  contract  in  such  case 
remains  executory.  It  is  not  the  privilege  of  the  borrower  alone 
to  take  advantage  of  the  usurious  taint.  The  statute  makes  the 
contract  void.^ 

II.    Compound  Interest. 

650.  As  to  compound  interest  the  general  rule  is  that  an 
executory  contract  for  it  cannot  be  enforced  ;  but  that  the 
payment  of  such  interest  by  the  debtor,  understandingly  and 
under  no  peculiar  circumstances  of  oppression,  does  not  constitute 
usury .4  It  is  admitted  that  there  is  no  law  prohibiting  such  a 
contract :  but  the  courts  have  adopted  the  rule  from  notions  of 
policy  ;  ^  holding  tliat  although  it  may  be  demanded  and  recovered 
as  it  becomes  due,  an  agreement  to  pay  interest  on  the  interest 
after  it  becomes  due  cannot  be  enforced.^  Lord  Thurlow  said  : ' 
"  My  opinion  is  in  favor  of  interest  upon  interest ;  because  I  do 
not  see  any  reason,  if  a  man  does  not  pay  interest  when  he  ought, 
why  he  should  not  pay  interest  for  that  also.  But  I  have  found 
the  court  in  a  constant  habit  of  thinking  the  contrary ;  and  I 
must  overturn  all  the  proceedings  of  the  court  if  I  give  it."  Lord 
Eldon  also  said  that  a  bargain  for  interest  on  interest  was  neither 

1  Haggerty  v.  Allaire  Works,  5  Sanclf.  made  after  the  interest  has  become  due, 
(N.  Y.)  230.  see  Force  v.  Elizabeth,  28  N.  J.  Eq.  403, 

2  Jones  V.  Trusdell,  23  N.  J.  Eq.  121,     note. 

554.  6  Connecticut  v.  Jackson,  1  Johns.  Ch. 

3  Jones  V.  Trusdell,  supra.  (N.  Y.)  13;  Van  Benschooteu  v.  Lawson, 
*  Culver  V.  Bigelow,  43  Vt.  249.  6  lb.  313  ;  Stewart  v.  Petree,  55  N.  Y.  621  ; 
5  For  numerous  authorities  in  support  Article  in  16  Alb.  L.  J.  252. 

of  the  rule  that  interest  shall  not  bear  in-         "^  In  Waring  v.   Cuuliffe,  1  Ves.  Jun. 
terest,  except  by  virtue  of  an  agreement     99. 

546 


COMPOUND   INTEREST. 


[§  650. 


unfair  nor  illegal,  but    that   it  could    not  be  allowed  because  it 
tended  to  usury,  although  it  was  not  usury. ^ 

In  several  states  it  is  now  provided  by  statute  that  interest 
upon  interest  may  be  contracted  for ;  ^  and  it  would  seem  that 
inasmuch  as  the  objection  to  such  contracts  has  been  that  they 
savored  of  usur}'^,  and  inasmuch  as  it  has  always  been  held  that 
the  parties  may,  bj^  a  new  agreement  after  the  interest  has  ac- 
crued, turn  it  into  principal,  in  those  states  where  the  laws  against 
usury  have  been  abolished  there  can  be  no  reason  wliy  an  agree- 
ment for  turning  interest  into  principal  is  not  valid.  But  in 
Neva(hv,  altliough  it  is  provided  by  statute  that  parties  may  agree 
in  writing  for  the  payment  of  any  rate  of  interest,  it  is  held  in 
equity  that  a  contract  for  compound  interest  cannot  be  enforced.^ 
The  court  say,  that  "  when  the  Nevada  statute  was  passed,  it 
was  the  settled  rule  of  courts  of  equity  to  refuse  to  allow  com- 


1  Chambers  v.  Goldwin,  9  Ves.  254, 
271.  See,  also,  Blackburn  v.  Warwick, 
2  Y.  &  C.  92,  per  Aldereon,  B. ;  Barnard 
V.  Young,  1 7  Ves.  44,  47  ;  Leith  v.  Irvine, 

1  Myl.  &K.  277,284  ;  Thornhillu.  Evans, 

2  Atk.  330. 

-  In  Micliigan  it  is  provided  that  when 
any  instalment  of  interest  upon  any  note, 
bond,  mortgage,  or  other  written  contract 
shall  have  become  due,  and  the  same  shall 
remain  unpaid,  interest  may  be  computed 
and  collected  on  any  such  instalment  so 
due  and  unpaid,  from  the  time  at  which  it 
became  due,  at  the  same  rate  as  specified 
in  any  such  note,  bond,  mortgage,  or  other 
written  contract,  not  exceeding  ten  per 
cent.  ;  and  if  no  rate  of  interest  be  speg- 
fied  in  such  instrument,  then  at  the  rate  of 
seven  per  centum  per  annum.  Annot. 
Stats.  1882,  §  1599. 

Minnesota :  Interest  cannot  be  com- 
pounded ;  but  a  contract  to  pay  interest 
not  usurious  upon  interest  overdue,  is  not 
construed  to  be  usury.  Stats.  1 879,  ch.  23, 
§2;  Laws  1879,  ch.  66. 

In  Missouri  parties  may  contract  in 
writing  for  the  payment  of  interest  upon 
interest ;  but  the  interest  shall  not  be  com- 
puted oftener  than  once  in  a  year.  Where 
a  different  rate  is  not  expressed,  interest 
upon  interest  is  at  the  same  rate  as  inter- 
est on  the  principal  debt.  K.  S.  1879,  ch. 
41,  §  2728  ;  Waples  v.  Jones,  62  Mo.  440. 


In  California  the  parties  may  contract 
in  writing,  and  agree  that  if  the  interest 
is  not  punctually  paid  it  shall  become  part 
of  the  principal  and  bear  iuterest  at  the 
same  rate.     Civil  Code  1885,  §  1919. 

In  Wisconsin  it  is  provided  that  interest 
shall  not  be  compounded,  or  bear  interest 
upon  interest,  unless  there  be  an  agree- 
ment to  that  effect,  expressed  in  writing, 
and  signed  by  the  party  to  be  charged 
therewith.     R.  S.  1878,  §  1689. 

On  the  other  hand,  express  provisions 
against  compound  interest  have  been 
made  in  a  few  states. 

Arkansas  :  In  no  case  where  a  payment 
shall  fall  short  of  paying  the  ititere.-t  due 
at  the  time  of  making  such  payment  shall 
the  balance  of  such  interest  be  added  to 
the  principal.  Dig.  of  Stats.  1884,  § 
4738. 

In  Looisiana  interest  upon  interest  can- 
not be  recovered  unless  it  be  added  to  the 
principal,  and  by  another  contract  made 
a  new  debt.  No  stipulation  to  that  effect 
in  the  original  contract  is  valid.  Rev. 
Civil  Code  1870,  art.  1939. 

In  Idaho  compound  interest  is  not  al- 
lowed, but  a  debtor  may  agree  in  writing 
to  pay  interest  upon  interest  overdue  at 
the  date  of  such  agreement.  U.  S.  1887, 
§  1265. 

•'  Cox  V.  Smith,  1  Nev.  161.  Question- 
able. 

647 


§  651.]  USURY. 

pound  interest  when  their  aid  was  invoked  to  collect  a  debt.  In 
courts  of  law  the  rule  was  not  so  well  settled,  but  we  think  a 
majority  of  the  States  of  this  Union,  and  the  English  courts  of 
law,  had  refused  to  enforce  that  portion  of  contracts  which  pro- 
vided for  the  collection  of  compound  interest.  None  of  these 
rulings  were  founded  on  the  statutes  against  usury,  but  on  the 
general  principles  of  the  common  law  as  it  existed,  without  ref- 
erence to  the  usury  law." 

In  states  where  all  usury  laws  have  been  abolished  it  would 
seem  that  a  stipulation  for  the  payment  of  compound  interest  is 
valid  and  may  be  enforced.^ 

651.  So  long  as  the  agreement  for  compound  interest  is 
executory  merely,  the  courts  will  not  lend  their  aid  to  enforce  it ; 
but  when  the  contract  has  been  acted  upon  by  the  parties,  and 
such  interest  has  been  paid,  the  courts  will  not  require  a  repay- 
ment, nor  will  they  hold  the  transaction  to  be  in  any  degree 
tainted  with  usury  by  reason  of  such  payment.  Such  an  agree- 
ment does  not  render  a  mortgage  usurious,  but  the  contract,  so 
far  as  it  provided  for  usurious  interest,  is  void ;  but  it  may  be 
enforced  for  the  debt  and  interest,  even  where  usury  makes  void 
the  contract.2  An  agreement  to  pay  interest  on  interest,  made 
after  the  interest  has  accrued,  is  valid  and  may  be  enforced.^ 

Some  recent  decisions  do  away  with  this  distinction,  and  hold 
that  there  is  no  objection  to  a  contract  for  interest  upon  in- 
terest.* 

In  Ohio  and  Iowa  it  is  the  settled  rule  that  when  interest  is 
payable  by  the  terms  of  a  mortgage  at  stated  periods,  without 
any  special  agreement  to  that  effect,  it  becomes  principal  from 
the  time  of  payment,  and  may  be  recovered  as  such,  with  inter- 
est from  the  time  it  became  due.  Upon  a  note  which  simply 
provides  for  the  payment  of  interest  annually,  the  interest  on  the 
interest  will  be  computed  at  the  legal  rate  provided  for  cases 
where  the  parties  do  not  agree  upon  a  higher  rate ;  and  although 
the  interest  upon  the  note  be  fixed  at  a  higher  rate,  in  the  ab- 
sence of  any  agreement  as  to  the  rate   of    interest  upon  accrued 

1  Clarkson  y.  Henderson,  L.  R.  14  Ch.     Fobes  r.  Cantfield,  3  Ohio,  17,  18;  Paul- 
D.  348.  ling  V.  Creagh,  54  Ala.  646  ;  Force  v.  Eliz- 

2  Mowry   v.   Bishop,  5  Paige  (N.  Y.),     abeth,  28  N.  J.  Eq.  403,  note. 

98.  4  HoUingsworth  v.  Detroit,  3  McLean, 

3  Tylee  v.  Yates,  3  Barb.  (N.  Y.)  222  ;     472 ;  Scott  v.  Saffold,  37  Ga.  384. 

548 


COMPOUND  INTEREST.  »   [§§  652,  652  a. 

interest  that  rate  will  not  govern. ^  Where  interest  upon  a  mort- 
gage note  was  payable  annually,  interest  upon  the  delinquent 
interest  was  allowed,  although  the  note  was  made  in  New  York 
and  was  payable  there,  where  the  rule  was  otherwise.^ 

But  when  interest  on  interest  is  stipulated  for,  the  rate  reserved 
by  mortgage,  if  within  the  limits  allowed  by  law,  will  control.^ 

652.  Accrued  interest  is  a  debt ;  and  even  where  an  agree- 
ment made  at  the  time  of  the  loan  for  converting  interest  into 
principal,  from  time  to  time  as  it  shall  become  due,  is  not  al- 
lowed, because  it  is  regarded  as  offensive  and  usurious,  yet  when 
it  has  become  due,  there  is  no  objection  to  the  parties  converting 
such  interest  into  principal,  and  securing  it  by  a  further  mort- 
gage. It  is  regarded  as  in  the  nature  of  a  further  advance,  and 
not  only  may  it  form  the  consideration  of  a  second  or  further 
mortgage,  but  as  between  the  parties  it  may  be  tacked  to  the 
first  mortgage.*  If  interest  be  demanded  when  due,  it  legally 
bears  interest  from  that  time ;  or  if  no  demand  be  proved,  then 
from  the  commencement  of  suit.^ 

Wiien  a  mortgage  is  given  to  secure  the  payment  of  money  in 
instalments,  to  commence  at  a  future  day,  "  with  interest  semi- 
annuallj',"  interest  begins  to  run  from  the  making  of  the  con- 
tract. The  holder  may  sue  for  each  half  year's  interest  as  it 
becomes  due,  although  the  principal  is  not  due.'' 

652  a.  Taking  interest  upon  a  loan  in  advance  for  the  ordi- 
nary term  of  commercial  paper,  or  even  for  a  year,  is  not  usury, 
though  the  result  in  such  case  is  to  enable  the  creditor  to  make 
interest  upon  interest."  But  if  a  debtor  gives  his  creditor  a  new 
note  and  mortgage  for  the  amount  of  the  debt,  to  which  is  added 

1  Cramer  y.  Lepper,  26  Ohio  St.  59;  S.  hugh  v.  McPhcrson,  3  Gill  (Md.),  408; 
C.  20  Am.  R.  756;  Mann  v.  Cross,  9  Hale  a.  Hale,  1  Cold.  (Tenn.)  233;  Tar- 
Iowa,  327.  ham  v.  Pulliam,  5  lb.  497. 

-  Preston   v.    Walker,   26   Iowa,    203  ;  ^  Howard  v.  Farley,  19   Abb.   (N.  Y.) 

Burrows  u.  Stryker,  47  Iowa,  477.  Pr.  126  ;  Stewart  v.  Petreo,  55  N.  Y.  621  ; 

*  VVatkiiison    v.    Root,   4    Ohio,    373;  Force  y.  Elizabeth,  28  N.  J.  Eq.  403.  406, 

Dunlap   V.    Wiseman,   2   Disney    (Ohio),  where  authorities  arc  collected  in  note  ; 

398.  Meyer  v.  Graebcr,  19  Kaus.  165  ;  Article 

■»  Qiiimby  v.   Cook,  10  Allen    (Mass.),  in  16  Alb.  L.  J.  252. 

32;  Wilco-x  u.  Ilowland,  23  Pick.  (Mass.)  «  Conners  v.   Holland,  113    Mass.  .'iO ; 

167  ;   Pinckard    v.    Ponder,   6    Ga.  233  ;  Hastings  v.  Wiswall,  8  Mass.  455. 

Townsend   v.   Corning,   1    Barb.   (N.   Y.)  ^  Bloomer  v.  Mclncrney,  30   Hun  (N. 

627  ;  Williams  v.  Hance,  7  Paige  (N.  Y.),  Y.),  201  ;  Mitchell  v.  Lyman,  77  111.  525  ; 

581  ;  Eslava   v.  Lepretre,   21    Ala.   504  ;  McGill  v.  Ware,  4  Scam.  (III.)  21. 
Banks  v.   McClellan,    24   Md.    62;  Fitz- 

549 


§§  653-655.]  USURY. 

interest  for  a  year,  and  also  interest  on  such  interest  for  that  pe- 
riod, the  transaction  may  be  regarded  as  usurious.^ 

653.  Interest  coupons,^  —  It  is  the  general  practice  for  cor- 
porations, in  making  mortgages  upon  their  property,  to  attach  to 
the  mortgage  bonds  coupons  representing  the  interest  payable  at 
the  several  times  when  the  interest  falls  due  ;^  and  this  practice 
has  been  adopted  in  several  states  quite  extensively  by  individ- 
uals, in  making  ordinary  mortgages  or  trust  deeds  upon  their  pri- 
vate property.  Such  coupons  for  the  payment  of  definite  sums 
of  money  at  specified  times  are  in  effect  promissory  notes,  and 
are  held  to  draw  interest  in  the  same  manner  after  maturity. 

Interest  coupons,  although  detached  from  the  bond,  are  still 
covered  by  the  lien  of  the  mortgage  given  to  secure  the  bond.* 
Such  coupons  are  usually  payable  to  bearer,  and  may  be  trans- 
ferred and  presented  by  any  holder.^ 

654.  A  provision  for  the  payment  of  interest  annually, 
and  that  if  not  so  paid  it  shall  be  compounded,  is  no  waiver 
of  the  right  to  enforce  payment  when  due  ;  and  if  the  deed 
further  provides  that,  upon  a  failure  to  pay  the  debt  or  interest 
as  it  matures,  the  whole  shall  become  due  and  payable,  upon  a 
failure  to  pay  the  interest  annually  the  whole  debt  or  the  interest 
only  may  be  enforced,  at  the  creditor's  election.^ 

G55.  Computation  of  interest.  —  When  no  payments  have 
been  made  upon  the  mortgage,  the  interest  should  be  computed 
from  the  date  of  the  note  until  the  rendition  of  the  decree.  It 
is  erroneous  to  compute  the  interest  to  the  time  of  maturity,  and, 
adding  it  to  the  principal,  then  to  compute  it  upon  the  gross 
amount  to  the  time  of  rendering  the  decree." 

In  computing  interest  upon  a  note  with  interest  payable  annu- 
ally, intermediate  payments  made  on  account  of  the  interest  ac- 
cruing, but  not  yet  due,  should  be  deducted  at  the  end  of  the 
year,  without  any  allowance  of  interest  upon  them  ;  but  rests 
should  not  be  made  at  the  time  of  such  intermediate  payments, 
as  that  would  result  in  giving  compound  interest  upon  the  loan.^ 

1  First  Nat.  Bank  y.  Davis,  108111.  633.         *  Miller  v.  Rutland   &  Washington  R. 

2  See  Jones  on  Railroad  Securities,  §§     R.  Co.  40  Vt.  399. 

317-340.  5  Sewall  v.  Brainerd,  38  Vt.  364. 

3  Harper  v.  El}',  70  111.  581 ;  Hollings-  6  Waples  v.  Jones,  62  Mo.  440. 
worth  V.  Detroit,  3   McLean,  472  ;    Gel-  '^  Barker  v.  International  Bank,  80  111. 
pecke  0.  Dubuque,  1  Wall.  175,  206  ;  Dun-  96.     See,  also,  Leonard  v.  Villars,  23  111. 
lap  V.  Wiseman,  2   Disney  (Ohio),   398  ;  377. 

Columbia  Co.  v.  King,  13  Fla.  451.  8  Townsend  v.  Riley,  46  N.  H.  300. 

550 


CONFLICT  OF  LAWS.  [§§  656,  657. 

III.    Conflict  of  Laws. 

666.  The  general  rule  undoubtedly  is,  that  the  law  of  the 
place  where  the  contract  is  executed  governs  as  to  the  construc- 
tion and  validity  of  it ;  but  there  is  this  well  recognized  excep- 
tion to  the  rule,  or  qualification  of  it,  that  where  the  contract 
is  to  be  performed  in  another  place,  then  the  law  of  the  place 
of  performance  will  govern.^  When  the  mortgage  debt  is  by 
its  terms  made  payable  in  the  state  where  the  land  is  situated, 
though  the  mortgage  was  executed  in  another  state,  the  con- 
tract, so  far  as  it  is  personal,  is  to  be  int*preted  by  the  laws  of 
the  place  of  performance.^  But  the  place  where  the  morto-a^e 
is  made  payable  may  be  different  from  the  place  where  the  land 
is  situated  ;  and  the  mortgage  may  have  been  executed  in  still 
a  third  place,  and  the  question  arises,  By  what  law  is  the  mort- 
gage then  to  be  governed?  "  Obligations,  in  respect  to  the  mode 
of  their  solemnization,"  says  Mr.  Wharton,^  "  are  subject  to  the 
rule  locus  regit  actum  ;  in  respect  to  their  interpretation,  to  the 
lex  loci  contractus ;  in  respect  to  the  mode  of  performance,  to  the 
law  of  the  place  of  performance.  But  the  lex  fori  determines 
when  and  how  such  laws,  when  foreign,  are  to  be  adopted,  and,  in 
all  cases  not  specified  above,  supplies  the  applicatory  law."  Mr. 
Justice  Hunt,  in  a  recent  case  before  the  Supreme  Court  of  the 
United  States,  after  quoting  the  rule  as  above  laid  down,  himself 
states  it  as  follows  :  *  "  Matters  bearing  upon  the  execution,  the 
interpretation,  and  the  validity  of  a  contract  are  determined  by 
the  law  of  the  place  where  the  contract  is  made.  Matters  con- 
nected with  its  performance  are  regulated  by  the  law  prevailing 
at  the  place  of  performance.  Matters  respecting  the  remedy, 
such  as  the  bringmg  of  suits,  admissibility  of  evidence,  statutes 
of  limitation,  depend  upon  the  law  of  the  place  where  the  suit 
is  brought." 

657.  What  law  governs.  —  The  validity  of  a  contract,  secured 
by  mortgage  made  in  one  state  upon  lands  in  another  state,  de- 
pends, so  far  as  the  usury  laws  affect  it,  upon  the  question.  By 
the  law  of  which  state  is  the  contract  itself  governed?  If  the 
loan  is  to  be  repaid  in  the  state  where  it  is  made,  the  contract 

'  Morgan    r.   New  Orleans,   Mobile   &  -'  Duncan  v.  Helm,  22  La.  Ann.  41S. 

'I'ex.   R.   R.  Co.  2  Woods,  244  ;  Junction  »  Connict  of  Laws,  §  401  /> 

R.  R.  Co.  V.  Bank  of  AHliiand,  12  Wall.  4  Scudder  v.  Union  Nat.  Hank,  91  U.  S. 

Tif>;  Little  v.  Riley,  43  N.  II.  109;  Vat-  406. 
ham   V.    I'uiliarn,  :>    Cold.    (Tenn.)   497  ; 

Lindsay  v.  Hill,  66  Me.  212.  551 


§  657.]  USURY. 

■will  be  governed  by  the  laws  of  that  state,  even  when  secured  by 
mortgage  of  land  situate  in  another  state. ^  If  nothing  be  said 
about  the  place  of  payment,  the  contract  is  presumably  payable 
where  the  parties  reside  and  the  contract  is  made,  although  the 
land  be  situated  in  another  state ;  and  the  validity  of  the  contract 
would  be  determined  by  the  laws  of  the  place  of  contract.^  If  no 
place  of  payment  be  named,  and  the  mortgagee  reside  in  the  state 
in  which  the  land  lies,  and  the  mortgage  is  there  delivered  and 
the  loan  received  by  an  agent  of  the  mortgagor  who  resides  in 
another  state,  the  contract  will  be  governed  by  the  law  of  the 
former  state.^  But  tie  parties  may  contract  with  reference  to 
the  law  of  a  state  other  than  that  where  the  land  is  situated,  and 
if  the  note  or  mortgage  be  made  payable  in  that  state,  the  law  of 
that  state  will  govern  in  the  construction  and  legal  effect  of  the 
contract.*  The  parties  may  stipulate  for  interest  with  reference 
to  the  laws  of  either  the  place  of  contract  or  the  place  of  payment, 
so  long  as  the  provision  be  made  in  good  faith,  and  not  as  a  cover 
for  usury.^ 

When  a  contract  is  made  payable  in  another  state  for  the  pur- 
pose of  evading  the  usury  laws  of  the  state  where  the  contract  is 
executed,  the  question  is  not  which  law  shall  govern  in  execut- 
ing the  contract,  but  which  shall  decide  the  fate  of  the  security. 
Unquestionably  it  is  the  law  of  the  place  of  contract.^ 

'  By  statute  in  Michigan  the  interest  on  mortgages  may  be  made 
payable  out  of  the  state  at  such  place  as  the  parties  may  agree 
upon,  although  the  rate  of  interest  in  such  place  may  be  less  than 
in  this  state ;  and  the  rate  of  interest  reserved  is  not  affected  by 
the  laws  of  the  place  where  payment  is  to  be  made.'^ 

1  3  Kent's  Com.  460;  Story's  Conflict  ^  Mills  v.  Wilson  (Pa.  1878),  7  Report, 
of  Laws,  §§  287,  292,  293  ;   Cope  v.  Whee-     er,  218  ;  S.  C.  6  W.  N.  C.  No.  23. 

ler,  41  N.  Y.  303;  S.  C.  53  Barb.  350;  46  *  Robinson   v.   Bland,  2    Burr.    1077; 

lb.  272;    Newman  v.   Kershaw,   10  Wis.  Slocum  i-.  Pomeroy,  6  Cranch,  221 ;  Fitch 

333;   Kennedy  v.   Knight,  21   Wis.  340;  v.   Remer,   supra;  Duncan   v.   Helm,   22 

Mills  V.  Wilson,  88  Pa.  St.  118.  La.  Ann.  418  ;   Nichols  v.  Cosset,  1  Root 

2  Cope  v.  Alden,  53  Barb.  (N.  Y.)  350;  (Conn.),  294.    See  Oregon  &  Washington 
aff'd  41  N.  Y.  303  ;  the  action  was  for  sur-  Trust  Co.  v.  Rathbun,  5  Sawyer,  32. 
plus  moneJ^     And  see  Reimsdyk  v.  Kane,  &  Townsend  v.  Riley,  46   N.   H.   300  ; 
1  Gall.  371,  374,-  Fitch  v.  Remer,  1  Flip-  Peck  v.  Mayo,  14  Vt.  33,  38. 

pin,   15 ;    Williams  v.  Ayrault,  31  Barb.  ^  Andrews  v.  Pond,  13  Peters,  65,  78  ; 

(N.  Y.)  364;  Williams  v.  Fitzhugh,  37  N.  Mix  v.  Madison  Ins.  Co.  11  Ind.  117. 

Y.)444;  Blydenburgh  t'.  Cotheal,  5  N.  J.  "  Compiled   Laws   of  Mich.    1871,  pp. 

Eq.  (1  Halst.)  631  ;  Dobbin  v.  Hewett,  19  541,  542. 
La.  Ann.  513;    Cubbedge  v.  Napier,  62 
Ala.  518. 

552 


CONFLICT    OF   LAWS.  [§§  658,  659. 

668.  But  the  laws  of  another  state  cannot  be  imported  into 
a  contract  by  a  mere  mental  operation  or  understanding  of  the 
parties,  for  the  purpose  of  making  the  character  of  the  loan  dif- 
ferent from  -what  it  is  under  the  law  of  the  place  of  contract.  A 
mortgage  was  made  in  New  York,  where  both  of  the  parties  to  it 
resided,  of  land  situate  in  Wisconsin,  and  interest  was  reserved 
at  the  rate  of  twelve  per  cent.,  which  was  legal  in  the  latter  but 
not  in  the  former  state.  The  only  pretext  that  the  loan  was 
made  with  reference  to  the  law  of  Wisconsin  was  that  the  mort- 
gagor had  money  due  to  her  there  at  twelve  per  cent,  interest, 
which  the  borrower  there  desired  to  retain,  and  therefore  he  was 
willing,  and  agreed  to  pay  that  rate  for  money  borrowed  in  New 
York,  to  relieve  temporary  wants.  But  the  loan  being  made  in 
New  York,  where  it  was  also  to  be  repaid,  and  the  use  of  the 
money  being  unrestricted,  the  reason  why  the  borrower  was  will- 
ing to  pay  more  than  lawful  interest  was  immaterial.  The  trans- 
action was,  therefore,  governed  by  the  laws  of  New  York,  under 
which  the  mortgage  was  usurious.^  The  same  decision  was 
reached  in  a  case  where  the  facts  were  substantially  the  same, 
except  that  the  mortgagor  resided  in  Ohio,  where  the  mortgaged 
lands  were  situated.  The  mortgage  was  executed  in  New  York, 
and  was  made  payable  there ;  and  the  contract  was  therefore 
governed  by  the  laws  of  that  state.^  A  like  decision  was  made 
in  Ohio  with  reference  to  a  loan  negotiated  in  the  State  of  New 
York,  where  the  money  was  advanced,  and  a  note  and  mortgage 
payable  there  taken  as  security  ;  although  the  mortgage  covered 
lands  in  Ohio,  it  was  held  that  the  laws  of  the  State  of  New  York 
relating  to  usury  were  applicable  to  the  transaction. 

659.  But  a  contract  made  in  a  state  where  it  is  valid,  to 
be  performed  in  another  where  it  would  be  invalid,  may  after 
all  be  held  valid  by  referring  it  to  the  law  of  the  state  where  it 
was  made.^  The  question  which  law  shall  govern  depends  upon 
the  law  applicable  to  the  contract  itself,  and  not  upon  the  fact 
that  the  mortgage,  considered  alone,  would  be  valid  by  the  law 
of  the  state  where  the  lands  lie.  "  The  place  of  payment  may, 
in  the  absence  of  any  more  controlling  circumstances,  be  sufficient 
to  show  that  the  parties  intended  to  refer  their  contract  to  the 

•  Cope  y.  Wheeler,  41  N.  Y.  303;  S.  C.  Y.),   627;    Pratt   v.  Acliuiis,    7    lb.   G15; 

53  Barb.  350  ;  40  lb.  272.  Fisher  v.  Otis,  3  Chiind.  (Wis.)  83  ;  S.  C. 

2  Williams  i-.  Fitzliuf,'b,  37  N.  Y.  444  ;  3  riiin.  (Wis.)  78;  Depau  v.  Ilnini>hrey.s, 

Lockwood  ;•.  Mitchell,  7  Ohio  St.  387.  20   Mnrtiii    (La.),    1;   Peck  i'.  Mayo,   14 

8  Chapman  v.   Kobertson,  6  Paige  (N.  Vt.  33. 

553 


§  660.]  USURY. 

law  of  that  place.  But  if  the  loan  was  actually  made  in  another 
state,  the  money  to  be  used  there,  the  parties  residing  there,  the 
security  given  there,  and  if  by  that  law  the  contract  would  be 
valid,  and  it  would  be  invalid  by  the  law  of  the  place  of  pay- 
ment, these  facts  may  well  be  held  to  have  a  stronger  influence 
in  showing  the  intention  than  the  mere  place  of  payment,  and 
the  rule  itself  resting  upon  that  intention,  where  the  intention  is 
rebutted  the  rule  should  cease."  ^ 

Where  a  mortgage  of  land  in  Michigan  was  executed  in  New 
York,  the  mortgagee  then  residing  there,  where  also  the  mortgage 
was  made  payable,  and  the  rate  of  interest  was  ten  per  cent., 
which  was  usurious  in  the  latter  state  but  was  valid  in  the  former, 
it  was  held  that  the  mortgagee  might  elect  to  proceed  to  enforce 
the  mortgage  in  Michigan  ;  for  it  was  to  be  presumed  that  the 
contract  was  made  with  reference  to  the  interest  laws  of  that 
state.^ 

660.  The  lex  rei  sitae  does  not  control.  —  The  authorities 
generally  do  not  regard  the  circumstance  that  the  loan  is  secured 
by  mortgage  in  determining  whether  it  be  usurious.^  Thus  a 
loan  made  in  New  Hampshire,  upon  land  situated  there,  may  be 
made  payable  in  New  York,  and  may  provide  for  the  payment  of 
interest  at  the  rate  of  seven  per  cent.,  being  the  rate  allowed 
there,  though  this  be  a  higher  rate  than  that  allowed  by  the  laws 
of  New  Hampshire,  if  this  arrangement  be  made  in  good  faith, 
and  not  for  the  purpose  of  evading  the  laws  of  New  Hampshire  ; 
and  such  mortgage  with  interest,  at  the  rate  so  provided,  will 
be  enforced  by  foreclosure  of  the  mortgage  in  New  Hampshire.* 
Although  the  mortgage  be  by  express  terms  payable  in  New 
Hampshire,  the  parties  may  after  its  maturity  agree  that  the 
interest  shall  be  paid  "  as  by  law  established  in  New  York," 
where  the  mortgagor  then  resided ;  and  such  agreement  made  in 
good  faith  will  be  enforced  in  New  Hampshire.  "  It  is  true," 
said  Mr.  Justice  Bellows,  "  that  in  many  cases  interest  may  prop- 

1  Newman  v.   Kershaw,    10  Wis.   333,  Atk.  727,  the   same  eminent  judge  said 

340,  per  Paine,  J.  that  if  a  contract  is  made  in  England  for 

-  Fitch   V.  Remer,  1   Flippiu,  15.     See  a   mortgage  of  a  plantation  in  the  West 

full  examination  of  the  question  by  Mc-  Indies,  no  more  than  legal  interest  shall 

Lean,  J.,  in  this  case.  be  paid  upon  such  mortgage ;  and  a  cov- 

^  In  Connor  v.  Bellamont,  2  Atk.  382,  enant  in  it  to  pay  eight  per  cent,  interest 

Lord    Hardwicke    allowed   Irish   interest  is  within    the  statute  of  usury,  notwith- 

upon  a  debt  contracted  in  England,  but  standing   that  was    the   rate   of   interest 

secured  by  a  bond  and  mortgage  executed  where  the  land  lies. 

in   Ireland.     In    Stapleton  i-.  Conway,  3  *  Townsend  v.  Riley,  46  N.  H.  300. 

654 


CONFLICT    OF    LAWS.  [§  660. 

erly  be  regarded  as  a  mere  incident  of  the  debt,  and  so  payable 
only  where  the  principal  is  payable ;  but  this  is  by  no  means 
always  the  case,  for  by  express  stipulation  the  interest  ma}^  be- 
come payable  by  itself,  and  a  suit  maintained  for  it  before  the 
principal  becomes  due,  as  in  the  case  of  a  contract  to  pay  interest 
annually;  so  in  the  case  of  bonds  with  coupons  attached;  and 
we  see  no  objection  to  the  parties  being  allowed  to  fix  the  amount 
of  interest,  and  the  time  and  place  of  payment  of  it,  as  they  may 
all  other  particulars  of  the  contract,  provided  it  be  done  in  good 
faith,  and  with  no  design  to  evade  the  usury  laws."  ^ 

A  mortgage  made  in  Ohio  upon  land  in  that  state,  but  made 
payable  in  New  York  with  interest  at  the  rate  of  ten  per  cent., 
which  is  a  legal  rate  in  the  former  state  but  not  in  the  latter,  was 
treated  as  a  contract  made  in  Ohio  with  reference  to  the  laws  of 
that  state,  although  the  mortgagee  resided  in  Connecticut,  and 
the  loan  was  made  by  means  of  a  draft  paid  in  New  York.^ 

A  like  decision  was  also  made  in  Wisconsin,  in  a  suit  to  fore- 
close a  mortgage  of  lands  situate  in  that  state,  made  in  New  York, 
where  the  parties  resided,  and  where  the  loan  was  made  payable ; 
therefore  the  laws  of  that  state  were  held  to  govern  the  contract 
as  to  its  validity  and  effect ;  ^  but  the  decision  would  have  been 
otherwise  in  case  the  mortgage  had  been  made  payable  in  Wiscon- 
sin, or  perhaps  had  been  made  there.* 

But  the  courts  of  New  York  refused  to  declare  void  a  mortgage 
made  in  Minnesota  upon  land  in  that  state,  with  interest  at  the 
rate  of  twenty-five  per  cent,  per  annum,  although  the  mortgage 
debt  was  made  payable  in  New  York;  for  the  rate  of  interest 
was  considered  as  fixed  with  reference  to  the  place  of  contract.^ 

The  law  of  the  place  of  contract,  or  of  the  place  of  perform- 
ance, determines  the  question  whether  the  mortgage  be  valid  or 
usurious,  irrespective  of  the  place  where  the  land,  which  is  the 
subject  of  the  mortgage,  is  situated.*"  The  location  of  the  land 
mortgaged  may  perhaps  in  some  cases  be  considered  in  connec- 
tion with  the  place  of  conti'act,  or  the  place  of  performance,  in 
<letermining  whether  tlu;  parties  contracted  witli  reference  to  the 

'  In  Townsend  v.  Riley,  40  N.  IL  .JOO.  «  De  Wolf  v.  Johnson,  10  Wheat.  .'567  ; 

2  Koelofson     v.     Atwatcr,     1     Disney  Dolmnn  v.  Cook,  14  N.  J.  Vj<\.  50  ;  Cam- 

(Ohio),  346.  piou  v.  Killc,  II).  229  ;  Andrews  v.  Toirey, 

■^  Newman  »•.  Kershaw,  10  Wis.  .'53."J.  lb.  3.')5  ;   Varick  v.  Crane,  4  N.  J.  Kq.  (3 

*  Kennedy  i;.  Kni;,'ht,  21  Wis.  340.  Green)    128;    Cothcal   v.  IJlydeiil)ur},'h,  5 

<■'  IJalme  v.  Womhough,  38  Barb.    (N.  N.J.  E<[.  (1  Ilalst.)  17,  631. 

V.)  352. 

666 


§  661.]  USURY. 

law  of  the  one  place  or  of  the  other  ;  but  on  the  authorities  this 
seems  to  be  all  the  consideration  that  can  be  given  to  this  cir- 
cumstance.^ 

661.  On  the  other  hand,  it  is  said  that  the  remedy  against 
the  mortgagor  personally  may  be  pursued  wherever  the  debtor 
may  be,  and  therefore  suit  may  be  brought  against  him  in  a  state 
other  than  that  in  which  the  mortgaged  premises  are ;  but  that 
the  lien  upon  the  land  can  be  enforced  only  in  the  state  where 
the  land  is  situated.  The  lex  fori  and  the  lex  rei  sitoe  in  this 
respect  must  always  be  the  same.  It  is,  moreover,  a  well  settled 
principle  that  title  to  real  property  must  be  acquired  agreeably 
to  the  law  of  the  place  where  it  is  situated.  This  principle  ap- 
plies to  mortgages  as  well  as  to  absolute  conveyances  ;  ^  and  of 
course  the  remedy  to  enforce  the  lien  must  be  sought  where  the 
property  is.  The  validity  of  a  mortgage  must  therefore  be  de- 
termined by  the  law  of  the  state  where  the  mortgaged  land  is, 
wherever  the  deed  may  have  been  executed  or  the  mortgage  debt 
made  payable.^ 

In  regard  to  these  cases  it  is  to  be  observed  that  Hosford  v. 
Nichols  was  decided  upon  the  ground  that  the  contract  was  in 
fact  executed  in  New  York,  where  the  land  was  situated,  and 
therefore  is  no  authority  for  the  position  that  the  law  of  the  place 
where  the  land  is  situated,  rather  than  the  law  of  the  place  of  con- 
tract, governs  as  to  usury.  The  later  case  of  Chapman  v.  Robert- 
son has  often  been  criticised,  and,  so  far  as  it  holds  that  the  lex 
rei  sitce  governs  as  to  usury,  it  has  been  repeatedly  overruled  by 
the  later  cases  in  New  York. 

A  person  residing  in  New  York  being  in  England,  there  ne- 

^  See  Newman  v.  Kershaw,  10  Wis.  333  ;  both  parties  resided,  of  land  in  Massachu- 

Kennedy  v.  Knight,  21  Wis.  340.  setts,  to  indemnify  the  mortgagee  against 

2  Hosford  V.  Nichols,  1  Paige  (N.  Y.),  a  liability  to  arise  subsequently.  Such  a 
220,  per  Walworth,  Chancellor.  See  Van  mortgage  being  invalid  under  the  laws  of 
Schaick  v.  Edwards,  2  Johns.  Cas.  (N.  Y.)  New  Hampshire,  this  invalidity  was  set 
355  ;  Oregon  &  Washington  T.  &  I.  Co.  v.  up  to  an  action  in  Massachusetts  to  fore- 
Rathbun,  5  Sawyer,  32.  close   the    mortgage.     The   court  —  Met- 

3  In  support  of  this  position  are  cited  calf,  J.,  delivering  the  opinion  —  say: 
the  cases  in  the  last  note  and  the  follow-  "  The  question  as  to  the  validity  of  the 
ing:  Goddard  v.  Sawyer,  9  Allen  (Mass.),  mortgage  in  this  case  is  to  be  decided  by 
78,  cited  and  approved  in  Sedgwick  v.  the  law  of  this  state,  within  which  the 
Laflin,  10  lb.  430,  432,  per  Gray,  J. ;  Lyon  mortgaged  premises  are  situate,  and  not 
V.  Mcllvaine,  24  Iowa,  9.  by  the  law   of  New  Hampshire,  where  it 

In  Goddard  v.  Sawyer,  supra,  a  mort-  was  executed,  and  where  the  parties 
gage  was  made  in  New  Hampshire,  where     thereto  resided." 

556 


CONFLICT    OF   LAWS.  [§  661. 

gotiated  a  loan  upon  the  security  of  a  bond  and  mortgage  upon 
lands  in  New  York,  at  the  legal  rate  of  interest  in  that  state.  It 
was  arranged  that  upon  the  return  of  the  borrower  to  New  York 
he  should  execute  and  record  the  mortgage,  and  that  upon  the  re- 
ceipt of  it  in  England  the  mortgagee  should  deposit  the  money 
with  the  mortgagor's  bankers  in  London  for  his  use.  This  was 
done  accordingly.  The  mortgage  was  usurious  under  the  laws  of 
England  ;  but  it  was  held,  in  a  suit  to  foreclose  the  mortgage, 
that  the  usury  laws  of  England  could  not  be  set  up  in  defence. 
Chancellor  Walworth  said  :  "  Upon  a  full  examination  of  all  the 
cases  to  be  found  upon  the  subject,  either  in  this  country  or  in 
England,  none  of  which,  however,  appear  to  have  decided  the 
precise  question  which  arises  in  this  cause,  I  have  arrived  at  the 
conclusion  that  the  mortgage  executed  here,  and  upon  property 
in  this  state,  being  valid  by  the  lex  situs,  which  is  also  the  law  of 
the  domicil  of  the  mortgagor,  it  is  the  duty  of  this  court  to  give 
full  effect  to  the  security,  without  reference  to  the  usury  laws  of 
England,  which  neither  party  intended  to  evade  or  violate  by  the 
execution  of  a  mortgage  upon  lands  here."  ^ 

Then  as  to  the  case  of  Goddard  v.  Sawyer,  in  Massachusetts, 
that  does  not  relate  to  the  contract,  but  rather  to  the  form  and 
validity  of  the  instrument  itself.  The  learned  judge  who  gives 
the  opinion  refers  to  a  case  before  the  Supi-eme  Court  of  the 
United  States,  holding  that  title  to  land  by  devise  can  be  ac- 
quired only  under  a  will  duly  approved  and  recorded,  according 
to  the  law  of  the  state  in  wliich  the  lands  lie,  and  in  which  Mr. 
Justice  Washington  says :  "It  is  an  acknowledged  principle  of 
law,  that  the  title  and  disposition  of  real  property  is  exclusively 
subject  to  the  laws  of  the  country  where  it  is  situated,  which  can 
alone  prescribe  the  mode  by  which  a  title  to  it  can  pass  from  one 
person  to  another."  Another  reference  in  the  Massachusetts 
case  is  to  an^earlier  case  in  that  state,  the  principal  bearing  of 
which  upon  the  case  before  the  court  is  in  the  statement  of  the 
principle,  that  "  the  title  to  and  disposition  of  real  estate  must  be 
exclusively  regulated  by'the  law  of  the  place  in  which  it  is  situ- 
ated." The  conclusion  therefore  is,  that  although  there  are  some 
statements  whicii  would  seem  to  support  the  position  that  the 
question  of  usury  in  a  mortgage  executed  and  made  payable  in  a 
state  other  than   that  where  the   land   is  situated   is  to  be  deter- 

1  Chapman  v.  Robertaon,  G  I'aigo  (N.  Y.),  G27. 

557 


§§  662,  663.]  USURY. 

mined  by  the  laws  of  the  state  where  the  land  is  situate,  there  is 
really  no  authority  for  this  position.^ 

662.  But  as  to  the  form  and.  validity  of  the  mortgage  deed 
as  a  conveyance,  the  law  of  the  place  where  the  land  is  situated 
must  always  govern.  Thus,  if  the  laws  of  the  state  where  the 
lands  are  situate  recognize  the  validity  of  a  mortgage  by  the  de- 
posit of  the  title  deeds  by  a  debtor  with  his  creditor,  then  the 
laws  of  that  state  govern  as  to  the  lien,  although  the  transaction 
be  had  in  another  state. ^  But  if  such  a  mortgage  be  not  recog- 
nized in  the  state  where  the  lands  are,  the  fact  that  a  deposit  is 
made  in  a  state  or  country  where  a  mortgage  in  this  form  is  rec- 
ognized will  not  enable  the  creditor  to  enforce  it  against  the 
lands.  And  so  if  the  laws  of  a  state  prohibit  the  making  of  a 
mortgage  to  secure  future  advances  or  liabilities,  a  mortgage  in 
this  form  of  land  in  that  state  would  not  be  recognized  there,  al- 
though made  in  a  state  where  such  a  mortgage  would  be  valid  ; 
and,  on  the  other  hand,  such  a  mortgage  made  in  the  former  state, 
where  it  would  not  be  valid,  but  covering  lands  in  a  state  where 
such  a  mortgage  is  valid,  would  be  enforced  in  the  latter  state, 
because  it  is  a  valid  conveyance  there. ^ 

663.  To  avail  of  the  usury  laws  of  another  state  as  a 
ground  for  defence,  they  must  be  distinctly  set  up  in  the  an- 
swer, and  at  the  hearing  must  be  proved  as  matters  of  fact.* 
Under  an  answer  setting  up  usury  without  any  more  specific  alle- 
gation, and  without  any  averment  showing  that  the  contract  is 
governed  in  this  respect  by  the  laws  of  another  state,  the  defence 
is  limited  to  the  statutes  against  usury  of  the  state  where  the  ac- 
tion is  pending.^  Until  otherwise  proved,  the  laws  of  anotliei- 
state  in  regard  to  usury  will  be  presumed  to  be  the  same  as 
those  of  the  lex  fori.^ 

When  in  the  course  of  the  pleadings  it  is  discretionary  with 
the  court  to  allow  the  defence  of  usury  to  be  set  up,  the  court 
may  refuse  to  allow  the  statute  of  another  state  whose  laws  gov- 
ern the  contract  to  be  pleaded,  when    that    statute   makes    the 

1  The  only   other  case   referred    to   is  Dolman  v.  Cook,  lb.  .56 ;  Andrews  v.  Tor- 

Hosford  V.  Nichols,  1  Paige  (N.  Y.),  220.  rey,  lb.  355  ;  Klincii  v.  Price,  4  W.  Va. 

■'  Griffin  v.  Griffin,  18  N.  J.  Eq.  104.  4  ;  Hosford  v.  Nichols,  supra. 

3  Goddard  r.  Sawyer,  9  Allen  (Mass.),  ^  Campion  v.  Kille,  supra. 

78.  ^  Van  Auken  v.   Dunning,  81    Pa.  St. 

*  Campion  v.  Kille,  14  N.  J.  Eq.  229;  464. 
558 


CONFLICT    OF   LAWS.  [§  663. 

mortgage  wholly  void,  such  a  defence  being  regarded  as  uncon- 
scientious.^ 

The  law  in  force  at  the  time  of  the  delivery  of  a  mortgage  gov- 
erns its  vaUdity  or  construction,  so  far  as  these  are  affected  by 
statute.^  A  mortgage  made  in  Alabama  during  the  civil  war 
was  enforced  in  the  courts  of  that  state,  acting  under  the  Con- 
stitution and  laws  of  the  United  States,  after  the  close  of  the  war, 
although  the  consideration  of  it  was  a  loan  of  Confederate  treas- 
ury  notes,''^  on  the  ground  that  it  was  valid  under  the  government 
de  facto  which  then  existed. 

A  stay  law,  making  void  and  of  no  effect  all  mortgages  and 
deeds  of  trust  for  the  benefit  of  creditors,  thereafter  executed, 
whether  registered  or  not,  does  not  apply  to  a  mortgage  executed 
prior  to  the  passage  of  the  act,  but  registered  after  its  passage.* 
Being  valid  when  made,  it  is  not  competent  for  the  legislature 
afterwards  to  make  it  invalid.^  A  mortgage  made  at  a  time 
when  there  is  no  statute  limiting  the  rate  of  interest  is  a  valid 
security,  although  the  rate  of  interest  be  extortionate  ;  and  its 
validity  is  not  affected  by  a  subsequent  statute  or  change  in  the 
Constitution  of  the  state  limiting  the  rate  of  interest.^ 

Although  the  law  of  the  place  of  contract  governs  as  to  the 
question  of  usur}',  yet  a  law  of  the  place  of  contract  relating  to 
the  manner  of  enforcing  the  remedy  is  not  binding  upon  the 
courts  of  another  state.  Thus  a  statute  of  the  State  of  New  York 
authorizing  a  borrower  to  obtain  a  cancellation  of  securities  with- 
out payment,  upon  the  ground  of  usury,  will  not  be  enforced  in 
Massachusetts.' 

1  Corning  v.  Ludlum,  28  N.  J.  Eq.  398.         «  Newton  i-.  Wilson,  31  Ark.  484;  Jaco- 

■■^  Olson  V.  Nelson,  3  Minn.  53;  Latrobe     way  v.  Denton,  25  Ark.  G25. 

V.  Hulbert  (C.    C.   Ohio,    1881),    6    Fed.         '  Matthews   v.   Warner   (C.   C.    Mass. 

Kep.  209.  1881),6  Fed.  Ilep.  461.     That  statute  i.x 

"  Scheible  v.  Bacho,  41  Ala.  423,  and     so  strictly  construed  in  New  York  that  it 

cases  cited.     See  to  the  contrary,  however,     is  held  not   to   apply  to   an   assignee  iu 

Stillman  u.  Looney,  3  Coldw,   (Tenn.)  20.     bankruptcy  of  the    bjrrower ;  Wheelock 

See  §  617.  v.  Lee,  n  Abb.  Pr.  N.  S.  24  ;  S.  C.  64  N. 

*  Harrison  v.  Styrcs,  74  N.  C.  290.  Y.  242 ;  nor  to  a  purchaser  of  the  equity 

^  Harrison  v.  Styres,  supra.  of  redemption.     Bissill  i-.  Kellogg,  65  N. 

Y.  432. 

559 


CHAPTER   XV. 


A   MORTGAGOR  S   EIGHTS   AND   LIABILITIES. 


I.  As  to  third  persons,  664-666. 
II.  As  to  the  mortgagee,  667-676. 
III.  His  personal  liability  to  the   mort- 
gagee, 677,  678. 


IV.  After-acquired    titles   and    improve- 
ments, 679-683. 
V.  Waste  by  mortgagor,  684-698. 


Introductory,  —  The  nature  of  a  mortgage  was  considered  in 
the  first  chapter,  and  some  of  the  rules  and  statutes  were  there 
stated  which  determine  in  'hirge  part  the  rights  and  liabilities  of 
the  parties.  The  rights  of  the  parties  with  reference  to  partic- 
ular matters  have  been  considered  in  other  chapters.  In  fact,  the 
whole  treatise  relates,  in  some  form,  to  the  rights  or  liabilities  of 
either  the  mortgagor  or  mortgagee  ;  but  in  this  and  the  following 
chapters  of  this  volume  it  is  proposed  to  treat  of  the  general  rela- 
tions of  the  parties  to  each  other  and  to  third  persons ;  but  inas- 
much as  their  relations  to  a  purchaser  of  the  equity  of  redemp- 
tion, to  a  lessee  of  the  mortgaged  propert}^  and  to  an  assignee  of 
the  mortgage,  present  many  important  questions  in  respect  to 
each,  special  chapters  will  be  given  to  the  consideration  of  these. 

I.  As  to   Third  Persons. 

664.  The  owner  of  the  equity  of  redemption  is  entitled  to 
possession  as  against  every  one  except  the  mortgagee  and 
those  claiming  under  him,  and  may,  as  against  any  others,  main- 
tain a  real  action  to  recover  possession.^  Against  all  other  per- 
sons he  has  the  same  rights  respecting  the  mortgaged  premises 
that  he  ever  had.^  He  may,  so  far  as  his  interest  goes,  deal  with 
it  in  every  respect  as  the  owner.  He  may  devise  it,  sell  it,  or 
lease  it,  or  make  any  contracts  in  respect  to  it.^     His  conveyance 

1  Huckius  V.  Straw,  34  Me.  166;  Stin-  kins  v.  French,  20  Me.  Ill ;  Chamberlain 
son  V.  Ross,  51  Me.  556  ;  Bird  v.  Decker,  v.  Thompson,  10  Conn.  243  ;  Bartlett  v. 
64  Me.  550 ;  Ellison  v.  Daniels,  U  N.  H.     Borden,  13  Bush  (Ky.),  45. 

274;  HalU-.  Lance,  25  111.277;  Duval?;.         s  Kennett   v.   Plummer,   28   Mo.    142; 
McLoskey,  1  Ala.  708.  Grigg  v.  Banks,  59  Ala.  311. 

2  Orr  V.  Hadley,  36  N.  H.  575;  Wil- 

660 


AS   TO    THIRD   PERSONS.  [§  664. 

is  SO  far  a  conveyance  of  tlie  land  that  the  covenants  real  are 
annexed  to  it,  and  pass  with  it  to  the  grantee  and  his  assigns.^ 
The  wife  of  a  mortgagor  is  entitled  to  dower,  and  the  husband  of 
a  mortgagor  to  curtesy,  in  the  mortgaged  premises.  The  equity 
of  redemption  is  subject  to  attachment  and  to  sale  upon  execu- 
tion by  the  mortgagor's  creditors.^  He  has  the  remedies  of  an 
owner  as  against  every  one,  except  the  mortgagee,  who  interferes 
with  his  possession  or  enjoyment  of  the  land.^  At  common  law, 
as  between  the  mortgagor  and  mortgagee,  the  legal  title  is  in  the 
latter,  and  so  remains  even  after  the  debt  is  paid,  if  it  be  not 
paid  till  after  the  law  day.*  But  no  one  can  avail  himself  of  this 
title  but  the  mortgagee  ;  and  therefore,  in  case  of  an  action  of 
ejectment  brought  by  a  second  mortgagee  against  the  mortgagor, 
the  latter  cannot  set  up  the  legal  title  of  the  prior  mortgagee  as 
a  defence.  The  fact  that  he  has  such  an  interest  in  the  land  as 
will  enable  him  to  redeem,  can  make  no  difference.  Until  he 
does  redeem,  he  is  a  stranger  to  the  legal  title.^  The  fact  that 
the  mortgagor  has  paid  since  the  law  day,  but  has  taken  no  dis- 
charge, constitutes  no  defence  to  an  action  of  ejectment.^ 

So  long  as  the  mortgagor  remains  in  possession,  and  does  not 
commit  waste,  he  may  lawfully  dispose  of  the  products  of  the 
land.'  He  may  recover  damages  for  waste  committed  by  a  stran- 
ger in  cutting  and  removing  trees,  and  lumber  manufactured 
from  them.s  As  against  the  mortgagee  he  is  entitled  to  receive 
the  rents  and  profits  of  the  mortgaged  land,  and  to  take  the 
emblements,  without  being  liable  to  account.  The  mortgagee  has 
tlie  remedies  of  an  owner  for  the  purpose  of  enforcing  his  lien 
against  the  mortgagor  ;  but  except  as  to  such  remedies,  and  as  to 
all  persons  but  the  mortgagee,  a  mortgagor  in  possession  is  to  be 
regarded  and  treated  as  the  owner  of  the  estate,  subject  merely 
to  a  lien  or  charge.'^      The  legal   title   passes  by  the  mortgage 

1  White  V.  Whitney,  3  Met.  (Mass.)  81.        "  Kimball  v.  Lewiston  Steam  Mill  Co. 

2  Coggswell  V.  Warren,  1   Curtis,  223,     55  Me.  494. 

230.  8  Bird  V,  Decker,  64  Me.  550  ;  Abuey 

3  Denby  v.  Mellgrew,  58  Ala.  147.  v.  Austin,  6  Bradw.  (111.)  49. 

*  Chamberlain  v.  Thompson,  10  Conn.  »  Willington  t;.  Gale,  7  Mass.  138 ;  Tay- 

243;  Cross  v.  Itobinson,  21   Conn,  379  ;  lor  v.  Porter,  7    Mass.  355  ;  Goodwin  v. 

Smith  V.  Vincent,  15  Conn.   1  ;  Toby  v.  Richardson,  11   Mass.  469,  473;  Snow  i-. 

Heed,   9   Conn.  216;  Cooch   v.   Gerry,  3  Stevens,  15  Mass.  278 ;  Eaton  i.-.  Wliiting, 

llarr.  (Del.)  280.  3  Pick.    (.Vla.ss)    484,  488;    Hlauchurd  v. 

6  Savage  v.  Dooh-y,  28  Conn.  411.  Brooks,  12  lb.  47  ;  Fay  v.  CJhency,  U  lb. 

6  Doton  V.  Kussell,  17  Conn.  146.  399;  Clark  i-.  Ueyburn,  1  Kans.  281 ;  Col- 

voi.  I.                     30  561 


§  665.]  A  mortgagor's  rights  and  liabilities. 

merely  for  the  purpose  of  giving  the  mortgagee  the  full  benefit  of 
the  security.^  He  may  recover  possession  of  the  land  in  an  ac- 
tion of  ejectment  from  a  stranger  who  has  entered  without  right,^ 
and  he  may  recover  damages  for  injuries  to  his  possession  by  such 
wrong-doer. 

After  possession  has  been  taken  by  tlie  mortgagee  for  the  pur- 
pose of  foreclosure,  the  mortgagor  cannot  maintain  an  action  of 
tort  against  a  stranger  for  using  it  as  a  way.  There  being  no  in- 
jury to  the  reversionary  interest,  the  mortgagee  is  the  only  party 
entitled  to  maintain  such  action.-'^ 

665.  The  mortgagor's  equity  of  redemption  may  be- seized 
upon  execution  by  a  third  person,  or  even  by  the  mortgagee, 
upon  an  execution  obtained  upon  a  debt  not  secured  by  the  mort- 
gage, either  before  or  after  default.^  The  levy  of  an  execution 
by  any  other  creditor,  or  the  sale  under  it,  does  not  affect  the 
rights  of  the  mortgagee.^  A  purchaser  of  the  equity  of  redemp- 
tion at  execution  sale  succeeds  to  the  equitable  rights  of  the  mort- 
gagor, and  may  redeem  the  estate  just  as  the  mortgagor  could.^ 
It  is  immaterial  as  regards  such  sale  whether  the  incumbrance  be 
strictly  a  mortgage  or  a  deed  of  trust  with  power  of  sale  upon  de- 
fault, for  such  a  deed  is  in  legal  effect  a  mortgage.''  The  mort- 
gagee may,  however,  by  consenting  to  a  sale  of  the  mortgaged 
property,  or  to  a  levy  upon  it,  without  reference  to  his  mortgage, 
debar  himself  from  asserting  his  title  afterwards.^ 

If  there  be  a  surplus  of  the  purchase  price  of  the  equity  of  re 
demption  after  paying  the  judgment  and  costs,  this  should  be  paid 
to  the  judgment  debtor  and  not  to  the  mortgagee.^ 

If  no  account  be  taken  of  the  mortgage  in  making  the  levy,  the 
interest  of  the  debtor,  and  nothing  more,  passes  by  the  proceed- 

lins  V.  Torry,  7  Johns.  (N.  Y.)  278;  Greer  ^  Febeiger   v.  Craighead,  4  Dall.  151  ; 

r.  Turner,  36  Ark.  17.  Crow   v.   Tinsley,   6   Dana    (Ky.),   402; 

1  Glass  V.  Ellison,  9  N.  H.  69  ;  Bartlett  Gotten  v.  Blocker,  6  Fla.  I  ;  Childress  v. 
V.  Bordeu,  13  Bush  (Ky.),  45;  Oldham  v.  Monette,  54  Ala.  317;  Ateheson  v.  Broad- 
Pfleger,  84  111.  102.                                       ,  head,    56    Ala.    414  ;    Northwestern    For- 

2  Bartlett  v.  Borden,  supra.  warding  Co.  v.  Mahaffey,  36  Kans.  152. 

8  Sparhawk  v.  Bagg,  16  Gray  (Mass.),  ^  Turner  v.    Watkins,    31    Ark.    429  ; 

583.  Shaw  v.  Lindsey,  60  Ala.  344  ;  Lovelace 

4  §§  1229,  1230;    Gushing  v.  Hurd,  4  v.  Webb,  62  Ala.  271  ;  Jenkins  v.  Green, 

Pick.  (Mass.)  253  ;  Walters  v.  Defenl.augh,  22  Kans.  562. 

90  111.  :241  ;  Finley  v.  Thayer,  42  111.  350;  ''  Turner  v.  Watkins,  supra. 

Bernstein  v.  Humes,  71  Ala.  260;  Gassen-  ^  Grace   v.  Mercer,  10  B.  Mon.  (Ky.) 

heimer  v.  Moulton  (Ala.),  2  So.  Rep.  652.  157  ;  Smith  v.  Sweetser,  32  Me.  246. 

562  ^  Jenkins  v.  Green,  22  Kans.  562. 


AS    TO   THIRD   PERSONS.  [§  665. 

ings.i  The  levy  is  not  thereby  rendered  invalid.^  The  debtor, 
in  such  case,  has  no  occasion  to  complain.^ 

After  a  sale  upon  execution  the  mortgagor  has  no  rights  in  the 
land  unless  he  redeems  it,  or  unless  the  judgment  upon  which  the 
execution  was  issued  be  reversed.* 

Inasmuch  as  an  absolute  deed  with  a  bond  for  reconveyance 
constitute  an  express  mortgage,  the  property  is  subject  to  attach- 
ment and  to  levy  and  sale  upon  execution  under  a  judgment 
against  the  grantor.^  Such  is  the  case  also  when  there  is  no 
written  defeasance,  but  the  conveyance  is  in  fact  a  mortgage.^ 

If  a  mortgagee  be  in  possession  of  the  mortgaged  premises  after 
condition  broken,  a  sale  under  execution  against  the  mortgagor 
does  not  divest  liim  of  possession,  or  enable  the  purchaser  to  re- 
cover possession  in  an  action  of  ejectment.  His  only  remedy  is 
to  redeem." 

In  some  states  the  laws  provide  for  a  sale  of  the  debtor's  right 
of  redeeming  mortgaged  land,  while  land  not  covered  by  a  mort- 
gage can  only  be  taken  by  a  levy  and  set-off  in  the  usual  way, 
and  is  not  the  subject  of  sale  on  execution.  Where  such  is  the 
law,  if  one  owning  a  tract  of  land  in  fee  mortgages  a  life  estate, 
the  reversion  is  not  covered  by  the  mortgage,  and  therefore  his 
title  to  it  is  not  an  equity  of  redemption,  and  cannot  be  sold  as 
constituting  a  part  of  his  equity  of  redemption.  When  the  life 
estate  expires,  the  equity  of  redemption  expires  with  it.  If  the 
mortgage  is  foreclosed,  the  reversion  remains.  If  the  equity  is 
sold  on  execution,  the  reversion  remains.  No  interest  not  covered 
by  the  mortgage  passes  by  the  sale.^ 

If  an  estate  be  subject  to  a  mortgage  when  attached,  but  the 
mortgage   be  discharged  before  the  levy  of  an  execution  in  the 

1  Dunbar  v.  Starkey,  19  N.  H.  160.  possession  and  enjoyment  of  tlie  property, 

2  Pettcc  i;.  Peppard,  125  Mass.  66.  with  the  rij,'lit  to  use  and  rent  it,  until 
^  Peirin  v.  Reed,  3h  Vt.  2.                           default  be  made  in  the  i)ayineiit  of  bonds 

*  Delano  v.  Wiblc,  II  Gray  (Mass.),  17.  extending  through  several  year.*,  the  mort- 
'•"  Clinton   National    Bank    v.  Manwar-  gagor  has  a  clear  legal  riglit,  whicli  is  sub- 
ring,  39  Iowa,  281  ;  Moors  v.  Albro,  129  ject    to    levy   and    sale    under  execution 
Mass.  9.     Contra,   Phiiiizy   v.   Clark,   62  against  him;  and  a  purchaser  at  i he  sale 
Ga.  62.3  ;  Gilison  v.  Uoiv^h,  60  Ga.  .588.  acquires  a  title  on  which  he  may  recover, 

*  McConeghy  v.  McCaw,  .31  Ala.  447;  in  ejectment,  against  any  one  who  does 
Gassenheiiner  v.  Moiilton  (Ala.),  2  So.  not  show  a  paramount  title.  Bernstein  v. 
Rep.  G.')2,  6.'>.5,  per  ("lopion,  J.  Humes,  60  Ala.  582.     See  Sliaw  v.  Lind- 

T  Hall  V.  Tunnell,  1  llou-t.  (Del.)  320;  sey,  60  Ala.  344  ;  Cotton  v.  Carlisle,  4  So. 

Dadmuii  v.  Lamson,  9  Allen  (Mass.),  85.  Kcp.  670. 

In  Alabama  it  is  held  tliat  where   the  *  LaQin  v.  Crosby,  99  Mass.  446. 
mortgage  ic.iervcs  to  the  mortgagor  the 

563 


§  QGQ-I  A  mortgagor's  rights  and  liabilities. 

suit,  the  estate  cannot  be  levied  upon  and  sold  as  an  equity  of 
redemption.^ 

The  sale  is  valid  though  there  be  a  right  of  homestead  in  the 
debtor,  and  the  sale  is  not  expressly  made  subject  to  it.  The  sale 
is  necessarily  subject  to  that  right,  and  whether  declared  so  or 
not  it  is  immaterial.^ 

Upon  the  foreclosure  of  the  mortgage,  a  levy  commenced  upon 
the  mortgagor's  interest  in  the  land  is  defeated,  although  the  land 
is  bought  in  by  the  mortgagee,  who  has  the  right  to  purchase,  for 
the  amount  of  the  mortgage.^ 

If  land  subject  to  a  mortgage  be  attached,  and  afterwards  the 
mortgagee  sells  the  land  under  a  power  of  sale  for  more  than 
enough  to  pay  the  mortgage  debt  and  the  expenses  of  sale,  the 
attaching  creditor  may,  by  a  bill  in  equity  brought  within  the 
time  the  land  would  have  been  held  as  security  to  satisfy  the 
judgment,  enforce  his  lien  against  the  surplus  remaining  in  the 
hands  of  the  mortgagee.*  His  claim  has  preference  over  a  second 
mortgage  made  after  the  attachment.  The  surplus  after  the  sale 
belongs  to  the  same  persons  the  land  belonged  to  before  the  sale. 
No  means  being  provided  by  statute  for  enforcing  the  creditor's 
lien  against  the  funds,  equity  will  afford  a  remedy,  to  the  same 
effect  and  upon  the  same  conditions  as  nearly  as  may  be,  as  in 
proceedings  at  law  in  like  cases.^ 

Land  owned  by  a  single  woman  at  the  time  of  her  marriage 
was  afterwards  attached  in  an  action  against  her  by  Jier  maiden 
name,  the  creditor  being  ignorant  of  the  marriage,  and  judgment 
was  afterwards  recovered  against  her  by  the  same  name  and  the 
land  was  sold  on  execution.  After  the  attachment,  and  before 
judgment,  the  woman,  by  her  married  name,  mortgaged  the  same 
land  to  a  person  who  had  no  actual  notice  of  the  attachment. 
The  attachment  was  held  to  take  precedence  of  the  mortgage.*^ 

666.  The  widow  of  the  mortgagor  is  entitled  to  dower  in 
an  equity  of  redemption,  although  she  has  released  her  right  in 
the  mortgage,^   or  became   the  wife  of  the   mortgagor  after  the 

1  Hackett  w.  Buck,  128  Mass.  369.  Act  s  pgp  Qj-^y^  q  j^  in  Wiggin  v.  Hey- 
of  1874,  ch.  188,  does  not  authorize  a  sale     wood,  supra. 

in  such  a  case.  6  Cleaveland  v.  Boston  Five  Cents  Sav- 

2  Swan  V.  Stephens,  99  Mass.  7.  ings  Bank,  129  Mass.  27. 

8  German-American  Seminary  v.  Saen-         v  Otherwise  in  England,  where  dower 

ger  (Mich.),  33  N.  W.  Rep.  301.  is  a  legal  estate.     Story's  Eq.  Jur.  §  629; 

<  Wiggin  V.  Hey  wood,  118  Mass.  514.         Kent,  C,  in  Titus  v.  Neilsou,  5  Johns.  (N. 

y.)  Ch.  452;  Snow  i;.  Stevens,  15  Mass. 


564 


278  ;  Leary  v.  Shaffer,  79  Ind.  567. 


AS   TO   THIRD   PERSONS.  [§  666.' 

execution  of  the  mortgage.^  She  cannot  maintain  an  action  for 
it  against  the  mortgagee,  yet,  if  the  mortgage  is  not  foreclosed, 
she  is  allowed  in  equity  to  redeem  the  mortgage,  and  then  take 
her  dower.-  Foreclosure  or  sale  under  a  power  effectually  bars 
her  right  if  she  has  duly  released  this  in  the  mortgage.^  She  is 
then  entitled  only  to  her  share  of  the  surplus  remaining  after 
payment  of  the  mortgage  debt.*  She  is  entitled  to  dower  in  the 
whole  estate  as  against  every  one  but  the  mortgagee,  but  to  re- 
deem the  land  from  him,  she  must  pay  the  whole  amount  due  on 
the  mortgage.^  The  mortgagee  in  possession  is  entitled  to  the 
rents  and  profits  until  his  claim  is  paid,  as  against  a  widow  whose 
right  is  subordinate  to  the  mortgage.^  If,  however,  the  mortgage 
be  discharged  by  the  other  party  in  interest,  the  widow  of  the 
mortgagor  is  let  into  her  dower  in  the  unincumbered  estate ;  as 
where  the  purchaser  of  the  equity  of  redemption,  on  an  execu- 
tion sale,  afterwards  paid  the  amount  due  on  the  mortgage  and 
claimed  an  assignment  of  it  from  the  mortgagee,  but  the  mort- 
gagee, declaring  that  an  assignment  was  unnecessary,  discharged 
it  upon  the  margin  of  the  record :  it  was  held  that  this  discharge 
operated  to  extinguish  the  mortgage,  and  not  as  an  equitable  as- 
signment of  it,  and  that  therefore  the  widow  was  dowerable  in 
the  land  free  from  the  incumbrance  of  the  mortgage.'^ 

The  widow  of  one  who  has  purchased  real  estate,  and  assumed 
the  payment  of  a  mortgage  thereon,  is  entitled  to  dower  only 
under  the  same  conditions.^ 

If  a  purchaser  pays  off  a  mortgage  to  which  the  right  of  dower 
would  be  subject,  when  he  is  under  no  obligation  to  pay  the  mort- 
gage debt,  and  takes  an  assignment  of  the  mortgage,  his  mortgage 
title  will  prevent  an  assignment  of  dower  in  the  whole  estate;^ 
and  even  if  the  mortgage  be  discharged,  and  not  in  form  assigned 

1  Wait  I'.  Savage  (N.  J.),  15  Atl.  Rep.  5  McCabe  i'.  Bellows,  7  Gray  (Mass.), 
225.  148  ;  Graves  v.  Braden,  62  Ind.  93  ;  Camp- 

2  Eaton  V.  Simonds,  14  Pick.  (Mass.)  bell  v.  Campbell,  30  N.  J.  Eq.  415;  Mc- 
98;  Van  Dyne  v.  Thayre,  14  Wend.  (N.  Mahon  v.  Russell,  17  Fla.  698,  705. 

Y.)    233  ;    Hitchcock    v.    Harrington,    6  "^  Wait  v.  Savage,  snjJra. 

Johns.  (N.  Y.)  290;  Collins  v.  Torry,  7  ^  Eaton  v.  Simonds,  supra;  Wedge  v. 

lb.  278;  Coles  v.  Coles,  15  lb.  319  ;  Haw-  Moore,  6   Ciish.  (Mass.)   8.     See  chapter 

ley  V.    Bradford,   9   Paige   (N.  Y.),  200;  xx.,  on  "  Merger." 

Swaino  v.   Pcrine,    5  Johns    (N.  Y.)   Ch.  "  Kemerer  v.  Bournes,  53  Iowa,  172. 

4'il  ;  Trenholm  v.  Wilson,  13  S.  C.  174.  '■•  Strong  v.  Converse,  8  Allen  (Mass.), 

3  Johnson  w.  Wauson,  87  111.  535.  557;    Newton  v.    Cook,  4   Gray    (Mass.), 
■•  Wait  V.  Savage,  supra ;  Hinchman  v.  46. 

.Stiles,  9  N.  J.  K(\.  454. 

565 


§  667.]  A  mortgagor's  rights  and  liabilities. 

to  him,  he  m;iy  in  some  cases  be  held  to  have  redeemed  the  mort- 
gage.^ But  if  the  mortgage  debt  be  paid  by  the  debtor,  or  from 
his  property,  or  in  his  behalf,  such  payment  is  a  discharge  of  the 
mortgage,  and  dower  can  be  assigned  in  the  whole  property ;  ^  and 
the  payment  is  in  behalf  of  the  debtor,  when  he  in  any  manner 
furnishes  the  means  of  payment,  or  imposes  an  obligation  on  the 
purchaser  to  assume  and  pay  the  debt  as  his  own.  In  such  cases 
an  assignment  of  the  mortgage  amounts  to  a  discharge,  and  the 
legal  title  under  the  mortgage  merges  in  the  equity.^ 

If  an  heir  or  devisee  gives  a  bond  conditioned  to  pay  all  the 
debts  of  the  deceased,  and  takes  an  assignment  of  a  mortgage  of 
a  part  of  the  real  estate  to  himself,  it  would  seem  that  he  could 
not  stand  upon  his  mortgage  title,  and  by  foreclosure  defeat  the 
widow's  estate  of  dower  and  homestead,  because  the  bond  in  this 
case  may  be  regarded  as  supplying  the  place  of  the  assets  which 
would  otherwise  have  been  derived  from  the  sale  of  the  lands  ;  * 
and  certainly  in  such  case  if  dower  in  the  mortgaged  premises  had 
already  been  assigned  to  the  widow,  with  the  assent  of  the  heir  or 
devisee,  he  could  not  set  up  his  mortgage  title  under  the  assign- 
ment or  foreclosure  against  the  dower  estate.^ 

II.    As  to  the  Mortgagee. 

667.  The  mortgagor  is  really  a  tenant  at  will,  and  may  be 
ejected  by  the  mortgagee  without  notice,  except  in  those  states 
where  the  mortgagor  is  by  statute  confirmed  in  his  possession  until 
foreclosure,  unless  the  mortgage  contains  a  covenant  or  agreement 
allowing  the  mortgagor  to  remain  in  possession  until  a  breach  of 
condition  occurs;  for,  unless  there  be  such  a  covenant,  the  mort- 
gagee may  at  any  time  enter  and  dispossess  him,  or  may  recover 
possession  by  a  writ  of  entry.^  Yet,  while  the  mortgagor  is  left 
in  possession,  he  is  in  most  respects  regarded  as  the  owner  of  the 
land,  and  he  may  occupy  and  improve,  or  may  take  the  rents  and 

1  See  chapter  xx.,  on  "Merger."  Doug.  21  ;    Rockwell  v.  Bradley,  2  Conn. 

2  Holmes  v.  Holmes,  3  Paige  (N.  Y.),  I,  where  the  point  is  fully  discussed; 
363;  Bolton  v.  Ballard,  13  Mass.  227;  Brown  ?;.  Cram,  1  N.  H.  169;  Hartshorn 
Brown  v.  Lapham,  3  Cush.  (Mass.)  551,  v.  Hubbard,  2  N.  H.  453;  Simpson  v.  Am- 
554.  mons,  1  Binn.  (Pa.)  175;  Smith  v.  Shuler, 

8  See  chapter  xx,  on  "Merger."    Mc-  12  S.  «Sb  R.  (Pa.)  240;    Martin  v.  Jackson, 

Cabe  r.  Swap,  14  Allen  (Mass.),  188,  per  27  Pa.  St.  504;    Youngman  v.  Elmira  & 

Wells,  J.  Williamsport  R.  R.  Co.  65  Pa.  St.  278 ; 

*  King  V.  King,  100  Mass.  224.  Watford  v.  Gates,  57  Ala.  290. 

6  King  V.  King,  su})ra.  So  provided  by  statute  in  Vermont :  R. 

«  See  §§  11,  15,  702;  Keech  r.  Hall,  1  L.  1880,  §  1258. 

666 


AS   TO   THE  MORTGAGEE.  [§  667. 

profits  to  his  own  use,  in  the  same  manner  as  before  he  made 
the  mortgage.^  The  commencement  of  an  action  against  him  by 
the  mortgagee  to  recover  possession  does  not  change  his  rights  in 
this  respect,  and  he  is  not  accountable  for  the  rents  and  profits 
accruing  afterwards,  and  before  the  mortgagee  is  entitled  to  pos- 
session under  the  judgment.  If  the  mortgagee  wishes  to  receive 
the  rents  and  profits,  he  must  take  early  means  to  obtain  posses- 
sion.^ 

But  the  mortgagee  cannot,  before  actually  taking  possession, 
give  another  person  any  right  to  the  possession  of  the  premises, 
to  the  exclusion  of  the  owner  of  the  equity  of  redemption .^ 

The  making  of  the  mortgage  deed,  and  the  subsequent  posses- 
sion of  the  mortgagor,  furnish  no  presumption  of  a  license  from 
the  mortgagee  to  the  mortgagor  to  remain  in  possession.^  If  both 
the  mortgagor  and  mortgagee  be  living  together  in  possession  of 
the  premises  after  condition  broken,  it  is  not  a  case  of  mixed  pos- 
session, as  between  tenants  in  common,  but  the  possession  is  in 
one  or  the  other  ;  and  in  which  it  is,  is  a  question  of  fact  for  the 
jury  to  determine.^ 

An  aflSrraative  covenant  that  the  mortgagor  shall  retain  posses- 
sion of  the  premises  with  power  to  take  the  rents  and  profits  until 
default,  with  a  limitation  of  time  beyond  which  his  possession 
shall  not  extend,  amounts  to  a  redemise.  But  a  redemise  is  not 
to  be  inferred  from  a  covenant  that  the  mortgagor  will  not  sell  or 
lease  until  after  notice.^ 

Where  in  a  deed  of  trust  to  secure  a  debt  it  is  provided  that  the 
grantor  may  remain  in  possession  until  default,  when  he  should 
surrender   possession    upon    demand,   it   has  been   held   that  the 

1  Taliaferro  v.  Gay,  78  Ky.  496;  An-     profits  from  the  mortgagor  for  any  of  the 
derson  v.  Strauss,  98  111.  485.  years  back  during  the  possession  of  the 

2  Wilder  v.   Houghton,  1  Pick.  (Mass.)     mortgagor." 

87  ;  White  v.  Wear,  4  Mo.  App.341.   "As  See,  also,  Wilson,  ex  parte,  2  Ves.  &  B. 

to  the  mortgagor,"  says  Lord  Ilardwicke,  2.52.     The  text  is  quoted  and  approved  by 

in  Mead  u.  Orrery,  3  Atk.  244,  "  I  do  not  McAllister.   J.,   in    Silverman  v.   N.    W. 

know  of  any  instance,  where  he  keeps  in  Mut.  Life  Ins.  Co.  5  Bradw.  (111.)  124. 

possession,  that  he  is  liable  to  account  for  8  SiHoway  v.  Brown,  12  Allen  (Mass.), 

the  rents  and  profits   to   the  mortgagee,  .30;  Mayo  v.  Fletcher,   14  I'ick.    (Mass.) 

for  the  mortgagee  ought  to  take  the  legal  52.'j,  .')31. 

rcmi-dies  to  get  into  possession."      And  ■•  Wakeman  (;.  Banks,  2  Conn.  44.'>. 

again,  in  Iliggins  w.  York  Buildings  Com-  o  Hall   v.  Tunncll,    1    Houston    (Del.), 

I)any,   2  Atk.   107,  the  same  judge  said  :  320. 

"  Upon  a  bill   brought  by  the  mortgagee  '  George's  Creek   ('oal  &    Iron   Co.   v. 

for  an  afcouiit  in  this  court,  he  never  can  Detraold,  1  Md.  225. 
have  a,  decree  for  an  account  of  renis  and 

667 


§  668.]  A  mortgagor's  rights  and  liabilities. 

grantor's  interest  is  not  an  estate  upon  condition,  but  an  estate 
upon  a  conditional  limitation,  which  terminates  with  the  happen- 
ing of  the  contingency,  and  the  right  of  possession  would  cease 
without  any  entry  or  demand,  except  for  the  contract  to  make 
demand.  The  demand  in  such  case  is  not  a  demand  for  the  pur- 
pose of  avoiding  the  estate,  but  in  fact  a  mere  notice  to  quit  upon 
a  tenant  at  will.  If  the  grantor  or  his  assignee  wrongfully  refuses 
to  surrender  possession  after  such  demand,  he  is  liable  to  the 
trustee  in  damages.^ 

The  mortgagor's  reservation  of  the  right  of  possession  seldom 
extends  his  right  beyond  a  breach  of  the  condition  by  him  ;  and 
therefore,  except  in  those  states  in  which  by  statute  the  mort- 
gagee has  no  right  of  possession  before  foreclosure,  he  may  imme- 
diately, upon  default,  take  possession.^ 

When  the  mortgagee  is  entitled  to  possession,  and  brings  an 
action  to  recover  it,  the  mortgagor  cannot  defend  on  the  ground 
that  the  mortgage  was  made  to  defraud  creditors.  He  is  not 
allowed  to  annul  his  own  conveyance,  under  which  a  perfect  legal 
title  has  passed  to  the  mortgagee.'^ 

668.  His  right  of  possession  may  be  implied  from  the 
nature  of  the  condition,  as  where  a  mortgage  provides  that  he 
shall  occupy  and  cultivate  a  farm,  and  deliver  to  the  mortgagee 
one  half  of  the  produce  of  it.  B}'-  accepting  an  estate  with  such  a 
condition,  the  mortgagee  is  as  much  estopped  from  claiming  pos- 
session as  he  would  have  been  if  he  had  agreed  by  indenture  that 
the  mortgagor  should  retain  exclusive  occupation.  If,  before  de- 
fault, the  mortgagor's  possession  be  disturbed  by  entry  of  the 
mortgagee,  except  for  the  purpose  of  taking  away  his  own  share 
of  the  produce,  he  is  liable  in  an  action  of  trespass.**  So,  also,  if 
a  mortgagee  takes  a  lease  of  the  premises  from  the  mortgagor, 
and  covenants  to  pay  him  rent  until  the  condition  be  broken,  this 
aniounts  to  an  agreement  that  the  mortgagor  shall  retain  posses- 
sion, and  receive  the  profits  to  his  own  use.^  A  provision  in  the 
mortgage,  that  the  mortgagee  may  enter  after  default,  implies 
that  the  mortgagor  is  entitled  to  possession  until  such  default.^ 

1  Walker  v.  Teal,  7  Sawyer,  39.  i  See  §§  80,  389,  702 ;  Flagg  v.  Flagg, 

2  Pierce  v.  Brown,  24  Vt.  165;  Pratt  v.  11  Pick.  (Mass.)  47.5;  Hartshorn  v.  Hub- 
Skolfield,  45  Me.  386  ;  Stevens  v.  Brown,  bard,  2  N.  H.  453  ;  Flanders  v.  Lamphear, 
Walk.  (Mich.)  41  ;  Hill  v.  Robertson,  24  9  N.  H.  201  ;  Rhoades  v.  Parker,  10  N. 
Miss.  368.  H.  83 ;  Lamb  v.  Foss,  21  Me.  240. 

"  Brookover  v.   Hurst,    1    Mete.   (Ky.)         &  Newall  v.  Wright,  3  Mass.  138. 
665.  6  Smith  v.  Taylor,  9  Ala.  633;  McMil- 

568  Ian  V.  Otis,  74  Ala.  560. 


AS   TO   THE  MORTGAGEE.  [§  669. 

A  stipulation  that  upon  default  the  mortgagee  may  take  pos- 
session, and  receive  the  rents  and  profits  until  the  mortgage  debt 
shall  be  paid,  may  be  enforced  by  the  mortgagee's  taking  posses- 
sion and  holding  it;  but  the  mortgagor  is  entitled  to  have  the 
property  again  at  any  time  upon  paying  the  mortgage  debt.^ 

An  express  stipulation  is  not  necessary  to  enable  the  mort- 
gagor to  retain  possession  until  a  breach  of  the  condition,  when 
the  very  purpose  of  the  instrument  is  such  that  the  mortgagor 
cannot  fulfil  his  covenants  without  the  possession  of  the  property ; 
as,  for  instance,  when  the  purpose  is  to  secure  an  agreement  to 
support.^  The  mortgagor's  right  of  possession  until  breach  of  the 
condition  is  implied  from  a  condition  that  the  mortgagor  shall  sup- 
port the  mortgagee  during  his  life  in  a  house  upon  the  premises, 
or  shall  deliver  to  him  a  certain  portion  of  the  produce  annually.^ 
By  taking  possession  in  such  case  the  mortgagee  would  prevent 
the  mortgagor's  carrying  into  effect  the  purpose  for  which  alone 
the  mortgage  was  made.*  But  a  condition  of  a  mortgage  requir- 
ing the  mortgagor  to  furnish  a  comfortable  home  for  the  mort- 
gagee, and  to  provide  him  necessaries  and  support  during  his  life, 
there  being  no  intimation  that  the  support  was  to  be  provided 
upon  the  premises,  was  regarded  by  the  Supreme  Court  of  Maine 
as  affording  no  implication  that  the  mortgagor  should  retain  pos- 
session.^ 

The  agreement  that  the  mortgagor  may  remain  in  possession 
need  not  be  in  the  mortgage  itself,  but  may  be  contained  in  a 
separate  paper,  as,  for  instance,  the  mortgage  note.^ 

669.  Right  of  possession  as  modified  by  statute.  —  It  has 
already  been  noticed  that  in  several  states  the  common  law  doc- 
trine of  the  relation  between  the  mortgagor  and  mortgagee  is 
wholly  done  away  with,  and  the  mortgagee  cannot  obtain  posses- 
sion of  the  mortgaged  premises,  even  after  condition  broken,  ex- 
cept by  purchasing  them  on  a  foreclosure  suit."  Even  the  fore- 
closure decree  and  sale  under  it  do  not  divest  the  mortgagor  of 
his  right  of  possession  ;  this  is  not  lost  till  the  deed  under  the  sale 
is  delivered  to  the  purchaser.     If  the  premises  are  occupied  by 

1  Mclntyre  v.  Wliitfield,  21    Miss.   (l.'J  *  Wales  7>.  Mellcn,  1  Gray  (Mass ),  512. 

Sm.  &  M.)  88;  and  .see  Ilyman  v.  Kelly,  That  he  may  eiitor  iininodiatuly,  sec  Col- 

I  Nev.  179.  man  r.  Packard,  IG  Mass.  3<J. 

^  Soper  V.  Guernsey,  71  I'a.  St.  219.  '^  Mason  v.  Mason,  G7  Mc.  r)4G. 

'^  Norton  v.  Webb,  35  Me.  218  ;  Hrown  ''  Clay  v.  Wren,  .34  Me.  187. 
V.  Leach,  35   Me.   39;   Clay  v.  Wren,  34  ^  See  §§  17-56. 
Me.  187;  Lamb  v.  Foss,  21  Me.  240;  Bry- 
ant V.  Erakine,  55  Me.  153,  156.  569 


§  669.]  A  mortgagor's  rights  and  liabilities. 

tenants,  tlie  mortgagor  may  collect  the  rents  until  the  purchaser 
is  entitled  to  enter  under  his  deed.^  Under  such  a  statute,  al- 
though the  mortgage  contains  a  stipulation  which  seems  to  give 
the  mortgagee  the  right  after  condition  broken  to  take  possession 
and  receive  the  rents  and  profits,  yet  inasmuch  as  such  a  mort- 
gage gives  only  a  lien  upon  the  mortgaged  property  and  the 
rents  and  pi'ofits,  and  this  lien  can  be  enforced  only  by  action, 
the  stipulation  does  not  transfer  to  the  mortgagee  the  title  to  the 
rents  and  profits.^  An  exception  to  this  rule  is  made  in  case  the 
property  is  shown  to  be  inadequate  to  meet  the  mortgage  debt,  in 
which  case  the  court  may  appoint  a  receiver  of  the  rents  and 
profits  pending  proceedings  to  foreclose.^  But  even  then  it  has 
been  held  that  the  mortgagor  is  entitled  to  the  rents  until  the 
court  decrees  their  payment  to  the  receiver.* 

Such  a  statutory  provision  restraining  a  mortgagee  from  ob- 
taining possession  is  by  some  coui'ts  held  to  apply  in  case  the 
mortgage  is  in  the  form  of  an  absolute  deed.^  But  it  is  held  oth- 
erwise by  other  courts.^ 

Where  the  mortgagor  is  by  statute  protected  in  his  possession 
until  foreclosure,  his  possession  is  a  matter  of  right,  and  not  of 
sufferance,  as  it  is  at  common  law,  except  when  assured  to  him  by 
express  agreement."  A  special  provision  in  a  mortgage  that  the 
mortgagor  shall  have  possession  without  paying  rent  until  breach 
of  the  condition,  is  not  to  be  construed  as  conferring  the  right  of 
possession  upon  the  mortgagee  after  that  event.  Such  a  provision, 
being  merely  an  expression  of  what  the  law  implies,  is  treated  as 
surplusage.^ 

A  statutory  provision,  that  it  shall  not  be  waste  for  the  mort- 
gagor to  continue  to  use  the  mortgaged  premises  during  the  period 
allowed  for  redemption,  may  be  waived  by  a  stipulation  in  the 
mortgage  to  the  contrary.^ 

1  Gelstou  V.  Burr,  11   Johns.  (N.  Y.)         *  Hunter  y.  JIays,  supra. 

482;  Astor  f.  Turner,   11   Paige  (N.  Y.),  5  California:    §    20;    and  New   York: 

436  ;  Clason  v.  Corley,  5  Sandf.  (N.  Y.)  Thompson  v.  Hickey,  8  Abb.  (N.  C.)  159. 

447;  Mitchell  v.   Bartlett,   52  Barb.    (N.  6  Georgia:  §  26;  Iowa:  §  29;   Michi- 

Y.)  319;  Argall  v.  Pitts,  78  N.  Y.  239;  gan :  §  36;  Nevada:  §41. 

Barrett  u.  Blackmar,  47  Iowa,  565  ;  Seek-  "^  Crippen  v.   Morrison,    13   Mich.   23; 

ler  V.   Delfs,   25   Kans.    159;    Hunter  v.  Ladue  v.  Detroit  &  Milwaukee  II.  R.  Co. 

Hays,  7  Biss.  362.  13  Mich.  380 ;    Kidd  v.  Teeple,  22    Cal. 

2  Seckler  ?;.  Delfs,  s?ipra.  255;    Hoopers.    Wilson,    12    Vt.    695; 

3  §  1536  ;  Post  V.  Dorr,  4  Edw.  (N.  Y.)  Witherell  v.  Wiberg,  4  Sawyer,  232. 
412  ;  Lofsky  v.  Maujer,  3  Sandf.  (N.  Y.)  8  Morrow  v.  Morgan,  48  Tex.  304. 

Ch.  69.  9  Edwards  v.   Woodbury,  1    McCrary, 

670  429  ;  S.  C.3  Fed.  Rep.  14. 


AS   TO   THE   MORTGAGEE.  [§  670. 

670.  So  long  as  the  mortgagor  is  allowed  to  remain  in  pos- 
session he  is  entitled  to  receive  and  apply  to  his  own  use  the 
income  and  profits  of  the  mortgaged  estate. ^  He  is  not  liable 
for  rent.  His  contract  is  to  pay  interest  and  not  rent.  Although 
the  mortgagee  may  have  the  right  to  take  possession  upon  a 
breach  of  the  condition,  if  he  does  not  exercise  this  right  he  can- 
not claim  the  profits.^  Upon  a  bill  in  equity  to  obtain  fore- 
closure and  sale,  he  may,  in  proper  cases,  apply  for  the  appoint- 
ment of  a  receiver  to  take  for  his  benefit  the  earnings  of  the 
property.  He  is  then  confined  to  the  rents  and  profits  accruing 
during  the  pendency  of  the  suit.^  If  he  neglects  to  apply  for  a 
receiver,  the  final  decree,  if  silent  upon  this  subject,  does  not 
affect  the  mortgagor's  possession  or  right  to  the  earnings  in  the 
mean  time.  It  is  only  after  sale  under  the  decree,  except  where 
statutes  provide  otherwise,  that  the  mortgagor  is  wholly  divested 
of  title,  and  consequently  of  right  to  possession. 

Even  if  tlie  rents  and  profits  of  the  mortgaged  property  are 
expressly  pledged  for  the  security  of  the  mortgage  debt,  with  the 
right  in  the  mortgagee  to  take  possession  upon  default,  the  mort- 
gagee is  not  entitled  to  the  rents  and  profits  until  he  takes  actual 
possession,  or  until  possession  is  taken  in  his  behalf  by  a  receiver  ;  * 
or  perhaps  until  the  mortgagee  makes  a  proper  demand  for  pos- 
session and  this  is  refused.^ 

If  a  prior  mortgagee  takes  possession,  and  his  mortgage  is  af- 
terwards declared  void,  a  second  mortgagee  may  intercept  and 
claim    the    rents    accruing    during    the    possession    of   the   prior 

1  Chinnery  v.  Blackman,  .3  Doug.  391 ;  Walker,  111  U.  S.  242  ;  Morse  v.  Whitchcr 

Kountze  v.  Hotel  Co.  107  U.  S.  378,  392  ;  (N.  H.),  15  Atl.  Rep.  207,  209  ;  Central 

Boston    Biink    v.   Reed,   8  Pick.    (Mass.)  Trust  Co.  v.  Wabash,  St.  L.  &  P.  Ry.  Co. 

459;  Mayo  v.  Fletcher,  14  lb.  525;  Noyes  30  Fed.  Rep.  332;  Reeder  v.  Dargan,  15 

V.  Rich,  52  Me.  115;  Wathen  v.  Glass,  54  S.  C.  175;  Leeds  v.  Gifford,  41   N.  J.  Eq. 

Miss.  382  ;  Mis.si.ssippi  Valley  &  Western  464  ;  Coffey  v.  Hunt,  75  Ala.  2.'36 ;  John- 

Ry.  Co.  w.  U.  .S.  Express  Co.  81  111.  .534;  ston  v.  Riddle,  70  Ala.   219;  Chelton  v. 

Woolley   V.    Holt,   14   Bush   (Ky.),   788;  Green,  65  Md.  272. 

Frierson  v.  Blanton,  1   Bax.  (Tenn.)  272  ;  -  McKim  v.  Mason,  3  Md.  Ch.  186. 

Lovelace  v.  Webb,  62   Ala.  271  ;  Lehman  »  Argall  v.  Pitts,  78  N.  Y.  239. 

V.  Talla.ssee  Maniifacturin<;  Co.  64  Ala.  *  Teal  v.  Wnlkcr,  supra;  Grant  v.  In- 

567;  Hall  v.  Mobile  &  Montgomery  Ry.  surance  Co.   121  U.  S.  105,  117;  7  Sup. 

Co.  58  Ala.  10;  Scott  v.  Ware.  65  Ala.  Ct.  Rep.  841;  Freedman's  Sav.  &  Trust 

174;  Wooten  v.   Bellinger,  17    Fla.  289;  Co.  i;.  Shepherd,  8  Sup.  Ct.  Rep.  12.50. 

Falkncr  v.  Campbdl  Printing  PrcsH,  &c.  ^  Dow  u.  Railroad  Co.  124  U.   S.  652, 

Co.  74  Ala.  359  ;  Young  v.  Northern  III.  654  ;    Freedman's   Sav.   &  Trust   Co.    v. 

Coal   &  Iron   Co.  9   Bi.ss.  300 ;    Teal    v.  Shepherd,  supra. 

671 


§  670  «.]        A  mortgagor's  rights  and  liabilities. 

mortgagee  which  have  not  been  collected  by  him  or  by  the  mort- 
gagor.^ 

Upon  the  death  of  a  mortgagor  in  possession,  his  widow  is  en- 
titled to  remain  in  possession,  taking  the  rents  and  profits,  until 
her  dower  is  assigned,  or  until  the  mortgagee  enters  or  forecloses 
his  mortgage.^ 

These  principles  are  the  same  whatever  may  be  the  subject  of 
the  mortgage.  Although  the  mortgage  be  given  by  a  railroad 
company,  and  by  its  terms  includes  not  only  its  property  and 
franchises,  but  also  "  the  tolls,  rents,  and  profits  to  be  had,  gained, 
or  levied  therefrom,''  but  it  is  implied  from  the  mortgage  that  the 
company  is  to  hold  possession  and  receive  the  earnings  of  the 
road  until  the  mortgagee  takes  it,  or  the  proper  judicial  authority 
should  interpose;  the  possession,  so  long  as  it  is  continuous,  gives 
the  right  to  receive  the  income  of  the  road,  and  to  apply  it  to  the 
general  purposes  and  debts  of  the  company.  So  long  as  the  com- 
pany is  allowed  to  receive  the  income  of  the  road,  it  is  within  its 
discretion  to  decide  what  shall  be  done  with  it.  The  mortgage 
does  not  affect  the  application  of  it.  If  the  mortgagees  want  it 
they  must  take  possession  of  the  road,  or,  pending  a  bill  to  fore- 
close the  mortgage,  apply  for  the  appointment  of  a  receiver.^ 
Upon  the  appointment  of  a  receiver,  he  cannot  maintain  a  suit 
to  recover  earnings  of  the  road  in  the  hands  of  an  agent  which 
accrued  before  the  receiver's  appointment.* 

In  like  manner,  if  the  mortgage  be  of  leasehold  premises,  and 
the  mortgagor  hold  over  after  breach  of  the  condition,  the  law 
does  not  imply  an  obligation  on  his  part  to  pay  rent  previous  to 
an  entry  by  the  mortgagee.^ 

670  a.  Royalties  paid  for  an  exclusive  lease  of  a  coal  mine 
are  a  part  of  the  corpus  of  the  estate,  and  not  a  profit  arising 
from  it ;  and  as  between  the  owner  or  his  assignee  in  bankruptcy 
and  the  holder  of  a  mortgage  upon  the  property,  such  royalties 
belong  to  the  latter.  But  so  long  as  the  mortgagor  is  allowed  to 
remain  in  possession  he  may  exercise  the  rights  of  an  owner  and 
receive  the  royalties.  If,  however,  he  is  enjoined  from  commit- 
ting waste,  or  a  receiver  is  appointed,  and  the  proceeds  of  the 

1  Falkner  v.  Campbell  Printing  Press,  cago  Air  Line  R.  R.  Co.  5  Biss.  237 ;  Mis- 
&c.  Co.  74  Ala.  359.  sissippi  Valley  &  Western  Ry.  Co.  ry.  U.  S. 

2  Cook  V.  Parham,  63  Ala.  456;  Boyn-     Express  Co.  81  111.  534. 

ton  V.  Sawj-er,  35  Ala.  497.  *  Noyes  v.  Rich,  52  Me.  115. 

3  Gilman  v.  111.  &  Miss.  Tel.  Co.  91  U.  ^  jyiayo  v.  Fletcher,  14  Pick.  (Mass.) 
S.  603.     See  Pullan  w.  Cincinnati  &  Chi-     525. 

572 


AS   TO   THE   MORTGAGEE.  [§  671. 

royalties  are  paid  into  court  for  distribution,  the  right  of  the 
owner  to  receive  the  royalties  having  been  suspended,  neither  he 
nor  his  assignee  in  bankruptcy  can  claim  any  part  of  the  proceeds 
until  the  mortgage  is  first  paid.^ 

671.  Whether  the  raortgagor  is  liable  to  an  action  for  use 
and  occupation  after  the  mortgagee's  entry  to  foreclose  seems 
to  be  an  open  question,  in  the  absence  of  any  agreement  for  pay- 
ment of  rent.2  Such  an  action  certainly  cannot  be  maintained 
after  the  foreclosure  has  been  completed,  if  the  premises  are  then 
worth  more  than  the  debt  and  interest  secured  by  the  mortgage  ; 
for  a  completed  foreclosure  is  payment  of  the  mortgage  debt,  in 
contemplation  of  law,  if  the  value  of  the  estate  is  equal  to  or 
greater  than  the  whole  sum  due.'^  If  the  mortgagee  be  not  satis- 
fied, he  may  recover  any  deficiency  ;  and  on  this  ground  he  might 
recover  rents  previously  due  from  the  mortgagor. 

Although  after  a  breach  of  the  condition  of  the  mortgage,  the 
holder  of  it,  having  the  legal  title  and  the  right  of  present  pos- 
session, may,  if  he  sees  fit,  exercise  this  right,  and  he  will  there- 
upon become  entitled  to  all  the  damages  that  may  be  done  to  the 
possession,  yet  if  without  taking  possession  under  his  mortgage 
he  flows  the  mortgaged  land,  by  means  of  a  mill-dam  upon  other 
land  belonging  to  him,  such  flowing  is  not  an  exercise  of  any 
right  of  possession  or  of  ownership.  It  is  not  the  exercise  of  any 
possession  under  the  mortgage.  The  injury  is  an  incidental  re- 
sult of  the  exercise  of  his  riparian  rights  annexed  to  other  lands. 
So  long  as  the  mortgagor  is  suffered  to  remain  in  possession  he  is 

1  Duff's  App.  (Pa.)  14  All.  Rep.  364.  foreclosure,   the  value  of  the  estate  was 

-  Morse  v.  Merritt,  110  Mass.  458;  Mer-  greater  than  the  whole  sum  due  to  the 

rill  V.  Bullock,  105  Mass.  486.  mortgagee,  and  that   the  mortgagee  has 

^  Morse  v.  Merritt,  supra.  sold  and  conveyed  the  estate ;  so  that  he 

"  A  foreclosure,"  said  Mr.  Justice  Wells,  ought  to  be  precluded  from  opening  the 

"would  not,  of  itself,  prevent  recovery  of  foreclosure,  or  denying  the  sufficiency  of 

rents  previously  due  from  the  mortgagor,  the  ])ayment.     The  amount  due  to  him 

But  such  a  recovery  against  him  would  be  u]jon  his  mortgage  was  ascertained  by  the 

held  to  operate,  like  a  recovery  of  part  of  decree  u|)on  the  bill  to  redeem.     No  de- 

the  mortgage  debt  specifically,  to  open  the  duction  was  then  made  on  account  of  the 

foreclosure.     Perhaps,  in  a  suit  for  rents,  sums  which  he  now  seeks  to  recover.     If 

it  might  not  be  Tiecessary  for  tlie  plaintiff  they  had  been  collected  when  they  iiecame 

to  show  affirmatively   that  the  land  was  due,  as  is  claimed,   the  amount  required 

insufficient  in  value  for  the  full  j)ayment  for  redemption  by  the  decree  would  have 

of  the  mortgage  debt.     The  mortgagor's  been  reduced  by  so  much.     He  can  have 

rights  would  all  be  secured  by  the  oppor-  no  better  right  now  to  collect  it  for  his 

tunity  to  redeem  thus  afforded  him.     In  own  use,  witiiout  applying  it  to  the  relief 

this  case,  however,  it  appears  by  the  re-  of  the  mortgage,  than   he  had  before  tlie 

port  that,  at  the  time  of  the  completed  foreclosure." 

573 


§§  672,  673.]       A  mortgagor's  rights  and  liabilities. 

entitled,  by  vii'tue  of  that  possession,  to  the  damages,  notwith- 
standing the  person  who  caused  the  flowing  is  the  holder  of  a 
mortgage  upon  the  premises  flowed.^ 

The  mortgagee  becomes  entitled  to  recover  and  receive  the 
damages  from  the  time  he  takes  possession,  at  which  time  the 
right  of  the  mortgagor  ceases.  But  the  mortgagor  may  after- 
wards recover  for  damages  suffered  while  he  was  in  possession.^ 
The  fact,  therefore,  that  the  defendant  has  taken  an  assignment 
of  the  mortgage,  is  no  defence  to  the  mortgtigor's  right  to  main- 
tain an  action  for  such  damages,  so  long  as,  by  the  terms  of  the 
mortgage,  the  holder  of  the  mortgage  is  restricted  from  the  right 
of  possession.^ 

672.  A  mortgagor  or  his  grantee  does  not  hold  adversely 
to  the  mortgagee.  His  possession  is  at  common  law  consistent 
with  the  right  and  title  of  the  mortgagee.*  But  a  mortgagor 
may,  by  his  declarations  and  acts,  repudiate  the  mortgage,  deny 
the  title  or  right  claimed  under  it,  and  convert  his  holding  into 
an  adverse  holding.  So  may  the  grantee  of  the  mortgagor.^  The 
possession  of  a  mortgagor,  after  a  foreclosure  sale,  is  presumed  to 
be  in  subordination  to  the  title  of  the  purchaser  ;  and  the  statute 
of  limitations  does  not  run  in  his  favor  ;  ^  and  the  same  may  be 
said  of  his  possession  after  a  decree  of  strict  foreclosure,  and  the 
expiration  of  the  time  of  redemption."  He  is  a  tenant  at  suffer- 
ance of  the  mortgagee.^  The  possession  of  the  mortgagor  is  so 
far  that  of  the  mortgagee  that  the  latter  may  purchase,  while 
such  possession  continues,  an  outstanding  title  or  lien  for  his  own 
protection,  and  hold  it  as  paramount  to  his  mortgage  title,  not- 
withstanding a  statute  making  void  a  purchase  of  land  which  is  at 
the  time  in  the  actual  possession  of  another  claiming  adversely.^ 

673.  The  mortgagor's  remedy  to  recover  possession  of  the 
mortgagee  after  payment  is  in  equity ;  and  this  is  his  only  rem- 
edy .^'^  If  ejectment  or  a  writ  of  entry  would  lie  in  such  case,  the 
mortgagee  would  have  no  remedy  to  recover  for  disbursements 

1  Vaugh  V.  Wetherell,   116  Mass.  138  ;  ^  Jamison  v.  Perry,  38  Iowa,  14. 

Paine  v.  Woods,  108  Mass.  160 ;  Morse  v.  ^  Seeley  v.  Manning,  37  Wis.  574  ;  and 

Whitcher  (N.  H.),  15  Ail.  Rep.  207,  quot-  see  "Wright  v.  Speiry,  25  Wis.  617. 

ing  text.  ''  Tucker  v.  Keeler,  4  Vt.  161. 

'^  Vaugh  V.  Wetherell,  supra ;  Walker  *  Tucker  v.  Keeler,  supra. 

V.  Oxford  Woollen   Manuf.  Co.  10  Met.  ^  "Wright  ?;.  Sperry,s(//)m, •  and  see  Wal- 

(Mass.)  203.  thall  v.  Rives,  34  Ala.  91,  97. 

3  "Vaugh  V.  Wetherell,  supra.  ^'>  Wilson  v.  Ring,  40  Me.  116 ;  Rowcll 

*  Doyle  V.  Mellen  (R.  I.),  8  AtL  Rep.  i'.  Mitchell,  68  Me.  21 ;  Jewctt  v.  Hamlin, 

709.  68  Me.  1 72  j  Rowell  v.  Jewett,  69  Me.  293. 
574 


AS   TO   THE  MORTGAGEE.  [§  674. 

made  by  him  for  repairs ;  for  his  right  to  demand  these  depends 
upon  the  rules  of  equity,  and  not  those  of  common  hiw,  under 
which  the  mortgagee  is  considered  as  the  absolute  owner.^  If,  on 
a  bill  by  the  mortgagor  to  recover  possession,  it  appears  that  there 
is  a  balance  due  from  the  mortgagee  to  him,  he  cannot  have  judg- 
ment and  execution  for  such  balance,  but  must  proceed  at  law.^ 
And  when  one  claiming  under  the  mortgagor  has  not  been  made 
a  party  to  a  bill  in  equity  to  foreclose  a  mortgage,  so  that  he  is 
not  bound  by  the  proceedings,  he  cannot  maintain  ejectment 
against  a  purchaser  at  the  foreclosure  sale  ;  his  only  remedy  is 
by  a  bill  to  redeem.'^ 

The  mortgagee  in  possession  after  condition  broken,  until  a  dis- 
charge of  the  mortgage  or  a  reconveyance,  retains  the  legal  estate, 
although  the  mortgage  debt  may  have  been  paid  or  satisfied,  and 
although  he  could  not  maintain  an  action  to  recover  possession, 
because  no  conditional  judgment  could  be  entered  ;  yet,  being  in 
possession,  he  could  not  be  dispossessed  in  an  action  at  law.  The 
only  remedy  against  him  is  in  equity.* 

674.  A  mortgagor  cannot  maintain  ejectment  against  the 
mortgagee  in  possession  so  long  as  there  is  any  question  whether 
the  mortgage  debt  has  been  paid  in  full,  or  there  remains  any 
question  of  account  to  be  settled  between  the  parties.^  He  must 
resort  to  a  bill  to  redeem.  That  is  the  only  way  in  which  an  ac- 
count can  be  settled;  so  that  even  when  the  mortgagee  has  in 
fact  received  rents  and  profits  from  the  premises  sufficient  to  sat- 
isfy the  debt,  he  can  be  compelled  to  apply  them  to  the  payment 
of  it  only  by  a  suit  in  equity.  Neither  can  the  mortgagor  main- 
tain a  writ  of  entry  against  the  mortgagee,  or  his  assignee  in  pos- 
session, after  condition  broken  ;  as  before  stated,  his  remedy  is  in 
equity  only.^ 

Even  in  states  where  a  mortgagee  lias  no  right  to  take  posses- 
sion until  foreclosure  is  absolute,  if  the  mortgagor  voluntarily 
puts  the  mortgagee  in  possession,  his  possession  is  rightful,  and 
ejectment  cannot  be  brought  against  him  unless  some  action  is 

•  See  §  1093  ;  Piirsons  v.  Welles,  17  ^  Moiilion  v.  Leigliton,  3.3  Fed.  Kcp. 
Mass.  419;  Hill  v.  l'aynon,  3  Mass.  559,  143;  Beaeli  v.  Cooko,  28  N.  Y.  508;  Ed- 
560.  Contra,  bee  Blaneliard  v.  Kenton,  4  wards  v.  Farmers'  Fire  Ins.  &  Loan  Co. 
Bibb  (Ky),  451.  21  Wend.  467  ;  S.  C.  26  lb.  541  ;  uiul  seo 

'•^  Tiiylor  t).  Townsend,  6  Mass.  264.  Dou;;heity  r.  Kcrcheval,  1  A.  K.  Marsh. 

»  Friaehe  v.  Kramer,  16  Ohio,  125.  (Ky.)  52;  Oklhani  v.  1'Hef^er,  84  111.  102. 

*  New  England  Jewelry  Co.  v.  Merrinm,  «  Woods  v.  Woods,  66  Me.  206. 
2  Allen  (Masi.),  390. 

676 


§§  675,  675  a.]       a  mortgagor's  rights  and  liabilities. 

previously  taken  which  will  terminate  his  right  and  render  his 
continuance  in  occupancy  wrongful. ^ 

In  Pennsylvania,  however,  a  mortgagor  may  bring  ejectment 
against  a  mortgagee  in  possession,  as  a  substitute  for  a  bill  to 
redeem,  and  this  action  is  governed  by  the  same  equitable  princi- 
ples which  apply  to  such  a  bill.^ 

675.  A  mortgagor  cannot  maintain  trespass  against  the 
mortgagee,  or  any  one  holding  under  him,  after  entry  for  condi- 
tion broken,  although  the  mortgage  debt  be  in  fact  paid,  if  it  be 
not  released.^  The  mortgagor  cannot  maintain  such  action  for 
acts  done  by  the  mortgagee  after  the  entry  of  a  decree  of  redemp- 
tion which  provides  that  the  mortgagee  shall  execute  a  deed 
within  five  days  from  the  time  of  payment  of  the  amount  found 
due  on  the  mortgage,  or  even  for  acts  done  within  such  five  days, 
inasmuch  as  he  is  in  lawful  possession  during  such  time.*  Neither 
can  a  mortgagor  who  is  not  entitled  by  the  terms  of  the  mort- 
gage, on  a  fair  construction  of  it,  to  retain  possession,  maintain 
trespass  against  a  mortgagee  for  entering  and  carrying  away  a  fix- 
ture ;  ^  and  even  before  condition  broken,  when  the  possession  is 
not  either  expressly  or  impliedly  secured  to  the  mortgagor  by  the 
mortgage  deed,  he  cannot  maintain  trespass  against  the  mortgagee 
for  entering  and  harvesting  the  crops  growing  upon  the  land. 
The  gist  of  the  action  is  unlawful  entry ;  but  the  entry  of  the 
mortgagee  in  such  case  is  lawful .^  Yet  the  objection  that  tres- 
pass will  not  lie  by  a  mortgagor  against  a  mortgagee  does  not 
hold,  when  it  is  shown  that  the  mortgagor  is  in  possession  under 
an  agreement  which  makes  him  a  tenant  of  the  mortgagee." 

675  a.  But  the  mortgagor  may  maintain  an  action  for 
damages  against  a  mortgagee  not  in  possession.  Thus,  an 
action  on  the  case  was  sustained  against  a  mortgagee  not  in  pos- 
session, for  damages  caused  to  the  mortgaged  land  by  the  mort- 
gagee's allowing  sawdust  from  his  mill  on  a  stream  above  such 

1  Preston  y.  Young,  46  Mich.  103,  107;  v.   Townsend,   8   Mass.   411  ;    Wilson   v. 
Newton  v.  McKay,  30  Mich.  380.  Ring,  40  Me.  116. 

2  Wells  V.  Van  Dyke,  109  Pa.  St.  330.         *  Jones  v.  Smith  (Me.),  10  Atl.  Rep. 
In  such  suit,  if  it  appears  that  a  balance  254. 

is  due  on  the  mortgage,  and  a  verdict  is  ^  Chellis  v.  Stearns,  22  N.  H.  (2  Fost.) 

found  for  the  plaintiff,  it  should  be  made  312.      See  Mooney  v.  Brinkley,   17  Ark. 

conditional  upon  his  paying  the  balance  340. 

due  within  six  months.  «  Oilman  v.  Wills,  66  Me.  273  ;  Leckey 

3  Howe  V.  Lewis,  14  Pick.  (Mass.)  329  ;  v.  Holbrook,  11  Met.  (Mass.)  458  ;  Wilson 
Parsons  v.  Welles,  17  Mass.  419;  Taylor  v.  Martin,  40  N.  H.  88,  91. 

'  Marden  v.  Jordan,  65  Me.  9. 

576 


AS   TO   THE   MORTGAGEE.  [§§  675  6,  676. 

land  to  1)6  deposited  in  the  stream,  and  floated  down  upon  the 
land.  The  mortgage  in  such  case  affords  no  protection  against  a 
claim  for  damages  to  the  mortgagor's  land  or  crops.^  And  so  the 
mortgagee  is  liable  in  damages  to  the  mortgagor  for  damaging 
the  mortgaged  land  by  flowing  it  with  water  by  means  of  a  dam 
erected  elsewhere.  Such  flowing  of  the  land  cannot  be  regarded, 
of  itself,  as  a  possession  under  the  mortgage  title.^ 

When  fixtures  are  severed  from  the  mortgaged  property  by  the 
mortgagee  without  the  consent  of  the  mortgagor,  in  a  state  where 
the  rule  is  that  the  title  and  right  of  possession  remain  in  the 
mortgagor  until  foreclosure,  the  mortgagor  may  recover  damages 
for  the  trespass  committed  by  the  persons  who  removed  the  fix- 
tures. The  fact  that  the  mortgage  was  afterwards  foreclosed  and 
the  property  bought  by  the  mortgagee,  and  conveyed  to  him  by 
the  sheriff,  does  not  affect  the  case ;  because,  the  fixtures  having 
been  removed,  they  are  freed  from  the  operation  of  the  mortgage, 
and  the  foreclosure  does  not  affect  them.  The  title  to  the  fixtures 
was  in  the  mortgagor  at  the  time  they  were  severed  from  the  free- 
hold, and  he  is  entitled  to  recover  their  value.^ 

675  h.  The  mortgagor  is  also  entitled  to  an  injunction  to 
restrain  the  mortgagee  from  doing  permanent  injury  to  the 
mortgaged  land.  Thus  an  injunction  was  granted  to  restrain  a 
mortgagee  from  unreasonably  depositing  sawdust  from  his  mill 
upon  the  mortgaged  land,  by  throwing  it  into  the  stream  on 
which  the  mill  stood,  whence  it  was  floated  down  upon  the  mort- 
gaged land  below.* 

676.  A  mortgagor  has  a  perfect  right  to  convey  his  equity 
of  redemption,  or  any  interest  in  it;  and  although  he  thereby 
obliges  the  mortgagee  to  make  liis  grantees  parties  to  a  suit  to 
foreclose  the  mortgage,  his  conveyances  cannot  be  considered 
fraudulent  against  the  mortgagee  as  tending  to  hinder  and  delay 
him.''  Of  course  the  mortgagee  is  not  affected  by  any  act  of  the 
mortgagor  in  pa'ssing  any  right  of  his  in  the  premises  to  third 

1  Morse  V.  Whitcher  (N.  H.),  15  Atl.  acts  of  the  defendant,  if  continued,  will 
Rep.  207  ;  S.  C.  217.  permiuiently  lay  waste  the  plaintiffs  land, 

-'  Great  Falls  Co.  v.  Worster.  1.5  N.  H.  and  de.'^troy  it  for  any  useful  purpose,  and 
412,  44.5.  a  remedy  at  law  can  bo  had  only  by  rc- 

•'  Hill  V.  Gwiu,  51  Cal.  47.  The  fi.\-  peatcd  Miits  for  damages,  with  continuous 
tures  removed  were  certain  stamps,  part  and  mischievous  litigation,  the  defendant 
of  a  stamp  battery,  and  a  mortar  block  will  be  restrained  by  injunction."  Vor 
belonging  to  a  mill.  Allen,  .1. 

*  Morse  v.   Whitcher    (N.   H),   \:,  Atl.         '>  Hudson    v.    Treat,  7   Wis.   263;    Bu- 
J{ep.  217.     "When,   as    in   this   case,   the     chunan  r.  Monroe,  22  Tex.  5.'i7. 
VOL.  I.  37  577 


§  677.]  A  mortgagor's  rights  and  liabilities. 

persons,^  whether  by  deed,  or  by  confession  of  judgraent,^  or 
otherwise.  He  cannot  bind  the  mortgagee  by  any  contract  or 
deed  prejudicial  to  his  title.  He  cannot  create  an  easement  in 
the  land  to  tlie  prejudice  of  the  rights  of  the  mortgagee.^  The 
mortgagor's  assignee  has  no  greater  rights  than  the  mortgagor 
himself ;  and  the  construction  of  the  mortgage  is  the  same  in 
every  respect,  whether  the  mortgagor  has  conveyed  the  equity  of 
redemption  or  not.*  Neither  can  the  mortgagor  and  his  grantee, 
by  any  subsequent  arrangement  between  themselves,  affect  the 
mortgagee's  lien,  or  prevent  its  operating  to  the  full  extent  con- 
ferred by  the  mortgage.^ 

The  mortgagor  cannot  dedicate  to  public  use  streets  laid  out 
by  him  upon  the  mortgaged  premises,  so  as  to  destroy  or  release 
the  mortgage  lien,  or  estop  the  mortgagee  from  the  assertion  of 
it,  without  the  concurrence  of  the  mortgagee,  or  of  the  cestui  que 
trust  under  a  trust  deed  clearly  established.^ 

ni.   His  Personal  Liability  to  the  3Iortgagee. 

677.  An  admission  or  recital  of  indebtedness  in  a  mortgage 
will  not  create  a  personal  liability  by  implication,  unless  it  be  ex- 
press and  unequivocal."  The  mere  recital  of  the  consideration 
is  not  sufficient  to  create  such  liability .^  Lord  Chancellor  Hard- 
wicke  said  of  such  a  mortgage,  that  there  did  not  appear  to  be 
any  contract,  either  express  or  implied,  for  the  payment  of  this 
mortgage  money .^  Although  there  be,  in  addition  to  the  recital 
of  consideration,  a  statement  in  the  condition  "  that  this  grant  is 
intended  as  security  for  the  payment  of  five  hundred  dollars  and 
interest,"  no  admission  of  indebtedness  creating  a  personal  liabil- 
ity is  implied. ^^  The  fact  that  the  mortgage  provides  for  a  policy 
of  insurance  as  additional  security,  or  that  it  contains  a  power  of 
sale  to  be  exercised  on  default,  or  that  it  contains  the  usual  clause 

1  Ellithorp  V.  Dewing,  1  D.  Chip.  (Vt.)     Co.  4  Cal.  294 ;  Smith  v.  Rice,  12  Daly 
141 ;  Coker  v.  Whitlock,  54  Ala.  180.  (N.  Y.),  307. 

2  Planagan  v.  Westcott,  11  N.  J.  Eq.         »  Henry  v.  Bell,  5  Vt.  393. 

(3  Stockt.)  264.  9  Howel  v.  Price,  1  P.  Wms.  291,  292; 

3  Murphy  v.  Welch,  128  Mass.  489.  Coleman  v.  Van  Kensselaer,  44  How.  (N. 
*  Kruse  v.  Sciipps,  11  111.  98;  Anderson     Y.)  Pr.  368,  where  several  cases  are  ex- 

V.  Strauss,  98  III.  485.  amined,  and  the  case  of  Chase  v.  Ewing, 

5  Hartley  v.  Harrison,   24  N.  Y.  170;  51  Barb.  (N.  Y.)  597,  is  criticised.     See, 
Frost  V.  Shaw,  10  Iowa,  491.  also.  Culver  v.  Sisson,  3  N.  Y.  264;  Turk 

6  Walker  v.  Summers,  9  W.  Va.  533.  v.  Ridge,  41  N.  Y.  201. 

^  Shafer  v.  Bear  River  &  A.  W.  Mining        ^^  Severance  v.  Griffith,  2  Lans.  (N.  Y.) 

38 ;  Coleman  v.  Van  Rensselaer,  supra. 

578 


HIS  PERSONAL   LIABILITY    TO    THE   MORTGAGEE.  [§  678. 

in  regard  to  tlie  possibility  of  a  surplus  after  sale,  providing  that 
it  shall  be  paid  to  the  mortgagor,  does  not  impart  any  admission 
to  the  other  recitals.^  A  recital  that  the  mortgagor  was  indebted 
to  the  mortgagee  in  a  certain  sum,  which  should  have  been  paid 
on  the  first  day  of  January  preceding,  was  held  to  be  a  covenant 
to  pay  money,  and  that  an  action  of  debt  would  lie  for  it.^  A 
stipulation  in  a  mortgage  given  to  secure  a  note,  that  "general 
execution  shall  not  issue  therein,"  limits  the  remedy  to  the  mort- 
gaged property.^  A  stipulation  in  a  mortgage  given  by  a  cor- 
poration to  secure  its  bonds,  that  the  trustees  should  sell  the 
property  at  the  request  of  the  holders  of  $100,000  of  its  bonds 
when  due,  does  not  prevent  an  action  by  any  bondholder  upon 
the  bonds  after  maturity.^ 

678.  In  several  states  it  is  provided  by  statute  that  no 
mortgage  shall  imply  a  covenant  for  payment  of  the  sum  se- 
cured ;  and  that  when  there  is  no  express  covenant  for  such  pay- 
ment, and  no  separate  obligation  for  the  debt,  the  remedy  of  the 
mortgagee  is  confined  to  the  lands  mortgaged.^  Under  such  a 
statute,  when  the  mortgage  contains  no  express  covenant  to  pay 
the  debt  secured,  and  no  bond,  note,  or  other  separate  instrument 
has  been  given  for  it,  an  action  cannot  be  maintained  upon  a 
verbal  agreement  to  pay  the  debt.  The  remedy  is  limited  to  the 
land  described  in  the  mortgage.^ 

Of  course  an  unqualified  admission  of  indebtedness  by  the 
mortgagor  is  equivalent  to  an  express  covenant^  But  an  inten- 
tion to  create  a  personal  liability  for  the  debt  cannot  be  inferred 
from  the  circumstance  that  the  mortgage  is  given  to  secure  part 
of  the  purchase  money  of  the  mortgaged  property  ;  nor  is  a  reci- 
tal in  such  a  mortgage,  that  the  mortgagor  "is  justly  bound" 
to  the  mortfjafree  in  a  certain  sum,  such  an  admission  of  indebted- 
ness  as  to  make  the  mortgagor  personally  liable.^ 

But  a  note,  or  bond,  or  other  separate  obligation  already  given 
for  the  payment  of  a  debt,  is  not  merged  or  extinguished  by  giv- 

1  Coleman  v.  Van  Rensselaer,  44  How.  Minnesota:  Rev.  ISCiti,  eli.  40,  §  6. 

(N.  Y.)  I'r.  3G8.  Michigan  :  Compiled  Laws  1871,  §  4208. 

'^  Cout^er  V.  J.,aneuhter,  f>  Ycrg.  (Tenn.)  Wyoming:  Comjjilcd  Laws  1876,  eb.  3, 

477.  §§  5,  6. 

'  Kennion  v.  KeJHey,  10  Iowa,  443.  «  See  §§  72,  1225  ;  V.iii  Biuiu  v.  Mis- 

♦  Philadelphia  &  linlt.  ('eut.  11.  R.  Co.  nier,  8  Minn.  232. 

f.  JohiiM.n,.J4  I'a.  St.  127.  '  Elder    v.    l^ouse,    l.'i    Wend.   (N.   Y.) 

'•>  California:  Civil  Co.le,  §  2'J28.  218. 

New  York:  2  K.  S.  187.5,  p.  1119.  "  Smiih  v.  Rice,  12  Daly  (N.  Y.),307. 

Oregon:  Gen.  Lawu  1874,  p.  516.  571i 


§  678  rt.]        A  mortgagor's  rights  and  liabilities. 

ing  a  mortgage,  or  a  deed  of  land  in  the  nature  of  a  mortgage, 
for  the  same  debt.^  The  mortgage  becomes  merely  collateral  se- 
curity for  the  payment  of  the  prior  obligation.  If  a  new  note  or 
bond  for  the  same  amount  be  given,  the  result  may  be  otherwise,^ 
if  given  with  the  intention  of  operating  as  payment. 

The  recitals  in  a  mortgage  in  regard  to  the  indebtedness  se- 
cured may  not  be  evidence  that  such  indebtedness  already  exists. 
They  may  refer  to  an  indebtedness  contemplated  by  the  parties, 
and  are  always  open  to  explanation.^  They  may  refer  to  a  past 
indebtedness  for  which  there  is  no  personal  liability  on  the  part 
of  the  mortgagor,  when,  of  course,  the  mortgage  gives  no  remedy 
beyond  a  resort  to  the  property  mortgaged.*  But  although  the 
recitals  in  the  mortgage  may  be  competent  evidence  against  the 
mortgagor  to  prove  the  considei-ation  of  the  note,^  yet,  when  ne- 
gotiable, the  note  must  be  produced  before  judgment,  unless  its 
loss  or  destruction  be  shown. *^ 

678  a.  The  mortgagor  has  the  right  to  have  the  mortgaged 
property  applied  to  the  payment  of  the  mortgage  debt,  so  far 
as  necessary  for  his  protection  against  personal  liability  for  the 
debt  secured.  Where  the  mortgagor  has  conveyed  the  equity  of 
redemption  to  one  who  has  assumed  the  payment  of  the  mortgage 
debt,  so  that  in  effect  the  mortgagor  becomes  a  surety  of  the  debt, 
he  has  the  right  to  have  the  property  first  applied  to  the  payment 
of  the  debt,  or  restored  to  him  upon  his  paying  it.  If,  therefore, 
the  mortgagee  releases  a  portion  of  the  mortgaged  premises  to  a 
purchaser  who  has  assumed  the  mortgage,  and  the  portion  not  re- 
leased is  insufficient  to  discharge  the  mortgage,  the  mortgagee,  in 
a  suit  against  the  mortgagor  to  recover  a  deficiency,  must  credit 
the  mortgagor  the  amount  the  latter  has  been  damnified  by  his 
release  of  the  mortgaged  property.  If,  for  instance,  the  entire 
mortgaged  property  would  have  been  insufficient  to  satisfy  the 
mortgage  debt,  the  mortgagor  is  entitled  to  have  applied  in  pay- 
ment of  the  debt  the  full  value  of  the  parcel  released,  though  the 
mortgagee  in  releasing  the  parcel  acted  in  good  faith.' 

1  Ligget  V.  Bank  of  Pa.  7  S.  &  R.  (Pa.)  *  Hone  v.  Fisher,  2  Barb.  (N.  Y.)  Ch. 
218;  Shaw  i'.  Burton,  5  Mo.  478;  Wil-     559. 

liamson  v.  Andrew,   4  Har.  &  M.  (Md.)  ^  Warner  v.  Brooks,  14  Gray  (Mass.), 

482.  107. 

2  Hall  V.  Hopkins,  14  Mo.  450.  «  Chewning  v.  Proctor,  2  McCord  (S. 

3  Keeler   v.   Keeler,    11    N.   J.   Eq.  (3  C.)  Ch.  11. 

Stockt.)458;  Ellis  i;.  Messervie,  1 1   Paige         "^  Worcester  Mechanics'  Sav.  Bank.  v. 
(N.  Y.),  467.  Thayer,  136  Mass.  459. 

580 


AFTER-ACQUIRED   TITLES   AND   IMPROVEMENTS.  [§  679. 

The  personal  liability  of  a  mortgagor  is  not  wholly  discharged 
by  the  mortgagee's  releasing  a  portion  of  the  mortgaged  premises 
to  a  subsequent  purchaser  without  the  mortgagor's  consent ;  al- 
though it  has  been  held  that  the  mortgagee  cannot  maintain  any 
action  for  a  deficiency  after  such  a  release,  and  that  the  mortgagee, 
by  giving  such  a  release,  assumes  the  risk  of  the  sufficiency  of  the 
portion  retained  to  pay  the  mortgage  debt.^  It  is  not  necessary, 
however,  to  go  to  this  extent  in  order  to  afford  full  protection  to 
the  mortgagor  ;  and  the  better  rule  is  that  previously  stated  in 
the  text.  The  fact  that,  after  the  mortgagee  has  released  a  por- 
tion of  the  premises  to  a  subsequent  purchaser,  the  mortgagor 
joins  his  wife  in  executing  a  release  to  such  purchaser  from  a 
mortgage  given  for  a  portion  of  the  purchase  money  to  the  wife, 
does   not  affect  the  case.^ 

IV.  After-acquired  Titles  and  Improvements. 
679.  It  is  a  well  settled  rule  of  law,  that  a  title  subse- 
quently acquired  by  the  mortgagor  enures  to  the  benefit  of 
the  mortgagee  and  his  assigns  by  virtue  of  the  covenants  in  his 
mortgage,  and  is  subject  to  foreclosure  ;  ^  and  a  subsequent  pur- 
chaser from  the  mortgagor  under  his  after- acquired  title,  having 
notice  of  such  mortgage,  stands  in  no  better  position  than  the 
mortgagor  himself.^  Neither  can  the  heirs  of  the  mortgagor 
claim  the  benefit  of  the  subsequent  title  as  against  the  mortgagee, 
when  the  mortgagor  himself  could  not  do  so.^  But  the  husband 
of  such  heir  is  not  estopped  to  claim  a  title  acquired  by  himself.*^ 
Where  one  having  a  claim  to  land  in  Missouri,  under  a  Spanish 
grant,  made  a  mortgage,  and  afterwards  Congress  confirmed  tiie 
claim,  it  was  held  that  the  confirmation  enured  to  the  benefit  of 
the  mortgagee  rather  than  that  of  the  mortgagor's  heirs  solely." 

1  Townsend  Savings  Bank  v.  Munson,  111.  45 ;  Rice  v.  Kelso,  7  N.  W.  Rep.  3  ; 

\1  Conn.  390.  57  Iowa,  1 15  ;  Toms  v.  Boyes,  50  Mich.  352. 

■i  Townsend  Savings  Bank  v.  Munson,  *  Tefftr.  Munson,  63  Harb.  N.  Y.31 ;  S. 

„iprii.  C.  57  N.  Y.  97  ;  Hitchcock  v.  Fortier,  65  III. 

'  §§    138,  561,  682,  825,    1483,  1656,  239  ;  M'Crackin  v.  Wright,  14  Johns.  (N. 

1671;    Bush    v.    Marshall,    G    How.   284;  Y.)  193,  194  ;  King  j;.  Gilson,  32  111.348; 

Wright  V.  Shumway,  1  Biss.  23  ;  Brayton  Gochenour  v.  Mowry,  33  111.  331  ;  Jones  v. 

,:  ivFeriihew,    56    Mich.    16G;    Parker    v.  King,  25  111.  383,  388;  Cockrill  v.  Bane 

./ones,  57  Ga.  204;    Hank  v.  Dauphin  &  (Mo.),  7  S.  W.  l{ep.  480,  quoting  text. 

Susquehanna   Coal   Co.    1    Pearson  (Pa.),  »  Somes  '.  Skinner,  3  Pick.  (Mass.)  52, 

4.53;  Fly nt    v.    iluhhard,   57    Mi.s.s.   471;  58;  Wark  u.  Willanl,  13  N.  H.  389. 

Levy /;.  Lane,  38  La.  Ann.  252  ;  Wells  v.  o  H„shton  i'.  Lippiiuott  (Pa.),    12   Atl. 

Somers,   4    Bradw.    (Ill)   297;    Pratt  v.  Rep.  761. 

i'nitt,  96   111.   184;  Gibbons   v.  Iloag,  95  ^  Mas.sey  f.  Papin,  24  How.  362. 


b 


81 


§  679.]  A  mortgagor's  rights  and  liabilities. 

In  California  it  is  declared  by  the  Code  that  a  title  subsequently 
acquired  by  the  mortgagor  enures  to  the  mortgagee  as  security,  in 
like  manner  as  if  acquired  before  the  execution.^ 

One  in  possession  of  land  under  a  contract  of  purchase  has  a 
mortgageable  interest.^  If  he  makes  a  mortgage  with  covenants 
of  warranty,  and  afterwards  acquires  the  legal  title  to  the  prop- 
erty, he  is  estopped  to  deny  that  he  had  title  at  the  time  of  the 
mortgage.  A  recital  in  the  mortgage  that  the  premises  are  the 
same  conveyed  to  the  mortgagor  by  the  person  who  is  the  vendor 
in  the  contract  of  sale,  will  estop  him  from  denying  the  validity 
of  the  mortgage  after  he  has  received  such  a  conveyance.  The 
covenants  of  warranty,  in  a  deed  to  him  by  the  vendor,  relate 
only  to  incumbrances  created  by  him,  and  not  to  those  created 
by  the  grantee ;  and  therefore  would  not  estop  the  vendor  from 
enforcing  the  mortgage,  although  he  became  the  owner  of  it  be- 
fore the  p;ivinor  of  the  deed.^ 

When  one  who  has  sold  by  warranty  deed  a  portion  of  a  parcel 
of  land  incumbered  by  a  mortgage  becomes  a  purchaser  at  a  fore- 
closure sale  under  the  mortgage,  such  title  so  acquired  to  this 
portion  enures  to  the  benefit  of  his  gi'antee  ;  or,  if  such  grantor 
allows  the  mortgage  to  be  foreclosed,  and  the  premises  are  pur- 
chased under  a  collusive  arrangement  for  his  benefit  by  another 
person,  this  purchaser  will  hold  the  portion  sold  with  covenant  of 
warrant}^  as  trustee  for  the  purchaser  of  such  portion.^ 

The  estoppel  is,  however,  limited  to  the  effect  of  the  covenant 
which  creates  it.  Thus,  if  a  second  mortgage  is  given  with  a 
covenant  against  the  claims  of  all  persons  "except  those  claiming 
under  the  prior  mortgage,"  and  the  premises  are  sold  under  fore- 
closure proceedings  upon  such  prior  mortgage,  and  afterwards  are 
conveyed  to  the  original  mortgagor,  he  is  not  estopped  by  the  cove- 
nant in  the  second  mortgage  from  claiming  the  property  in  fee  as 
unincumbered,  inasmuch  as  his  title  is  under  the  first  mortgage, 
which  was  expressly  exempted  in  his  covenant  of  warranty.^ 

But  the  fiction  of  relation  back  of  an  after-acquired  title  cannot 
be  so  applied  as  to  work  an  injury  to  innocent  parties.  Thus,  in 
the  ordinary  case  of  a  conveyance  of  land  and  a  simultaneous 
mortgage  for  the  purchase  money,  the  mortgagee  is  not   affected 

1  Civil  Code,  §2930;  Amendments,  *  Huxley  v.  Rice,  40  Mich.  73;  S.  C. 
1874,  p.  260.  11  Chicago  L.  N.  222. 

2  Crane  v.  Turner,  7  Hun  (N.  Y.),  357.  &  Huzzey  v.  Heffernan  (Mass.),  9  N.  E. 

3  Judd  V.  Seekins,  62  N.  Y.  266.  Rep.  .570. 

582 


AFTER-ACQUIRED    TITLES   AND   IMPROVEMENTS.  [§  680. 

by  any  previous  conveyance  or  mortgage  which  his  grantee,  the 
mortgagor,  may  have  phiced  upon  record  when  he  had  no  title  to 
the  premises.  The  previous  conveyance  or  mortgage  may  be 
good  between  the  parties,  and  ma}''  cover  the  after-acquired  title, 
except  as  against  a  mortgage  given  simultaneous!}'-.! 

Where  one  mortgaged  an  undivided  two  thirds  part  of  land 
without  covenants  of  title  or  warranty,  and  his  wife  afterwards 
acquired  the  other  undivided  third  part,  to  which  he  had  no  title 
when  he  gave  the  mortgage,  it  was  held  that  the  mortgage  did 
not  cover  the  part  acquired  by  the  wife,  although  the  husband 
furnished  the  money  for  the  purcliase.^ 

The  rule  has  no  application  where  a  mortgage  is  discharged  by 
a  sale  under  a  prior  mortgage,  and  the  purchaser  conveys  the  title 
back  to  the  mortgagor,  who  has  in  the  mean  time  been  discharged 
in  bankruptcy.^ 

680.  A  mortgagor  cannot,  by  acquiring  a  tax  title  upon  the 
land,  defeat  the  lien  of  the  mortgagee.*  It  is  his  duty  to  pay  the 
taxes,  and  he  is  not  allowed  to  acquire  a  title  through  his  own 
default.^  The  same  obligation  rests  upon  one  who  has  purchased 
the  land  of  the  mortgagor.  When  the  taxes  are  paid  by  one  who 
has  merely  a  lien  upon  the  land,  there  is  of  course  no  obligation 
upon  him  to  pay  the  taxes ;  and  although  he  may  acquire  the  tax 
title  for  the  protection  of  his  own  lien,  he  is  not  allowed  to  set  up 
that  title  to  defeat  a  prior  lien.  The  land  is  regarded  as  a  com- 
mon fund  for  the  payment  of  both  liens,  and  equity  regards  it  as 
an  act  of  fraud  for  him  to  acquire  a  title  to  the  land  for  an  incon- 
siderable sum,  and  use  it  to  destroy  the  claim  of  the  prior  mort- 
gagee to  the  land.** 

If  the  owner  suffers  the  land  to  be  sold  for  taxes,  and,  colluding 
with  his  son,  has  him  buy  in  the  land  at  the  tax  sale,  the  title  so 
acquired  is  subject  to  the  mortgage.'^ 

1  Htffron  V.  Flanijjan,  37  Mich.  274;  <»  Dayton  r.  Rice,  47  Iowa,  429  ;  Annely 
Elder  v.  Derby,  98  111.  228.  v.  De  Saussiire,  12  S.  C  488,  510.  Neither 

2  McClure  u.  Holbrook,  39  Mich.  42.  is  the  mortgagor  entitled  to  a  credit  on 

3  Ranch  v.  Dech  (I'a.),  9  Atl.  Rep.  180.     the  mortgage  debt  for  taxes  paid  by  him. 
♦  §§77,   713,714;    Fuller  v.  Ilodgdon,     Kilpatrick  v.   llen^on    (Ala.),   1    So.  Rep. 

25  Me.  243  ;  Fair  o.  Brown,  40  Iowa,  209  ;  188  ;  Newton  v.  Marshall,  C2  Wis.  8 ;  Bcl- 
Stears  v.  llollcnbeck,  38  Iowa,  550  ;  I'or-  train  v.  Villcre  (La.)  4  So.  Rep.  500. 
ter  w.  Lafferty,  33  Iowa,  254;  Allison  t;.  o  Fair  v.  Brown,  40  Iowa,  209;  Ren- 
Armstrong,  28  Minn.  27G ;  9  N.  W.  Rep.  shaw  v.  Stafford,  30  La.  Ann.  853  ;  Cou- 
80G;  41  Am.  Rep.  281  ;  Kezer  y.  Clifford,  necticut  Mut.  L.  Ins.  Co.  i;.  Bulto,  45 
59  N.  H.  208;   McAlpine  v.  Zitzer,  119  Mich.  113. 

111.273;    Boyd  v.  Allen,  15  Lea  (Tenn.),  '  McAlpine  o.  Zitzer  (111.),  s!</«(i. 
81  ;  McLaughlin  v.  Green,  48  Miss.  175; 

Cooper  V.  Jackson,  99  Ind.  5GG.  OOo 


§  681.]  A  mortgagor's  rights  and  liabilities. 

It  is  a  general  rule  that  any  one  interested  in  land  with  others, 
all  deriving  their  title  from  a  common  source,  will  not  be  per- 
mitted to  acquire  an  absolute  title  to  the  land  by  a  tax  deed,  to 
the  injury  of  the  others.  The  mortgagor,  or  any  holder  of  the 
equity  standing  in  his  place  as  a  purchaser,  or  a  second  mortgagee, 
cannot  set  up  such  title  against  the  prior  mortgagee.^  The  taking 
of  the  tax  title  in  such  case  is  regarded  jjrimd  facie  merely  as  a 
redemption  of  the  land  from  the  tax  sale.  But  a  mortgagor  for 
purchase  money,  who  has  acquired  a  tax  title  which  the  mortgagee 
by  his  covenants  was  bound  to  remove,  may  set  up  as  an  offset  in 
a  foreclosui-e  the  amount  he  was  compelled  to  pay  for  the  title.^ 

But  this  principle  does  not  prevent  a  mortgagor's  holding  the 
property  as  a  tenant  at  will  of  another  who  has  acquired  a  tax 
title  to  the  mortgaged  property  ;  for  a  tenant  at  will  has  no  estate 
which  is  assignable,  and  the  mortgagee  cannot  gain  by  estoppel 
any  greater  right  than  the  tenant  could  assign  ;  and  of  course  the 
mortgagee  would  acquire  no  right  as  against  the  holder  of  the  tax 
title.3 

As  already  noticed,  the  mortgagee  may  acquire  and  maintain 
title  to  the  premises  paramount  to  the  mortgagor,  by  purchase  at 
a  sale  for  taxes  or  under  a  prior  judgment  lien.* 

If  a  mortgage  containing  covenants  of  warranty  be  foi-eclosed, 
the  mortgagor,  by  buying  the  property  at  a  tax  sale  for  delin- 
quent taxes  on  the  land  existing  at  the  time  of  the  mortgage, 
cannot  defeat  the  title  of  the  mortgagee,  or  of  the  purchaser 
under  the  foreclosure.^ 

681.  Improvements  made  by  the  mortgagor  or  o"wner 
enure  to  the  benefit  of  the  mortgagee  ;  ^  and  improvements 
made  with  the  consent  of  the  owner,  by  one  who  has  notice  of  the 
mortgage,  become  subject  to  it  in  the  same  manner  as  if  they  had 
been  made  by  the  mortgagor  himself,  unless  there  be  a  covenant 
in  the  mortgage  for  such  allowance  in  case  of  foreclosure.'^  If  a 
corporation  having  the  power  to  take  the  land  by  condemnation 
make  improvements  before  exercising  this  power,  the  mortgagee 

1  Smith  V.  Lewis,  20  Wis.  350;  Avery         ^  Porter  v.  Lafferty,  33  Iowa,  254. 

f.  Judd,  21   Wis.  262;    Beckwith  v.  Se-  s  Asher  y.  Mitchell,  9  Bradw.  (III.)  335. 

born  (W.  Va.),  5  S.  E.  Rep.  453.  ''  Frierson  v.  Blanton,  I   Bax.   (Tcnii.) 

2  §§  1502-1504  ;  Eaton  v.  Tallmadge,  22  272  ;   Coleman   v.   Witherspoon,   76   Ind. 
Wis.  526  ;  Woodbury  v.  Swan,  59  N.  H.  22.  285  ;  Catterlin  v.  Armstrong,  79  Ind.  514  ; 

3  Coughlin  V.  Gray,  131  Mass.  56.  Alabama,  &c.   R.  Co.  v.   South  &  North 
"  §  672 ;  Sturdevant  v.  Mather,  20  Wis.     Ala.  R.  Co.  (Ala.)  3  So.  Rep.  236. 

576. 

584 


AFTER-ACQUIRED   TITLES   AND   IMPROVEMENTS.        [§  681  a. 

cannot  be  deprived  of  the  benefit  of  tlie  improvements  by  allow- 
ing the  corporation  to  redeem  the  land  on  paying  the  value  of  the 
land  when  it  took  possession.^  It  is  negligence  on  the  part  of  the 
corporation  to  proceed  with  improvements  without  first  either 
obtaining  a  release  of  the  mortgage,  or  condemning  the  interest  of 
the  mortgagee  if  it  has  that  power.  The  corporation  stands  in 
the  relation  of  a  purchaser  with  notice  of  the  mortgage,  it  being 
duly  recorded,  and  it  cannot  have  an  advantage  as  to  improve- 
ments which  the  mortgagor  would  not  have  had.  There  is  no 
good  reason  for  discriminating  in  its  favor.  To  give  a  purchaser, 
with  such  notice,  this  right,  would  enable  him  to  obtain  from  the 
mortgagee,  by  means  of  the  improvements,  a  compulsory  release 
at  the  value  of  the  land  at  the  time  of  taking  possession.^ 

The  mortgagor  is  not  entitled,  as  against  the  mortgagee,  to  be 
allowed  for  improvements  made  by  him  on  the  mortgaged  prop- 
erty,-^ unless  there  be  a  covenant  in  the  mortgage  for  such  allow- 
ance in  case  of  foreclosure.'* 

Neither  have  persons  furnishing  labor  and  materials  for  such 
improvements  any  claim  upon  the  mortgagee,  without  proof  of  a 
direct  or  implied  promise  on  his  part.^ 

681  a.  If  land  subject  to  mortgage  be  taken  in  the  exercise 
of  the  right  of  eminent  domain,  as,  for  instance,  for  the  right  of 
way  of  a  street  or  for  the  location  of  a  railroad  track,  the  mort- 
gagee should  be  made  a  party  to  the  proceeding  for  the  taking  of 
the  land,  and  the  damages  awarded  should  be  paid  to  him  ;  other- 
wise he  may  recover  the  same  by  action  against  the  person  or 
corporation  entering  upon  the  land.'^  In  Massachusetts  a  different 
course  is  pursued  under  statutes  providing  for  the  taking  of  land 
for  public  purposes.     The  damages  are  assessed  to  the  owner  of 

1  Booraem  v.  Wood,  27  N.  J.  Y.q.  37.  pean  &  N.  A.  liy.  Co.  67  Mc.  3.58.    Rliode 

-  Booraem  y.  Wood, «!//>ra.  Island:    Warwick    Inst,    for   Saviuj^s    r. 

='  Childsy.  Dolan,  .5  Allen  (Mass.),  319;  Providence,  12  R.  I.  144;    S.   C.   7  Re- 

Wharton  17.  Moore,  84  N.  C.  479;  Baird  porter,  121;    Peitis  v.  Providence,  11  R. 

V.  Jackson,  98  111.  78.  1.372.     Minnesota:   Tro^rden  v.  Wiuona 

*  Phillips  V.  Holmes,  78  N.  C.  191.  &  St.  Peter  U.  R.  Co.  22  Minn.  198.  Wis- 

•''  Holmes  V.  Morse,  50  Me.  102.  consin  :    Kennedy   v.    Milwaukee    &    St. 

''  §708;  New  Jersey:  Piatt  u.  Bright,  Paul  Ry.  Co.  22  Wis.  .'581.     Iowa:   Sev- 

29  N.  J.  Eq.  128;  S.  C'.31  lb.  81  ;  Bright  crin  v.  Cole,  38  Iowa,  403.     Mississippi: 

r.  Piatt,  32  N.  J.  K(|.  3C2  ;  State  v.  Easton  Stewart  r.   Kiiyniond  R.  R.  Co.  l.'i  Miss. 

&  Amboy  R.  R.  Co.  30  N.  .].  L.  181  ;  Coe  568.     Michigan:  Micliigan  Air  Line  Ry. 

r.  N.  J   .Midland  Ry.  Co.  28  N.  J.  Eq.  27  ;  Co.  v.  Harms  40  Micli.  383  ;  S.  C.  44  lb. 

North  Ilud-on  County  R.  R.  Co.  y.  Boo-  222.      Illinois:    Colehour   v.   State    Sav. 

raem,  lb.  450.     Maine:   Wihon  y.  Euro-  Inst.  90  111.  152. 

585 


§  682.]  A  mortgagor's  rights  and  liabilities. 

the  equity  of  redemption,  without  regard  to  mortgages  incumber- 
ing the  land.i  The  proceeding  is  in  the  nature  of  a  proceeding 
in  rem  against  the  land.  A  mortgagee  not  in  possession  has  no 
claim  for  compensation  for  an  injury  to  the  land  when  lawfully 
used  by  any  party.  As  to  third  persons  the  interests  of  mort- 
gagor and  mortgagee  are  not  joint,  but  the  mortgagor  is  the 
owner.  They  cannot  join  or  be  joined  in  an  application  to  assess 
damages  for  land  taken  for  public  uses.  The  mortgagor  alone 
can  make  a  surrender.  In  equity  the  damages  assessed  to  the 
owner  of  the  land  is  deemed  the  land,  and  the  mo;'tgagee  may 
follow  the  money  in  the  mortgagor's  hands,  or  prevent  its  going 
into  his  hands.  The  burden  of  proof  is  then  upon  him  to  show 
to  what  extent  he  has  a  claim  upon  the  funds;  and  that  question 
is  then  litigated  between  the  parties  in  interest,  and  not  at  the 
cost  of  the  taker  of  the  land.^ 

In  Connecticut  also  the  mortgagor  is  regarded  as  the  owner  of 
mortgaged  land  within  the  meaning  of  a  city  charter  which  pro- 
vides that  compensation  shall  be  made  to  the  owner  of  land  taken 
by  the  common  council  for  streets ;  so  that,  if  notice  be  regularly 
given  and  compensation  made  to  the  mortgagor,  the  city  is  not 
liable  to  the  mortgagee.^ 

If  a  mortgage  contains  a  reservation  in  favor  of  the  mortgagor 
of  any  benefits  that  may  accrue  from  the  taking  of  any  part  of 
the  land  by  the  city  for  a  sti-eet,  with  the  right  to  receive  directly 
from  the  city  the  damages  that  may  be  assessed  therefor,  and  such 
damages  are  less  than  the  assessments  made  upon  the  remain- 
ing part  of  the  land  for  the  improvements  resulting  to  that,  the 
mortgagor  cannot  claim  the  compensation  without  paying  the 
assessment.^ 

682.  Mortgagor  estopped  to  deny  his  title.  —  A  mortgagor, 
by  a  mortgage  containing  the  usual  covenants  of  seisin  and  war- 

1  Breed  v.  Eastern  R.  R.  Co.  5  Gray,  Savings  Bank  v.  Boston,  127  Mass.  254; 
47,  note.  And  see  Whiting  v.  New  Ha-  Read  r.  Cambridge,  126  Mass.  427  ;  Pond 
ven,  45  Conn.  303;  S.  C.  7  Reporter,  42.  v.  Eddy,  113  Mass.  149;  Paine  v.  Woods, 
This   inequitable   rule    was    changed   by  108  Mass.  160. 

Acts  1881,  ch.  110,  whereby  damages  are  ^  Whiting  v.  New  Haven,  supra;  and 

assessed  to  the  mortgagee  to  the  extent  of  see  Mills  v.   Shepard,  30  Conn.  98,  101  ; 

his  interest,  and  the  balance  to  the  mort-  Norwich  v.  Hubbard,  22  Conn.  587. 

gagor,  as  in  case  of  lands  taken  by  rail-  See  article  on  Road-Opening  through 

road  companies  under  Act  of  1874,  ch.  372,  Mortgaged  Lands,  by  L.  T.  Yale,  21  Alb. 

§110.  L.J.  25. 

2  Farnsworth  v.  Boston,  126  Mass.  1,  *  United  States  Mortgage  Co.  v.  Gross, 
9;    S.  C.19  Alb.  L.  J.  118;   Barnstable  93  IIL  483. 

686 


AFTER-ACQUIRED   TITLES   AND   IMPROVEMENTS.  [§  683. 

ranty,  is  estopped  to  deny  the  title  of  the  mortgagee,^  and  he  is 
as  much  estopped  to  deny  the  title  of  a  subordinate  mortgagee  as 
to  deny  that  of  the  first.^  He  is  not  only  estopped  from  claiming 
title  himself,  but  also  from  setting  up  a  prior  mortgage,  made  by 
himself  to  another,  as  an  outstanding  title.^ 

Where  a  mortgage  intended  for  the  secui-ity  of  the  school  funds 
was  executed  to  the  commissioner  of  that  fund  after  the  office 
was  abolished,  it  was  held  that  the  mortgagor  was  estopped  to 
deny  the  official  character  of  the  grantee,  and  that  effect  should 
be  given  the  instrument.^ 

The  mortgagor  in  such  case  will  not  be  heard  to  say,  in  con- 
tradiction of  his  covenant  of  warranty,  that  he  had  not  title  at  the 
date  of  the  conveyance,  or  that  it  did  not  pass  to  his  mortgagee 
by  virtue  of  his  deed.^  Where  an  owner  of  land  made  a  second 
mortgage  with  covenants  of  warranty,  and  the  first  mortgagee 
entered  and  autliorized  the  mortgagor  to  occupy,  and  died  intes- 
tate, leaving  the  mortgagor  his  heir,  it  was  held  that  the  mort- 
gagor was  not  entitled  to  possession  as  against  the  second  mort- 
gagee :  either  under  the  authority  of  the  first  mortgagee,  because 
such  authority  was  revoked  by  his  death  ;  or  by  descent  from  the 
first  mortgagee,  because  he  was  estopped  by  the  covenants  of  his 
mortgage.^ 

A  subsequent  discharge  in  bankruptcy  obtained  by  the  mort- 
gagor, while  it  releases  him  from  his  personal  debt,  does  not  de- 
stroy the  covenant  contained  in  his  mortgage  ;  and  therefore,  if 
after  his  discharge  he  purchases  the  property  at  a  sale  under  a 
prior  incumbrance,  he  is  still  estopped  to  set  up  this  title  as  supe- 
rior to  the  title  confened  by  his  mortgage." 

683.  The  doctrine  of  equitable  estoppel  is  also  applied 
against  a  mortgagor  "who  has  induced  another  to  take  an 
assignment  of  the  mortgage  from  the  holder  of  it,  upon  the 
representation  that  it  is  a  good  and  valid  security,  to  prevent  his 
assailing  its  validity  in  the  hands  of  such  assignee.  Having  by 
word  or  act  induced  another  to  part  with  his  money  for  the  secu- 
rity, he  is  not  allowed  to  I'epudiate   the  trutli  of  his  representa- 

'  Cro'^s   V.   Robinson,    21    Conn.   379;  *  Floyd  County  v.  Morrison,  40  Iowa, 

Sicclton  V.   Scott,  18    Iliin   (N.    Y.),  375;  188;  Franltlin  r.  Twot,'()0(I,  18  Iowa,  515. 

Kernfrood  v   Davis,  21  S.  C.  183.  •'''  See  §§  561.  1483;    Tellt  v.   Mnnaon, 

•^  Wiro.s  r.  Nelson,  20  Vt.  13;  Bailey  r.  57  N.  Y.  7'.);    U-sinu  v.  Wilder,   58    Ga. 

Lincoln  Academy,  12  Mo.  174.  178. 

'^  Fi»her  v.  Milrnine,  94  III.  328.  «  Lincoln  v.  Knicrson,  108  Mass.  87. 

'  Bush  V.  Person,  18  How.  82. 

587 


§  684.]  A  mortgagor's  rights  and  liabilities. 

tion,  and  escape  the  payment  of  the  obligation  by  showing  that, 
as  between  himself  and  the  former  holder  of  it,  it  was  invalid.^ 
Bnt  such  representations  made  by  one  of  several  mortgagors 
estops  him  alone  and  not  the  others.^  And  so  if  an  owner  of 
land  repi'esents  to  a  creditor  that  it  belongs  to  another,  and  in- 
duces such  creditor  to  take  a  mortgage  from  that  person,  and  to 
extend  the  time  of  payment  of  the  debt,  he  is  estopped  to  claim 
the  land  as  against  tiie  lien  of  the  mortgage.^ 

One  who  has  made  a  mortgage  to  secure  notes  payable  to  his 
own  ordei',  which  he  has  delivered  to  the  mortgagee  without  in- 
dorsement, thereby  admits  that  the  notes  are  valid  securities  for 
the  payment  of  money.* 

Onl}'^  the  parties  to  a  mortgage,  and  those  in  privity  witli  them, 
are  bound  by  or  can  take  advantage  of  an  estoppel  created  by  it.^ 
That  the  estoppel  cannot  bind  others  is  apparent  enough,  and  it 
is  onh'^  a  little  less  apparent  that  one  is  not  bound  to  all  the  world 
to  make  good  what  he  has  said  in  his  deed  to  the  other  party  to 
it,  even  if  others  have  relied  upon  his  recital.^ 

V.    Waste  hy  Mortgagor. 

684.  Injunction  against. — A  mortgagor  in  possession,  who 
is  about  to  cut  timber,  remove  fixtures,  or  commit  other  waste  on 
the  land,  to  an  extent  calculated  to  render  the  security  inade- 
quate, may  be  restrained  by  injunction  ;  and  it  is  not  necessary 
to  allege  or  prove  his  insolvency."     Whether  the  mortgage  be  re- 

1  Bush  V.  Cushman,  27  N.  J.  Eq.  131,  "  Eden  on  Injunction,  p.  119;  2  Story 

per  Van  Fleet,  V.  C.     "No  reference  to  Eq.   Jur.    §   915;    Goodman    v.   Kine,    8 

books   is    necessary   iu   vindication   of  a  Beav.   379 ;    Usborne  v.   Usborne,    Dick. 

principle  so  clearly  fundamental  in  every  75;  Hippesley  v.  Spencer,  5  Madd.  422; 

system  of  laws  framed  to  promote  justice.  Humphrej's  v.  Harrison,  1  Jac.  &  W.  561 ; 

I  refer  to  the  following  authorities  simply  Bagnall   ?;.  Villar,  L.  R.  12  Ch.  D.  812; 

to  show  how  the  doctrine  has  been   ap-  Harris  v.  Bauuon,  78  Ky.  568 ;    Adams 

plied:"  Martin  v.  Righter,  10  N.J.  Eq.  v.  Coniston,  7    Minn.  456;   Fairbank  v. 

(2  Stockt.)  510,  525 ;  Lee  v.  Kirkpatrick,  Cudworth,  33  Wis.  358 ;   Scott  v.  Web- 

14  N.J.  Eq.  264,  267;  Den  t;.  Baldwin,  21  ster,   50  Wis.   53;    Taylor  v.   Collins,   51 

N.  J.  L.  (1  Zab.)  395,  403;  Cable  v.  Ellis,  Wis.  123  ;  Dorr  v.  Dudderar,  88  111.  107  ; 

86  III  525.  Coker  v.  Whitlock,  54  Ala.  180.     In  the 

^  Cable  r.  Ellis,  st«/jra ;  Smyth  ?;.  Mun-  latter  case,  a  bill  to  enjoin  the  removal 

roe,   84   N.  Y.   354 ;    Smyth   v.   Knicker-  of  rails  half  decayed,  and  the   scattered 

booker  L.  Ins.  Co.  84  N.  Y.  589.  planks  of  a   building  of  little  value,  was 

^  Parlin  v.  Stone,  1  McCrary,  443.  dismissed  because  it  did  not  appear  that 

*  Hartwell  v.  Blocker,  6  Ala.  581.  the  mortgage   security  or  the  permanent 

'"  Bigelow  on  Estoppels,  269.  value  of  the  propertj^  would  be  impaired 

s  Mershon  v.  Mershon,  9  Bush   (Ky.),  by  the  removal.     In  Bunker  v.  Locke,  15 

633.  Wis.  635,  the  complaint  averred   the  in- 

588 


WASTE   BY    MORTGAGOR.  [§  684. 

garded  as  passing  the  legal  estate,  or  as  giving  merely  a  lien  for 
the  debt,  seems  not  to  be  regarded  by  the  courts  in  giving  this 
remedy  against  impairing  the  security .1  That  a  mortgagee  has 
the  legal  estate  may  be  one  ground  for  the  interference  of  a  court 
of  equity  in  this  way  ;  but  the  right  of  the  mortgagee  to  be  pro- 
tected in  his  security  is  a  ground  for  such  interference,  whether 
he  has  the  legal  title  or  not. 

In  order  to  obtain  an  injunction  it  is  not  generally  necessary 
to  show  that  the  threatened  injury  is  literally  irreparable.  It  is 
sufficient  if  there  be  no  adequate  remedy  by  action  for  damages.^ 
Although  the  trespasser  be  a  person  of  undoubted  solvency,  yet 
the  trespass  may  produce  inconveniences  and  perplexities  for 
which  a  jury  could  not,  under  the  rules  of  law,  give  full  corapen- 
sation.3  Mere  inconvenience,  though  the  damage  be  slight,  may 
under  some  circumstances  constitute  irreparable  injury  within  the 
rule  of  equity.'* 

In  Connecticut  it  is  held  that  until  a  decree  of  foreclosure,  and 
the  expiration  of  the  time  limited  for  redemption,  the  mortgagor 
is  not  liable  in  an  action  at  law  for  waste,  in  cutting  and  carry- 
ing away  wood  and  timber,  or  fixtures,  or  parts  of  buildings  ;  but 
that  the  mortgagee's  remedy  is  by  an  injunction  in  equity,  to 
restrain  the  mortgagor  from  impairing  the  security.^  In  New 
York,  also,  the  mortgagee  has  no  property  in  trees  cut  down  by 
the  mortgagor,  such  as  will  enable  him  to  maintain  trover  against 
him.^ 

In  states  where  the  possession  of  the  mortgaged  premises  is  by 
statute  assured  to  the  mortgagor  until  foreclosure  and  the  mort- 
gage is  a  mere  lien,  tiie  mortgagee  has  no  right  to  take  possession 
of  timber  cut  therefrom,  whether  it  be  upon  the  premises  or  not ; 
nor  can  he  maintain  an  action  to  recover  the  possession  of  such 
timber,  or  for  any  fixture  severed  from  the  realty.'      He  may,  per- 

solvency  of  the  mortgagor,  but  the  neecs-  stone  quarried  on   the   mortgaged   lands 

sity  of  the  avermeut  was  not  passed  upon,  after  a  decree  of  foreclosure. 

In  Robinson  v.  Russell,  24  Cal.  467,   the  '  Brady  v.  Waldron,  2  Johu.s.  (N.  Y.) 

acts  complained  of  were   the  removal  of  Ch.  148 ;  Salmon  v.  Clagctt,  3  Bland  Ch. 

fruit  from  trees,  and  of  growing  nursery  (Md.)  125  ;  Nelson  v.  I'incgar,  30  111.  473. 

stock;  and  the  court  held  the  averment  -  Kerr  on  Injunctions,  2d  ed.  pp.  16,  17. 

of  the  mortgagor's  insolvency  to  be  ncccs-  •'  State  Savings  Bunk  v.  Kercheval,  6.5 

sary,  on  the  ground  that  the  mischief  was  Mo.  682. 

not  irreparable.     In  American  Trust  Co.  ■•  Kerr  on  Injunctions,  2d  ed.  pp.  16,  17. 

of  New  Jersey  v.  North  Belleville  Quarry  •'''  Cooper  v.  Davis,  15  Conn.  556. 

Co.  31  N.J.  K(|.  8'J,  a  quarry  company  was  »  Telerson  v.  Clark,  15  Johns.  205. 

restrained  from  removmg  or  disposing  of  '  Vander.'-lice  r.  Knapp,  20  Kans.  647. 

689 


§  684.]  A  mortgagor's  rights  and  liabilities. 

haps,  have  an  action  for  damages  against  a  person  who  wrong- 
fully and  knowingly  impairs  his  security  ;  but  even  this  remedy 
is  denied  by  some  courts;^  and  at  best  this  is  an  uncertain  rem- 
edy as  compared  with  that  afforded  by  an  injunction  restrain- 
ing the  commission  of  waste ;  or  as  compared  with  the  remedy 
afforded  by  actions  at  law  for  the  recovery  of  the  property  re- 
moved from  the  mortgaged  premises,^  in  states  where  the  mort- 
gagee has  the  legal  title  and  right  of  possession.^ 

A  vendee  in  possession  under  a  contract  of  purchase  occupies  a 
like  position  to  that  of  a  mortgagor,  and  may  be  enjoined  in  the 
same  manner  from  committing  waste.^ 

Not  only  may  an  injunction  against  waste  of  the  mortgaged 
property  be  had  on  the  application  of  the  mortgagee,  but  also 
upon  the  application  of  any  one  who  stands  in  the  relation  of  a 
surety  of  the  mortgage  debt,  and  who  is  either  liable  personally 
for  its  payment,  or  whose  property  is  liable,  by  reason  of  being 
embraced  in  the  mortgage.  He  has  a  right  to  protect  the  prin- 
cipal fund,  and  to  save  himself  from  consequent  loss.^  It  may 
also  be  had  upon  application  by  the  purchaser  at  a  foreclosure 
sale,  pending  its  confirmation.^ 

Instead  of  permanently  enjoining  a  mortgagor  from  cutting 
timber,  the  court  may  under  some  circumstances  allow  him  to  cut 
it,  upon  his  securing  the  mortgagee  for  the  value  of  it ;  as,  for 
instance,  where  pine  woodland  had  been  burnt  over,  and  it  was 
proper,  both  for  the  permanent  benefit  of  the  estate  and  in  order 
to  save  the  burnt  wood,  that  this  should  be  cut  off,  the  mort- 
gagor was  allowed  to  proceed  to  do  so,  after  giving  security  for 
the  value  of  the  wood,  as  fixed  by  a  reference  ordered  by  the 
court. ^ 

The  court  in  a  foreclosure  suit  may  after  judgment  and  pending 
confirmation  of  the  sale  restrain  the  mortgagor,  on  the  petition  of 
the  purchaser,  from  committing  waste  ;  otherwise  the  mortgagor 
might  take  away  from  the  control  of  the  court  the  very  thing 
upon  which  it  had  adjudicated.^ 

1  Alexander  v.  Shonyo,  20  Kans.  705.  5  Knarr  v.  Conaway,  42  Ind.  260,  265 ; 

-  Adams  (-•.  Coiriston,  7  Minn.  456.  Johnson  v.  White,  11  Barb.  (N.  Y.)  194. 

3  §§  453-455.  6  Mutual  L.  Ins.  Co.  v.  Nat.  Bank  of 

*  McCaslin    v.    State,     44    Ind.    151;  Newbur^h,  18  Hun  (N.  Y.),  371  ;  Malone 

Thompson  v.  Hey  wood,   129  Mafs.   401 ;  v.  Marriott,  64  Ala.  486. 

Kimball  v.  Darling,  32  Wis.  675;  Taylor  ^  Brick  v.  Getl^iuger,    5   N.  J.  Eq.  (1 

V.  Collins,  51  Wis.  123.  Halst.)  391. 

8  Mutual  Life  Ins.  Co.  v.  Bigler,  79  N. 

590  Y.  568. 


WASTE   BY  MORTGAGOR.  [§§  685-687. 

If  pending  a  preliminary  injunction  to  restrain  waste  the  mort- 
gage is  foreclosed,  and  the  property  purchased  for  enough  to  pay 
the  debt  with  interest  and  costs,  the  injunction  should  be  dis- 
solved.i 

685.  An  injunction  will  not  ordinarily  be  extended  to  re- 
strain the  removal  of  timber  already  cut.  It  then  ceases  to  be 
part  of  the  realty,  and  being  converted  into  personal  property, 
trover  will  lie  for  it.  To  prevent  a  multiplicity  of  suits,  the 
courts,  in  granting  an  injunction  to  stay  the  commission  of  waste, 
have  sometimes  as  an  incident  to  that  deci'eed  an  account  for 
waste  already  done.^  "  It  would  seem,  then,  to  be  a  stretch  of 
jurisdiction,  to  apply  the  injunction  to  this  incidental  remedy, 
and  to  stay  the  use  or  disposition  of  the  chattel.  .  .  .  There 
must  be  a  very  special  case  made  out  to  authorize  me  to  go  so  far, 
and  such  cases  may  be  supposed.  A  lease,  for  instance,  may  have 
been  fraudulently  procured  by  an  insolvent  person,  for  the  very 
purpose  of  plundering  the  timber  under  shelter  of  it.  Perhaps, 
in  that  and  like  cases,  where  the  mischief  would  be  irreparable, 
it  might  be  necessary  to  interfere  in  this  extraordinary  way,  and 
prevent  the  removal  of  the  timber."  ^ 

686.  It  is  not  the  duty  of  a  mortgagee  to  enjoin  waste, 
although  it  is  his  right,  or  the  right  of  a  purchaser  of  the  equity 
of  redemption  of  a  part  of  the  mortgaged  property,  to  enjoin  the 
committing  of  waste ;  and  a  subsequent  mortgagee,  or  a  purchaser 
of  a  part  of  the  mortgaged  property,  cannot  require  an  account 
from  the  mortgagee  of  waste  committed  upon  other  portions  of 
the  pi'operty  by  the  mortgagee  or  others,  and  an  allowance  of  the 
damage  done  in  part  satisfaction  of  the  mortgage  debt.*  Such 
subsequent  mortgagee  or  purchaser,  standing  in  the  position  of  a 
surety  of  the  mortgage  debt,  might  himself  obtain  such  injunc- 
tion. 

687.  Trespass  for  waste  may  be  maintained  by  a  mortgagee 
having  the  legal  estate,  though  not  in  actual  possession,  but  en- 
titled to  it  after  condition  broken.  The  cutting  of  wood  or  tim- 
ber, or  the  committing  of  other  waste,  upon  the  premises,  is  re- 
garded as  an  injury  to  the  freehold  rather  than  to  the  possession. 
The  effect  of  the  mortgage  is  to  vest  the  legal  estate  at  once  in 

1  Ellison  V.  Smyth  (Iowa),  39  N.  W.  »  Watson  v.  Hunter,  5  Joliiis.  (N.  Y.) 
Kcp.  898.  Cli.  1C9,  per  Kent,  ClmnctUor. 

-  Jesus  College  v.  Bloom,  3  Aik.  202;  *  Knarr  u.  Cunaway,  42  Ind.  2G0;  Cole- 
Garth  V.  Cotton,  1  Ves.  528.  man  v.  Smith,  55  Ala.  368. 

591 


§  687.]  A  mortgagor's  rights  and  liabilities. 

the  moi'tgagee,  and  the  right  of  possession  also  immediately 
passes,  unless  the  mortgagor  by  stipulation  retains  the  right  of 
possession  until  condition  broken  ;  and  in  this  case,  after  condi- 
tion broken,  the  right  of  possession  immediately  accrues  to  the 
mortgagee.^  As  an  incident  to  the  right  of  possession  follows 
the  right  to  sue  in  trespass  for  an  injury  to  the  freehold  by  strip 
and  waste.2  'pj^g  possession  of  the  mortgagor  is  not  adverse  to 
the  possession  of  the  mortgagee.  A  second  mortgagee  may  main- 
tain the  action,  upon  a  discharge  of  the  first  mortgage  subse- 
quently to  the  commission  of  the  waste,^  or  upon  a  waiver  b}^  the 
first  mortgagee  of  his  right  of  action. 

But  in  states  where  a  mortgage  is  a  lien  only,  a  mortgagee  not 
in  possession,  and  not  entitled  to  possession,  cannot  maintain  an 
action  of  trespass  for  damages."^ 

It  is  said  that  trespass  against  the  mortgagor  for  waste  will  lie 
for  acts  done  while  he  was  in  possession,  if  the  action  be  brought 
by  the  mortgagee  after  he  has  entered,  —  the  law  by  a  kind  of 
jus  post  liminii  supposing  the  freehold  all  along  to  have  con- 
tinued in  him.^  After  a  mortgagee  has  entered  for  condition 
broken,  he  may  maintain  an  action  for  waste  done  by  a  tenant 
for  life  in  cutting  trees  before  the  entry,  —  and  before  any  breach 
of  condition  ;  and  it  is  no  defence  for  the  tenant  that  the  waste, 
which  consisted  in  cutting  down  trees  on  the  land,  was  committed 
by  a  stranger,  who  was  a  mere  trespasser.^ 

If  the  mortgagor,  after  condition  broken,  cut  timber  and  leave 
it  upon  the  mortgaged  premises  until  the  mortgagee  takes  pos- 
session, having  no  title  to  it  as  against  the  mortgagee,  he  is  liable 
in  trespass  quare  clausum,  or  in  tiover,  or  in  an  action  on  the 

1  Page  V.  Eobinson,  10  Cush.  (Mass.)  Smith  w.  Moore,  11  N.  H.  55 ;  Pettengill 
99;  Hapgood  v.  Blood,  11  Gray  (Mass.),  *-••  Evans,  5  N.  H.  54;  Stowell  v.  Pike,  2 
400.  In  Waterman  v.  Matteson,  4  R.I.  Me.  387  ;  Smith  v.  Goodwin,  2  Me.  173; 
539-543,  the  court  seemed  to  think  that  Linscott  v.  Weeks,  72  Me.  506  ;  Mosher 
trespass,  which  is  an  action  appropriate  v.  Vehue,  77  Me.  469 ;  Harris  v.  Haynes, 
only  to  an  injury  to  the  possession,  could  34  Vt.  220;  Mitchell  v.  Began,  11  Rich, 
not  be  maintained  by  a  mortgagee  who  (S.  C.)  686;  Cole  v.  Stewart,  11  Cush. 
has  never  had  possession.     See  §  688.  (Mass.)    181  ;    Butler    v.   Page,    7   Met. 

In   Pennsylvania   the    mortgagor   may  (Mass.)  40 ;  Atkinson  r.  Hewett,  63  Wis. 

continue  to  cut  and  sell  timber  upon  the  396. 

premises    without  violating   any   of    the         ^  Sanders  v.  Reed,  supra. 
rights  of  the  mortgagee.     Angier  v.  Ag-         *  Pueblo  &  Ark.  Valley  R.  Co.  i-.  Be- 
new,  98  Pa.  St.  587 ;  5.  C.  42  Am.  Rep.  shoar,  8  Colo.  32. 
624  ;    Hoskin   v.   Woodward,  45    lb.  42  ;         ^  Pettengill  v.  Evans,  supra. 
Witmer's  App.  lb.  455.  ^  Fay  v.  Brewer,  3  Pick.  (Mass.)  203. 

2  Sanders    v.   Reed,    12    N.    H.    558  ; 

592 


WASTE   BY    MORTGAGOR.  [§  688. 

case  in  the  nature  of  waste,  for  removing  it.^  If,  under  such  cir- 
cumstances, the  wood  be  attached  as  the  property  of  the  mort- 
gagor and  sold  upon  execution,  the  purchaser  acquires  no  more 
title  than  the  mortgagor  had,  and  he  can.not  be  compelled  to  pay 
the  price  bid  for  it.^ 

But  before  the  condition  of  a  mortgage  is  forfeited,  the  mort- 
gagee is  not  entitled  to  an  action  of  waste  against  the  mortgagor. 
Waste  is  an  injury  to  the  inheritance,  and  an  action  for  waste  is 
given  to  him  who  has  the  inheritance  in  expectancy.  The  inter- 
est of  the  mortgagee,  especially  before  the  mortgage  is  forfeited, 
is  contingent,  and  may  be  defeated  by  payment ;  and  is  not  such 
an  interest  as  will  sustain  the  action.^ 

An  action  of  trespass  by  a  mortgagee  for  the  value  of  a  build- 
ing removed  from  the  mortgaged  premises  pending  proceedings 
for  the  foreclosure  of  the  mortgage  cannot  be  maintained  unless 
the  mortgagee  shows  that  there  is  a  deficiency  upon  a  regular 
foreclosure  and  sale  of  the  mortgaged  property,*  or  that  the  pur- 
chaser acted  fraudulently,  or  with  intent  to  injure  the  mortgagee.^ 

688.  In  like  manner  replevin  may  be  maintained  by  the 
mortgagee  for  timber  cut  or  fixtures  removed  from  the  premises, 
after  condition  broken,  against  the  mortgagor  in  possession,  when 
the  act  results  in  wrongful  waste  and  in  substantial  diminution 
of  the  mortgage  security.  The  wrongful  act  of  the  mortgagor, 
in  severing  the  timber  and  wood  from  the  freehold,  ought  not  to 
deprive  the  mortgagee  of  his  right  to  it  under  the  mortgage  as 
security  for  the  debt.  The  wrong-doer  should  derive  no  advan- 
tage from  his  wrongful  act.^  The  principle  is,  that  property 
severed  from  the  realty  so  as  to  become  a  chattel  belongs  to  the 
legal  owner  of  the  land,  who  is  in  such  case  the  mortgagee ;  and 
that  the  mortgagee  having  such  interest  in  the  land,  and  the  ac- 
tual or  constructive  possession,  may  maintain  an  action  for  the 
value  of  tile  property  severed,  or  an  action  for  the  specific  chat- 
tels. This  is  the  common  law  doctrine.'  There  would  seem  to 
be  "no  reason  why  replevin  will  not  lie  wherever  trover  could  be 
maintained. 

>  Hagar  v.  Braincrd,  44  Vt.  294  ;  Mo-  ^  Rose  v.  Rose,  53  Mich.  585,  587. 

rey  v.  McGuire,  4  Vt.  327  ;  Lull  v.  Mat-  ''  Tomlinson  v.  Tlioinpsoii,  27  Kans.  70. 

thews,   I'J   Vt.  322;   I.aiigdoii  i'.   I'aul,  22  •■•  Waterman    i'.  Mattesoii,  4   R.  I.  .M9. 

Vt.  205.  See  §§  453-455. 

2  Lull  i;.  Muttiicws,  supra.  ''  Holland   v.   IIodj,'soii,   L.   K.  7   C.  P. 

■'»  IVtcrBon  V.  Clark,  15  Johns.  (N.  Y.)  328. 
205. 

VOL.  I.                .J8  593 


§  689.]  A  mortgagor's  rights  and  liabilities. 

A  mortgagee  may  maintain  replevin  for  a  house  severed  from 
the  mortgaged  premises  without  his  consent,  if  the  house  has  not 
become  attached  to  and  a  part  of  other  realty.  Even  after  it  has 
been  so  attached  to  other  realty,  if  it  afterwards  be  severed  from 
that,  before  the  mortgage  debt  is  discharged,  the  mortgagee  may 
regain  it  by  replevin.^ 

Under  a  different  view  of  the  nature  of  a  mortgage,  a  mort- 
gagee cannot  maintain  replevin  for  a  house  built  by  the  mort- 
gagor after  the  making  of  the  mortgage,  and  sold  and  removed 
by  a  purchaser  of  the  premises  before  foreclosure.  "  If  such  an 
action  can  be  maintained,"  say  the  court,  "  a  mortgagee  may  re- 
cover from  the  purchasers  all  the  timber,  stone,  or  other  property 
severed  from  the  realty  and  sold  by  the  mortgagor,  though  its 
value  may  exceed  the  mortgage  debt  an  hundred  fold,  and  how- 
ever ample  the  security  may  remain  ;  although  it  is  quite  clear 
on  principle  and  authority  that  the  purchaser  of  property  so 
removed  b}'  the  mortgagor  cannot  be  liable  in  an  action  for  the 
waste  beyond  the  actual  loss  the  mortgagee  thereby  sustains."  - 

Even  in  New  Jersey,  where  a  mortgage  is  regarded  as  a  con- 
veyance in  fee  simple,  but  still  as  conferring  the  legal  estate  only 
for  the  purpose  of  securing  the  debt,  a  different  view  of  the  mort- 
gagee's remedy  is  taken  in  such  case.  The  only  use  the  mort- 
gagee can  make  of  his  legal  estate  before  foreclosure  or  entry  is 
to  assert  and  maintain  a  right  to  the  possession  of  the  land  until 
the  debt  is  paid.  He  cannot  insist  upon  a  remedy  the  enforce- 
ment of  which  pertains  to  the  general  legal  ownership  of  the  land. 
Neither  is  he  regarded  as  having  a  constructive  possession  of  the 
premises  after  condition  broken  while  the  mortgagor  is  in  actual 
possession  ;  therefore  the  mortgagee  is  denied  any  remedy  founded 
upon  possession.^  But  although  the  mortgagee  cannot  maintain 
replevin  for  the  property  removed,  he  may  maintain  an  action  at 
law,  in  the  nature  of  an  action  on  the  case,  against  the  wrong- 
doer for  the  injury  inflicted.  Although  this  is  not  an  effectual 
remedy  if  the  defendant  be  irresponsible,  yet  it  is  declared  that 
this  is  a  risk  the  mortgagee  has  assumed.* 

689.  The  mortgagee,  being  entitled  to  the  timber  cut  upon 
the  mortgaged  premises,  may  claim  it  in  the  hands  of  a  pur- 

1  §§  143,  453  ;  Dorr  v.  Dudderar,  88  ^  Kirclier  v.  Schalk,  39  N.  J.  L.  335. 
lU.  107.  See  §§  453-455. 

2  Clark  II.  Kevburn,  1  Ivans.  281.  *  Kircher  v.  Schalk,  supra. 

594 


WASTE    BY   MORTGAGOR.  [§  689. 

chaser  from  the  mortgagor.^  Though  not  in  possession,  he  may 
retake  the  property  itself  from  such  purchaser,  or  he  may  recover 
the  vakie  of  it  from  him  in  an  action  of  trover.^  After  he  has 
notified  the  purchaser  of  his  right  to  the  property,  and  forbidden 
his  paying  the  price  of  such  timber  to  the  mortgagor,  the  latter 
cannot  maintain  an  action  for  such  price." 

The  assignee  in  bankruptcy  of  the  mortgagor,  having  taken 
possession  of  wood  and  timber  cut  from  the  mortgaged  premises 
with  notice  of  the  mortgagee's  claim  under  his  mortgage,  is  con- 
sidered as  taking  and  holding  possession  for  the  mortgagee.* 

The  mortgagee  may,  however,  either  directly  or  indirectly, 
waive  his  right  to  the  timber  severed  from  the  land,  and  when 
that  is  the  case  the  purchaser  cannot  resist  pa^'ing  the  price  of  it 
to  the  mortgagor,  from  whom  the  purchase  was  made.  The  fact 
that  the  mortgagee  acts  for  the  mortgagor  as  his  agent  in  collect- 
ing pa}  men t  for  the  timber  is  a  waiver  of  his  own  right.° 

A  moitgagee,  though  not  in  possession,  may  maintain  an  action 
of  tort  in  the  nature  of  trover  against  a  person  whose  servant 
unlawfully  takes  turf  from  the  mortgaged  land,  and  does  it  in  his 
master's  business.'' 

In  New  York,  and  probably  in  other  states  where  the  same 
doctrine  in  relation  to  the  nature  of  mortgages  prevails,  it  is  held 
that  the  title  to  the  wood  cut  from  mortgaged  land  vests  in  one 
who  has  purchased  and  cut  it  without  knowledge  of  the  lien  ;  and 
although  the  security  is  impaired,  and  the  mortgagee  has  after 
the  cutting  notified  the  purchaser  not  to  pay  the  purchase  money 
to  the  mortgagor,  he  cannot  recover  it  in  a  suit  against  the  pur- 
chaser after  he  has  so  paid  it  regardless  of  the  request.'^  It  is 
only  when  the  purchaser  cuts  the  wood  with  knowledge  of  the 
lien,  and  with  the  intent  to  injure  the  holder  of  it,  that  he  is 
liable  to  him  for  the  injury  done  the  security.*^ 

Mortgaged  property  which  has  been  taken  from  the  mortgaged 
lands  may  be  sold  under  a  foreclosure  sale  without  first  recover- 

1  Frotliiu;,'Iiam    v.   McKusick,   24   Me.         ''  Wilinarth     v.     Bancroft,     10     Allen 
403;  Stowell  v.  Pike,  2  Me.  387  ;  Gore  v.     (Mass.),  348. 

Jenncss,  19  Me.  53;  Waterman  v.  Matte-  ■»  In  re  liiuce,  9  IJcn.  23G. 

8on,  4  11.  I.  .539;  Adams  v.  Corriston,  7  *  Kimball  v.  Lewiston  Steam  Mill  Co. 

.Minn.  4.')6  ;  Bus.-ey  v.  Page,  14  Me.  132.  55  Me.  494. 

2  Scarle  v.  Sawyer,  127  Mass.  491 ;  Wil-  *>  Wilbur  v.  Moulton,  supra. 

I.ur  V.  Moulton,  127  Ma-s.  509  ;  Langdon         '  Wilson  v.  Mallby,  59  N.  Y.  126, 
r.  Paul,  22  Vt.  205;  Smith  v.  Moore,  11         «  Van  Pelt  v.  McGraw,  4  N.  Y.  110. 
N.  H.  55. 

595 


§§  690-692.]     A  mortgagor's  rights  and  liabilities. 

ing  possession  of  it  by  an  action  at  law.  Thus,  timber,  posts, 
rails,  and  cord-wood  made  from  trees  on  mortgaged  premises, 
fraudulently  cut  by  the  mortgagor  and  removed  to  neighboring 
lands,  may  be  sold  upon  foreclosure  to  make  up  a  deficiency  in 
the  mortgage  debt,  after  a  sale  of  the  land.^ 

690.  The  mortgagee  has  no  right  of  action  after  payment. 
If  the  mortgagee  purchase  tlie  mortgaged  premises  at  the  fore- 
closure sale,  for  the  full  amount  then  due  on  the  mortgage,  he  has 
no  claim  to  logs  previously  cut  upon  the  premises.^  When  he 
has  been  paid  his  debt  his  right  of  action  is  gone,  although  the 
trespass  upon  the  property  was  committed  before  the  payment.'^ 

691.  The  mortgagee  must  account  upon  the  mortgage  debt 
for  whatever  sum  he  may  recover  from  the  person  who  has  cut 
timber  upon  the  mortgaged  estate,  or  for  whatever  he  may  re- 
ceive from  the  sale  of  the  timber  itself,  when  he  has  taken  pos- 
session of  that."* 

692.  If  the  mortgagor  has  a  license  to  cut  timber,  of  course 
such  cutting  is  not  waste,  and  such  license  may  be  implied  from 
the  terms  of  the  mortgage,  as  in  the  case  of  one  given  as  secu- 
rity for  a  note  payable  in  wood,  in  which  it  was  provided  that 
the  mortgagor  was  "  not  to  cut  wood  or  timber  upon  the  said 
estate  except  for  the  payment  of  said  note,  to  reduce  the  value 
below  the  amount  secured  with  interest  annually."  Even  after 
a  breach  of  the  condition  of  the  mortgage,  the  mortgagor  may  cut 
timber  to  any  extent,  provided  he  does  not  so  strip  the  land  as 
to  leave  it  of  less  value  than  tlie  amount  then  due  upon  the  mort- 
gage note.^ 

Whether  the  cutting  of  wood  and  timber  is  wrongful  or  not 
depends  upon  the  question  whether  a  license  to  do  the  act  has 
been  expressly  given,  or  may  be  fairly  implied  from  the  circum- 
stances of  the  case;  and  this  a  question  for  the  jury.^ 

1  Higgins  i\  Chamberlin,  32  N.  J   Eq.  "  Searle    v.    Sawyer,    127    Mass.   491  ; 

566.  Smith  v.  Moore,    11  N.  H.  55;   Page  v. 

-  Berthold  v.   Holman,  12  Minn.  335;  Robinson,  10  Cush.  (Mass.)  99. 

Corbiu  V.  Reed,  43  Iowa,  459.  "  If  a  mortgage  be  of  a  dwelling-bouse, 

3  Kennerly  v.  Burgess,  38  Mo.  440.  the  mortgagor  may  do  many  acts,  such  as 

*  Guthrie  ?;.  Kahle,  46  Pa.  St.  331.  acts  of   repair  or  alteration,  which   may 

5  Ingell  V.  Fay,  112  Mass.  451.     For  a  involve  the  removal  of  parts  of  the  realty, 

case  where  the  mortgagee  had  license  to  which   would    not   be   wrongful,    because 

cut  a  certain  amount  of  timber,  and  was  within  the  license  implied  from  the  rela- 

held  to  account  for  timber  cut  in  excess  tious  of    the  parties.     If  a  farmer  mort- 

of  that  amount,  see  Scott  v.  Webster,  50  gages  the  whole  or  a  part  of  his  farm,  with 

Wis.  53.  a  clause  permitting  him  to  retain  posses- 

696 


WASTE   BY   MORTGAGOR.  [§§  693,  694. 

Where  the  mortgagee  has  waived  his  right  to  the  timber  cut 
by  the  mortgagor,  or  has  directly  assented  to  his  cutting  it,  or 
liis  assent  may  be  fairly  inferred  from  the  circumstances  of  the 
case,  he  cannot  afterwards  claim  it  or  treat  the  mortgagor  as.  a 
trespasser.^ 

693.  The  court  will  not  allow  an  abuse  of  a  privilege  of 
cutting  wood  and  timber  from  the  mortgaged  premises,  but  will 
restrain  the  exercise  of  it  to  an  extent  calculated  to  render  the 
premises  an  insufficient  security.^  But  there  must  be  an  allega- 
tion in  the  bill,  and  proof  that  the  land  would  not  be  an  adequate 
securit}^  for  the  payment  without  the  timber.^ 

No  authority  to  commit  waste  by  cutting  off  wood  and  timber 
can  be  implied  from  the  fact  that  the  land  was  purchased  by  the 
mortgagor  for  improvement  for  villa  sites,  nor  from  the  price  paid 
for  it.-^ 

If  a  mortgagee  permits  the  owner  of  the  land  to  sell  the  wood 
under  an  agreement  that  the  purchase  price  shall  be  paid  to  him, 
and  the  purchaser,  without  knowledge  of  the  lien,  goes  on  to  cut 
the  wood,  he  is  then  under  no  legal  duty  to  defer,  at  the  mort- 
gagee's request,  paying  the  price  of  the  wood  to  the  owner,  and, 
no  legal  proceedings  having  been  taken  to  prevent  it,  payment  to 
him  is  a  valid  discharge  of  the  debt.^ 

694.  The  mortgagor  in  possession  of  a  farm,  after  condi- 
tion broken,  may  cut  wood  for  his  own  fires,  for  repairing 
fences,  and  for  other  purposes,  according  to  the  well  known  and 
existing  usages  of  ordinary  husbandry.*'  "  The  well  known  and 
existing  usages  as  to  the  mode  of  carrying  on  a  farm  to  which  a 
wood  lot  is  attached,  both  as  to  the  cutting  of  suitable  wood  for 

sion,  it  is  within  the  contemplation  of  the  the  parties."      Per  Morton,  J.,  in  Searle 

parties  that  he  is  to  carry  on  his  farm  in  v.  Sawyer,  127  Mass.  491,  494. 

the  usual  mauiier,  and  a  license  to  do  so         ^  Smith  r.  Moore,  11  N.  II.  5."). 

is  implied.     In  such  case  it  is  clear  that         "^  Emmons   i-.  Hinderer,  24   N.  J.  Eq. 

he  is  entitled   to  take  the  annual  crops,  39;  Ensign  v.  Colburn,  11  Paij,'e  (N.  Y.), 

and  wood  for  fuel.     Woodward  v.  Pickett,  503  ;  Scott  v.  Webster,  .50  Wis.  .')3. 

8  Gray,  CI 7.     And  we  do  not  think  tliat         '^  Van  Wyck  v.  Allit;er,  tj  IJaib.  (N.  Y.) 

the  implied  license  is  necessarily  limited  507,   511,   and    cases    cited;    Buckout   v. 

to  the  annual  crops,  but  that  it  extends  to  Swift,  27  Cal.  433  ;  Hill  v.  Cnvin,  51  Cal. 

any  acts  of  carrying  on  the  farm  which  47. 

are  usual  and  projier  in  the  course  of  good         *  Coggill  v.  Miilburii  Land  Co.  25  N.J. 

husbandry.      If,   in   carrying    on   similar  Eq.  87. 

farm.s,  it  is  usual  and  is  good  husbandry         ''  Wilson  v.  Maltby,  59  N.  Y.  126. 

to   cut   and    carry   to   maiket  wood   and         "  Ilapgood  v.  Blood,  11   (J ray  (.Mass.), 

timber  to  a  limited  extent,  a  license  to  do  400;   Page  i'.  Kobinson,  10  Ousli.  (.Mass.) 

this  might  be  imjilied  from  the  relation  of  99,  102;  Smith  i;.  Moore,  1 1  N.  II.  55,  02. 

597 


§  695.]  A  mortgagor's  rights  and  liabilities. 

fires,  iind  of  timber  for  repairing  fences,  are  not  to  be  overlooked, 
and  tliey  may  furnish  justification  for  such  acts."  ^  And  if  he 
cut  wood  in  good  faith  for  his  own  use  as  fire-wood,  before  condi- 
tion broken,  as  he  may  rightfully  do,  the  title  to  it  is  not  ciianged 
by  the  subsequent  foreclosure  of  the  mortgage  while  the  wood 
still  remains  upon  the  ground,  and  the  mortgagor  may  remove  it 
witliout  being  held  in  trover  for  so  doin"".^ 

695.  Action  against  mortgagor  for  injury  to  the  property.  — 
The  mortgagor,  or  the  owner  of  the  equit}',  has  no  more  right  than 
a  stranger  to  impair  the  security  of  the  mortgagee  by  removal  of 
buildings  or  fixtures,  thereby  causing  substantial  and  permanent 
injury  and  depreciation  to  the  security.  The  mortgagee's  right 
of  action  in  such  case  is  based  upon  his  interest  in  the  property  ; 
and  the  damages  are  measured  by  the  extent  of  the  injury,  and 
not  by  the  extent  of  the  insufficiency  of  the  remaining  security. 
Although  the  property  in  its  damaged  condition  be  of  sufficient 
value  to  satisfy  the  mortgage  debt,  he  is  entitled  to  damages  all 
the  same.  It  is  his  right  to  hold  the  entire  mortgaged  estate  for 
the  full  payment  of  his  demand.^ 

One  holding  land,  both  as  mortgagee  and  as  grantee  of  the 
mortgagor,  is  liable  for  waste  to  a  second  mortgagee.^ 

If  a  prior  mortgagee  settle  in  good  faith  and  for  a  reasonable 
sum  paid  in  satisfaction  for  the  injury,  the  claim  of  a  subsequent 
mortgagee  is  discharged,  and  his  right  of  action  for  the  injury 
barred  ;  but  it  is  competent  for  him  to  show  that  the  articles  so 
removed  were  of  greater  value  than  the  sum  paid  in  satisfaction 

1  Per  Dewey,  J.,  in  Hapgood  v.  Blood,  cutting  wood  not  necessary  for  fire-wood 
11  Gray  (Mass.),  400.  to  be  used  on  said  land  by  the  family  of 

2  Wright  V.  Lake,  30  Vt.  206.  the  mortgagor,   or  by  any  other  means, 

3  §§  453-455,  721 ;  Byrom  v.  Chapin,  without  the  consent  in  writing  of  whoever 
113  Mass.  308;  Gooding  v.  Shea,  103  appears  of  record  to  be  the  owner  of  or 
Mass.  360  ;  Woodruff  v.  Halsey,  8  Pick,  interested  in  such  mortgage,  and  with  in- 
(Mass.)  333;  King  v.  Bangs,  120  Mass.  tent  to  defraud  any  owner  or  person  inter- 
514.  ested  in  such   mortgage,  or  with    intent 

In  Connecticut  it  is  provided  by  statute  to  lessen  the  value  of  the  property  subject 
that  any  person  claiming  the  right  of  pos-  to  such  mortgage,  to  the  injury  of  any 
session,  whether  as  mortgagor  or  other-  person  owning  or  interested  in  such  mort- 
wise,  to  any  land  subject  to  any  mortgage  gage,  shall  be  guilty  of  a  misdemeauor, 
duly  executed  and  recorded,  who  shall,  and  shall  be  punished  by  a  fine  not  ex- 
while  such  mortgage  is  unreleased  of  rec-  ceeding  one  hundred  dollars,  or  by  im- 
ord,  impair  the  value  of  the  premises  sub-  prisonment  not  exceeding  three  months, 
ject  to  such  mortgage  by  removing,  de-  or  by  both.  Acts  187'J,  p.  392. 
stroying,  or  injuring  any  building  or  *  Scott  v.  Webster,  50  Wis.  53. 
fixture  on  the  land  so  mortgaged,  or  by 

698 


WASTE   BY   MORTGAGOR.  [§  695  a. 

to  the  first  mortgagee ;  and  also  to  show  that  the  damage  caused 
the  premises  was  greater  than  that  sum.^ 

A  junior  mortgagee  is  entitled  to  compensation  for  waste  com- 
mitted by  the  owner  in  violation  of  an  injunction  granted  in  an 
action  to  foreclose  the  senior  mortgage,  between  the  date  of  the 
judgment  of  foreclosure  in  that  suit  and  the  date  of  the  sale  there- 
under. Such  claim  is  a  legal  claim.  After  the  foreclosure  and 
sale  under  the  senior  mortgage,  it  is  not  necessary  for  the  junior 
mortgagee  to  foreclose  his  mortgage  before  bringing  suit  for  the 
injury  .2 

A  mortgagee  may  have  an  action  for  injury  done  to  the  mort- 
gaged property  by  a  mob.  If  he  has  foreclosed  his  mortgage 
after  the  damage  was  done,  and  has  himself  become  the  purchaser 
at  the  sale,  in  order  to  recover  he  must  prove  not  only  the  injury 
to  the  property,  but  his  own  loss  of  a  part  of  the  mortgage  debt 
in  consequence.^ 

Where  a  mortgage  is  regarded  as  a  lien  merely,  and  does  not 
vest  title  to  the  land  in  the  mortgagee,  the  rule  is  that  the  dam- 
ages which  the  mortgagee  may  recover  against  a  third  person  in 
trespass  on  the  case  are  limited  to  the  amount  of  injurj^  to  the 
mortgage  as  a  security,  however  great  the  injui'y  to  the  land  may 
be.^  In  some  cases  it  has  been  held  to  be  necessary  to  show  that 
the  mortgagor  is  insolvent,  or  not  personally  responsible  for  the 
debt,  before  a  suit  for  damages  can  be  sustained. ° 

695  a.  The  mortgagee  is  entitled  to  recover  damages  for  a 
permanent  injury  to  the  mortgaged  land  by  a  third  person, 
whereby  the  value  of  the  security  is  impaired.^  His  rigiit  to  sue 
for  and  recover  such  damages  is  paramount  to  the  right  of  the 
mortgagor ;  though  of  course  he  will  hold  the  damages  he  may 
recover  under  the  mortgage,  to  apply  so  much  as  may  be  needed 
to  satisfy  his  mortgage,  and  the  remainder  for  the  benefit  of  the 
mortgagor.  Ho  must  act,  therefore,  with  a  due  regard  to  the  in- 
terests of  the  mortgagor.  But  having  reference  to  such  inter- 
ests and  acting  in  good  faith,  he  may  submit  such  claim  for  dam- 
ages to  arbitration,  or  may  compromise  it ;  and  his  settlement  and 

I  IJyrom  1-.  Cliaiiin,  113  Mass.  308.  ^'  Giinlner  r.   Ileaitt,  3    Den.   (N.   Y.) 

-  Whorton    v.   Webster,  .56    Wis.   35G ;  232. 

Scott  »;.  Webster,  50  Wis.  53.  «  Rearle    v.    Sawyer,    127     Mass.    491; 

8  Levy  L'.  New  York,  3  Kobt.   (N.  Y.)  Wilbur     v.   Moulton,  lb.    509;  James  r. 

194.  Worcester,   141    Mass.  361  ;  Atkinson  u. 

*  Mort'an  >:  Gilbert,  2  Klip.  C45  ;  -V.  C.  Ilewctt,  63  Wis.  396. 
2  Fed.  Ui;]>.  835.     In  tliis  case  the  mort- 
gagor was  insolvent.  Oov 


§§  696,  697.]     A  mortgagor's  rights  and  liabilities. 

release  of  the  claim  will  be  a  bar  to  an  action  by  the  mortgagor 
upon  the  same  claim. ^ 

696.  When  the  mortgagee  has  not  such  possession  of  the 
mortgaged  premises  as  will  enable  him  to  maintain  trespass 
for  a  wrongful  or  fraudulent  injury  to  the  premises  whereby  his 
security  is  impaired,  he  may  have  an  action  on  the  case  against 
the  mortgagor  or  other  person  who  has  committed  the  wrongful 
act.^  Thus  a  purchaser  from  the  mortgagor,  who,  with  knowl- 
edge of  the  mortgage  and  of  the  mortgagor's  insolvency,  takes 
away  the  fences  and  cuts  down  and  carries  away  valuable  timber, 
is  liable  to  such  action,  and,  in  order  to  sustain  the  action,  it  is 
not  necessary  to  show  that  the  defendant's  motive  was  to  injure 
the  plaintiff's  security.  He  is  presumed  to  intend  the  necessary 
consequences  of  his  acts.^  To  sustain  such  action  it  must  be 
alleged  and  proved  that  the  mortgagee's  security  is  actually  im- 
paired ;  that  the  security  after  the  injury  is  insufficient,  and  that 
the  mortgagor  is  insolvent.  Consequently,  where  it  appeared,  in 
an  action  against  a  purchaser  from  the  mortgagor  for  removing 
buildings  from  the  mortgaged  premises  after  tiiey  had  been  ad- 
vertised for  sale  under  a  power,  that  the  property  was  worth  more 
than  the  mortgage  debt,  the  action  was  not  sustained.* 

It  has  been  held  that  a  mortgagee  has  not  such  a  direct  title 
to  the  property  as  to  enable  him  to  maintain  an  action  against  a 
third  person  for  an  injury  done  the  premises  through  his  negli- 
gence, though  he  might  do  so  if  the  injury  were  done  with  the 
express  intent  to  damage  the  premises,  the  mortgagor  being  un- 
able to  pay  the  debt ;  thus  an  action  cannot  be  maintained  by 
him  for  negligently  removing  earth  from  a  hill  adjoining  the 
mortgaged  premises  in  such  a  manner  as  to  allow  the  earth  to 
slide  down  upon  the  premises  and  injure  them,  although  it  might 
be  maintained  if  the  act  had  been  done  fraudulently,  with  the 
intent  to  injure  the  mortgagee.^ 

697.  Emblements.  —  The  mortgagor,  until  foreclosure  or  pos- 
session taken  by  the  mortgagee,  is  entitled  to  emblements,  and, 
when  they  are  severed,  has  an  absolute  right  to  them  without 
any  liability  to  account  for  them.     They  are  covered  by  the  mort- 

1  James  v.  "Worcester,  141  Mass.  361.  3  Van  Pelt  v.  McGraw,  4  N.  Y.  110. 

2  Yates  V.  Joyce,  11  Johns.  (N.  Y.)  136;  *  Lane  v.  Hitchcock,  supra;  Chelton  v. 
Lane  v.  Hitchcock,  14  lb.  213  ;  Allison     Green,  65  Md.  272. 

V.  McCune,   15    Ohio,  726  ;  Carpenter  v.         ""  Gardner  v.   Heartt,   3   Den.  (N.  Y.) 
Canal  Co.  35  Ohio  St.  307.  232. 

600 


WASTE   BY   MORTGAGOR.  [§  697. 

gage  until  severance,  but  belong  to  the  raoi'tgagor  afterwards.^ 
A  mortgagee  not  in  possession  cannot,  therefore,  maintain  tres- 
pass qiiare  dausum  against  one  who  cuts  and  removes  the  grass,^ 
or  other  annual  crops.  The  same  rule  applies  to  an  ice  crop  cut 
by  the  mortgagor  or  his  lessee  before  a  foreclosure  of  the  mort- 
gage.3 

Trees  and  shrubs  planted  in  a  nursery,  for  the  purpose  of  culti- 
vation and  growth,  until  they  are  fit  to  be  sold  and  transplanted, 
pass  by  a  mortgage  of  the  land,  so  that  the  mortgagor  cannot 
remove  them  as  personal  chattels.^  But  if  the  mortgagee  had 
notice  that  the  trees  belonged  to  a  firm  of  which  the  mortgagor 
was  a  member,  though  planted  on  his  land  with  his  assent,  the 
firm  has  the  right  to  remove  them.^ 

A  mortgagor  compelled  to  surrender  the  estate  is  not,  like  a 
tenant  at  will,  entitled  to  emblements.  The  mortgagee  may  evict 
him  without  notice,  and  retain  the  emblements.^  A  lessee  hold- 
ing uuder  the  mortgagor  by  a  lease  granted  subsequently  to  the 
mortgage,  and  without  the  mortgagee's  concurrence,  has  no 
greater  rights  than  the  mortgagor ;  and  when  evicted  by  the 
paramount  title  of  the  mortgagee,  as  he  may  be  without  notice, 
he  cannot  retain  the  emblements."  A  purchaser  at  a  foreclosure 
sale  is  entitled  to  the  crops  growing  at  the  time  of  the  sale,  and 
may  maintain  trespass  against  the  mortgagor  or  his  lessee  for 
taking  and  carrying  them  away ;  ^  or  replevin  for  the  property.^ 
If  the  mortgagee  become  the  purchaser  at  such  sale,  he  may  main- 
tain the  action. ^*^  Moreover,  the  purchaser  at  the  foreclosure  sale 
may  by  injunction  restrain  the  mortgagor  from  taking  the  crops, 

1  Woodward  !;.  Pickett,  8  Gray  (Muss),  *  Maples    v.    Millon,    31    Conn.    598; 

617;  Colman  v.  Duke  of  St.  Albans,  3  Chiles  t-.  Wallace,  83  Mo.  84. 

Ves.  Jun.  2.'3;  Toby  r.  Reed, 9  Conn.  216;  ^  King  v.   Wilcomb,  7    Barb.    (N.   Y.) 

Gillett  V.  Balcom,  6  Barb.   (N.  Y.)370;  263. 

Cooper  V.    Cole,  38    Vt.    185;  Brown   v.  '^  Downard  r.  Groff,  40  Iowa,  597  ;  Gil- 

Thurston,   56  Me.    126;  I'erley  v.  Chase  man  v.  Wills,  66  Me.  273. 

(Me.),  11   Atl.  Rep.  418;  Rankiu  i-.  Kin-  'Jones    v.  Thomas,   8    Blackf.    (lud.) 

sey,  7  Bradw.  (III.)  215;  /n  re   Bruce,  9  428;  Anderson  r.  Strauss,  98  111.  485. 

Ben.  236  ;  Welp  i\  Gunther,  48  Wis.  543;  '  Shepard  v.  Piiilbrick,  2  Den.  (N.  Y.) 

4  N.  W.  Rep.  647;  Allen  v.  Elderkin,  62  174;  Downard  y.  Groff,  sH/;ra. 

Wis.  627;  22  N.  W.  Rep.  842.  '■'  §  1658;  Scriven  v.  Moote,  36  Mich. 

-  Hewes  v.  Bickford,  49  Me.  71  ;  Wood-  64  ;  Aldrich  v.  Reynolds,  1  Barb.  (N.  Y.) 

ward  (;.  Pickett,  «u/)ra  ;  Page  v.  Robinson,  Ch.  613. 

10  Cusli.  (Mass.)  99.  •''  Lane  v.  King,  8  Wend.  (N.  Y.)  584. 

'^  Gregory   i*.    Rosenkran.s    (Wis.),    39 
N.  W.  Rep.  378. 

601 


§  698.] 


A  mortgagor's  rights  and  liabilities. 


and  may  restrain  his  creditor  from  proceeding  under  execution  to 
levy  upon  them.^ 

698.  The  purchaser  may  waive  this  right.  A  mortgagor 
who  was  in  default  sowed  a  field  on  the  mortgaged  premises  with 
rye.  He  died,  and  his  administrator  sold  the  crop.  Before  it  was 
taken  off,  the  mortgage  was  foreclosed  under  a  power  of  sale, 
and  at  the  sale  the  auctioneer  announced  that  the  rye,  having 
been  sold,  was  reserved.  The  purchaser  at  the  mortgage  sale 
claimed  the  crop;  but  he  was  adjudged  not  entitled  to  it,  though 
he  would  have  been  had  it  not  been  expressly  excepted.^ 


1  Crews  V.  Pendleton,  1  Leigh  (Va.), 
297. 

2  Sherman  v.  Willett,  42  N.  Y.  146. 
Chief  Justice  Earl  said  :  "  While  a  mort- 
gairee  is  not  liound  to  sell  the  mortgaged 
premises  in  parcels  unless  they  are  in  the 
mortgage  described  in  parcels,  yet  I  have 
no  doubt  he  may  do  so  where  the  prem- 
ises are  so  situated  that  he  can  sell  in 
parcels  ;  and  in  such  a  case,  when  he  has 
sold  land  enough  to  satisfy  his  mortgage, 
he  need  sell  no  more  ;  and  in  such  a  case, 
if  any  one  can  complain  of  a  sale  by  par- 
cels, and  stek  to  avoid  the  foreclosure,  it 
certainly  cannot  be  a  purchaser,  but  must 
be  some  one  at  the  time  interested  in  the 
equity  of  redemption.  When  it  is  ad- 
mitted that  a  mortgagee  can   release   a 

602 


portion  of  the  premises  and  sell  the  re- 
mainder, although  they  are  described  as  a 
whole  in  the  mortgage,  I  do  not  see  why 
he  may  not  sell  the  same  portion  before 
releasing  any.  In  this  case,  the  mortgage 
was  a  lien  upon  the  whole  premises,  in- 
cluding the  rye,  and  at  the  time  of  sale 
the  mortgagee  announced  that  he  would 
not  sell  the  rye,  but  would  sell  the  bal- 
ance. The  purchaser  knew  this,  and  bid 
with  this  understanding.  The  rye  was 
not  sold.  The  purchaser  did  not  buy  it. 
How  can  he  claim  it"?  If  the  sale  was 
void  because  not  regularly  made,  and  be- 
cause the  entire  premises  were  not  sold, 
then  certainly  the  defendant  has  no  stand- 
ing upon  which  he  can  base  any  claim  U> 
the  rye." 


CHAPTER   XVI. 
A  mortgagee's  rights  and  liabilities. 

I.  The  nature  of  his  estate  or  interest,  I  III.  His  liability  to  third   persons,   722- 
699-706.  I  734. 

II.  His    ri<;hts  against    the    mortgagor,  I 
707-721.  I 

I.    The  Nature  of  his  JEstate  or  Interest. 

699.  The  mortgagee  is  not  in  a  general  sense  the  owner 
of  the  mortgaged  estate,  although,  as  ah'eady  noticed,  under  the 
common  law  doctrine  be  holds  the  legal  title  to  the  estate.^  Be- 
fore foreclosure  he  can  be  regarded  as  the  owner  only  in  a  vei-y 
limited  sense.  A  mortgage  of  certain  lands,  "  with  all  the  other 
lands  I  own  in  the  town  of  Norfolk,"  was  held  not  to  pass  the 
title  to  land  which  the  grantor  held  by  a  deed  absolute  in  its 
terms,  which  was  in  fact  a  mortgage,  though  the  defeasance  by  a 
separate  instrument  had  not  been  recorded.^  For  some  purposes, 
however,  he  may  be  regarded  as  an  owner  after  he  has  taken  pos- 
session ;  ^  but  before  he  has  taken  possession  it  seems  that  there 
is  no  sense  in  which  he  could  be  so  regarded,  unless  it  be  with 
reference  to  a  proceeding  to  enforce  his  rights  as  mortgagee.^ 

700.  A  mortgage  before  foreclosure  is  completed  is  per- 
sonal assets,  and  upon  the  death  of  the  mortgagee  vests  in  his 
executor  or  administrator.  The  mortgage  can  be  transferred,  I'e- 
leased,  or  foreclosed,  only  by  the  executor  or  administrator.^  A 
quitclaim  deed  by  the  heir  at  law  passes  no  title  whatever  in  the 
premises,*'  although  such  a  deed  by  the  executor  or  administrator 
would  transfer  the  mortgage  interest  by  way  of  assignment;'  and 
even  if  the  heir  at  law  be  at  the  same  time  administrator,  his  deed 

1  §§  11-59.  3  Lowell  V.  Shaw,  15  Me.  242. 

•^  Mills   V.   Shepard,  30  Conn.    98.     In         ■»  Great  Falls  Co.  v.  Worstcr,  15  N.  II. 

this   ca.se    there    was    no    pr0'>f    that    the  412;  Norwich  i'.  Iliihhuid,  22  Conn.  .587. 
niortga;,'ce  had  cxHniiiied  the  records,  and         ^  So  by  statiito  in   Oiiio.    R.   S.    1680, 

had  taken  the  inortf,'a^'e  relying  upon  tlio  §  G070  ;  IJaldwin  v.  liatchctt,  56  Ala.  4C1. 
security  of  the  land  in  (juestion.     Wiiat         «  Conner  v.  Whitniore,  52  Mo.  Ip5. 
the  effect  of   such  evidence  would  have         ^  Collamer  i;.  Langdon,  29  Vt.  32. 
been  is  kft  in  doubt. 

603 


§  701.]  A  mortgagee's  rights  and  liabilities. 

will  not  operate  as  an  assignment  of  the  mortgage  if  he  does  not 
convey  in  the  capacity  of  administrator.^  The  mortgage  title 
vests  in  the  personal  representative,  who  may  without  any  order 
of  court  assign  or  discharge  it,  or  take  possession  of  the  property, 
or  proceed  to  foreclose  it  by  suit.^  When  foreclosure  is  had  by 
entry  and  possession,  or  by  strict  foreclosure,  the  title  to  the 
property  upon  the  completion  of  the  foreclosure  may  ultimately 
vest  in  the  heir  at  law;  but  it  vests  in  him  as  a  distributee  of  the 
personal  estate,  and  is  first  subject  to  the  payment  of  the  debts  of 
the  deceased.  The  fact  that  there  are  no  outstanding  debts  does 
not  show  that  the  title  of  the  administrator  is  terminated  ;  but 
a  decree  of  distribution  is  necessai-y  for  this,  and  to  determine  in 
whom  the  property  shall  vest  after  the  trust  in  him  is  satisfied.^ 
The  heirs  of  a  mortgagee  have  no  right  as  such  to  enter  for  con- 
dition broken,  or  to  take  any  action  to  enforce  payment  of  the 
mortgage.  The  debt  belongs  to  the  executor  or  administrator, 
and  the  mortgage,  which  is  security  for  the  debt,  equally  belongs 
to  him.*  If  the  heir  cuts  and  carries  away  wood  and  timber 
from  the  mortgaged  premises,  he  is  liable  in  trespass  to  the  ad- 
ministrator of  the  mortgagee,  who  is  in  possession  by  entry  or 
judgment  for  foreclosure.^  A  gift  by  will  of  a  mortgage,  or  of 
the  testator's  interest  as  mortgagee  of  a  parcel  of  land,  is  a 
bequest  of  personal  property  only,  and  passes  no  title  in  the 
land.6 

701.  The  interest  of  a  mortgagee  cannot  be  levied  upon 
or  attached  for  his  debts  before  foreclosure.  Some  of  the  earlier 
cases  only  decide  that  the  interest  of  the  mortgagee  before  entry 
is  not  attachable  ;  but  as  all  the  inconveniences  that  would  at- 
tend an  attachment  before  entry  continue  until  foreclosure  is 
complete,  the  law  seems  to  have  become  settled  that  no  attach- 
ment of  the   mortgagee's  interest  can   be  made   till  foreclosure.'' 

1  Douglass  y.  Durin,  51  Me.  121.  Allen,  235;    Portland   Bank   v.   Hall,  13 

-  CoUamer    v.    Langdon,   29    Vt.    32;  Mass.    207;    Blanchard   v.    Colburn,    16 

Webster  v.  Calden,  56  Me.  204 ;  R.  S.  of  Mass.   345 ;   Eaton  v.    Whiting,   3   Pick. 

Wis.  1878,  §3829.  484;  New  York:   Jackson  v.  Willard,  4 

3  Taft  V.  Stevens,  3  Gray  (Mass.),  504.  Johns.  41  ;  Riinyan  v.  Mersereau,  11   lb. 

•*  Smith  V.  Dyer,  16  Mass.  18  ;  and  it  is  534;  Jackson  v.  Dubois,  4  lb.  216;  Hitch- 
so  provided  by  statute  ia  this  state.  Gen.  cock  v.  Harrington,  6  lb.  290;  Collins 
Stat.  ch.  96,  §§  9,  10.  v.  Tony,  7  lb.  278;  John.-on  v.  Hart,  3 

5  Stevens    v.  Taft,    11    Gush.    (Mass.)  Johns.  Gas.  322, 329.    Connecticut:  Hunt- 

147.  ington  v.  Smith,  4    Conn.    235;    Fish   v. 

•^  Martin  v.  Smith,  124  Mass.  111.  Fish,  1  Conn.  559.     Delaware:  Cooch  v. 

'  Massachusetts :    Marsh   v.   Austin,    1  Gerry,  3   Harr.  280.     Maine :   Brovi^n  v, 

604 


THE   NATURE    OF   HIS   ESTATE    OR   INTEREST.  [§  702. 

While  the  right  of  redemption  remains,  tlie  mortgagor  might  be 
mucli  embarrassed  by  the  levy  of  executions.  Until  this  hap- 
pens, the  mortgaged  premises  continue  to  be  real  estate  in  the 
hands  of  the  mortgagor,  and  liable  to  be  sold  on  execution  against 
him. 

Neither  is  the  interest  of  the  beneficiary  in  a  deed  of  trust  ex- 
ecuted to  secure  a  debt  subject  to  a  judgment  lien  or  to  sale  upon 
execution.^  Even  when  the  mortgage  is  made  by  an  absolute 
deed  with  a  separate  agreement  executed  at  the  same  time  to  re- 
convey,  the  mortgagee's  interest  is  not  subject  to  a  judgment  lien 
or  execution  until  the  mortgagor's  interest  has  been  divested  by 
foreclosure  or  otherwise.- 

702.  The  mortgagee  is  entitled  to  immediate  possession, 
in  the  absence  of  any  agreement  to  the  contrary.  He  may  enter 
upon  the  estate  under  his  deed,  even  before  condition  broken, 
and  may  maintain  an  action  against  the  mortgagor  as  a  trespasser, 
or  in  a  writ  of  entry  recover  against  him  as  a  disseisor,  if  he  re- 
fuse to  yield  possession.  The  mortgagee  has  the  remedies  of  an 
owner  for  the  purpose  of  enforcing  his  lien  against  the  mortgagor 
or  any  one  claiming  under  him,  but  he  has  them  for  this  purpose 
only.^  Though  restrained  from  entering  upon  the  mortgaged 
premises  and  taking  possession  before  breach  of  the  condition,  he 

Bates,  55  Me.  520.     Illinois  :  Nicholson  v.  Flagj^  v.  Flagg,  II   lb.  475  ;  Blanchard  v. 

Walker,  4  BraJw.  404.     Iowa:    Scott  v.  Brooks,  12lb.  47,  57;  Fay  v.  Cheney,  14 

Mewhirter,    49    Iowa,    487.      Arkansas  :  lb.  399.     Maine  :  Blaney  i;.  Bearcc,  2  Me. 

Trappiill  V.  State  Bank,  18  Ark.  53.    Ken-  132 ;  Oilman  v.  Wills,  66  Me.  273  ;   Allen 

tucky:    Buck   v.  Sanders,   1    Dana,    187.  i.  Parker,  27  Me.  531  ;  Howard  i;.  Iloiigh- 

Alabama :  Morris  r.    Barker,  2  So.  Rep.  ton,  G4  IMe.  445  ;  Treat  v.  Pierce,  53  Me. 

335,  quoting  text.   Pennsylvania:  Rickert  77;  Hadley  v.   Hadley,  15  Atl.  Rep.   47. 

V.   Madeira,   1   Rawle,  325.     Mississippi:  New  Jersey  :  Den  f.  Stockton,  12  N.  J.  L. 

Brooks  V.   Kelly,  63  Miss.  616.     I'or  an  322.     Ohio:  Ely  v.  McGuirc,  2  Ohio,  223. 

argument  that  the  mortgagee's  estate  is  Kansas:  Clark  v.  Reyburn,  1  Ivans.  281. 

subject  to  attachment,  see  Notes  of  Mort-  Alabama  :  McMillan  v.  Otis,  74  Ala.  560  ; 

gages,  by  Judge  Trowbridge,  8  Ma.ss.  Sup-  -S'.  6\  70  Ala.  46  ;   Watford  v.  Oates,  57 

plement,  pp.  554,  565.  Ala.  290 ;  Coffey  v.   Hunt,  75  Ala.  236. 

1  Beckett  v.  ])eau,  57  Miss.  232.  Woodward  v.  Parsons,  59  Ala.  625.  Mary- 

-  Scott   V.   .Mewhirter,  supra;  S.   C.  8  land:  Brown  v.  Stewart,  1   Md.  Ch.    87. 

Cent.  L.  J.  39.  Missouri:  Walcop  v.  McKinney,  10  Mo. 

'^  §   668.      Massachusetts:    Erskine   v.  229.     New  York:    Jackson  v.   Dubois,   4 

Townsend,    2     .Mm.ss.    493  ;    Goodwin    i-.  Johns.  216  ;  Jaeksou  i\  Hull,  10  11).  481. 

Richardson,   11    Mass.  469,  473;    Newall  New  Hampshire :    Morso  v.  Whiiclur,  15 

c.    Wright,  3    Mass.    138,   155;    Green  v.  Atl.  Kep.  2(J7  ;  Smith  i:  Moore,  11  N.  H. 

Kemp,  13  Mass.  515,  518  ;  Bradley  v.  Ful-  55  ;   Fletcher  v.  Chamberlin,  61  N.  H.  438, 

ler,   23   Pick.    1,   9;    Smith   v.  Johns,  3  478;  Furbush  i-.  Goodwin,  29  N.  11.321. 

Gray,  517  ;  Fay   i-.  Brewer,  3  Pick.  203  ;  Indiana:  Shute  v.  Grimes,  7  Blackf.  1. 

605 


§  703.]  A  mortgagee's  rights  and  liabilities. 

may  enter  and  take  possession  after  condition  broken,  if  he  can 
do  so  peaceably  and  unresisted.^ 

It  has  ab-eady  been  noticed  that  in  several  states  the  mort- 
gagee's right,  before  foreclosure,  to  maintain  ejectment  against  the 
mortgagor,  or  to  recover  possession  in  any  way,  has  been  taken 
away  by  statute.  But  this  right  of  possession,  being  implied  by 
law  in  all  mortgnges  executed  prior  to  the  passage  of  such  a 
statute,  is  therefore  inoperative  as  to  mortgages  of  prior  execu- 
tion.^ 

But  even  under  such  statutes  it  is  generally  held  that  a  mort- 
gagee, who  has  gone  into  peaceable  possession  of  the  premises 
after  a  default,  cannot  be  ejected  by  the  mortgagor  while  the 
mortgage  remains  unsatisfied.^  Such  statutes  do  not  prevent  the 
mortgagee  from  entering  under  a  parol  agreement  with  the  mort- 
gagor.^ Any  one  who  has  entered  into  possession  under  the  di- 
rection of  the  mortgagee  becomes  his  tenant,  and  has  the  same 
rights  as  the  mortgagee  to  retain  possession  as  against  the  mort- 
gagor. The  assignee  of  a  mortgage  has  all  the  rights  of  the 
mortgagee  as  to  possession,  and  may  defend  his  possession  by 
showing  his  mortgage  without  a  foreclosure.^ 

703.  A  mortgagee  cannot  be  disseised  by  the  mortgagor  ^ 
or  his  assigns."  His  possession  is  not  adverse ;  it  is  presumed  to 
be  in  subordination  to  the  title  of  the  mortgagee.  He  can  do  no 
act  prejudicial  to  the  mortgagee's  title.  He  cannot  bind  the  mort- 
gagee by  any  contract  or  lease  respecting  the  premises.  All  his 
acts  are  subject  to  the  mortgagee's  rights;  and  his  possession  is 
not  adverse,  except  the  mortgagee  elect  so  to  regard  it  for  the 
sake  of  his  remedy  to  obtain  possession.  The  mortgagee  may 
treat  any  person  found  in  possession  of  the  mortgaged  premises 
without  a  title  good  against  him  as  a  disseisor.^ 

1  Fuller  V.  Eddy,  49  Vt.  11.  6  poe  v.  Williams,  5  Ad.  &    El.  291, 

-Blackwood   v.   Van    Vleet,    11   Mich.  297;  Hunt  r.  Hunt,  14  Pick.  (Mass.)  374; 

252.     Applicable  only  to  suits  commenced  Shepard  i'.  Pratt,   1.5   lb.  32;    Colton  v. 

afterwards.     Shaw  v.  Hoadley,  8  Blackf.  Smith,  11  lb.  311 ;  Herbert  v.  Hanrick,  16 

(Ind.)  165  ;  Grimes  v.  Doe,  lb.  371  ;  Mor-  Ala.  581 ;  Beach  v.  Royce,  1  Root  (Conn.), 

gan  V.  AVoodward,  1  Smith  (Ind.),  321.  244  ;  Judd  v.  Woodruff,  2  lb.  298;  Noyes 

'^  Hennesy  v.  Farrell,  20  Wis.  42;  Fee  i\   Sturdivant,   18  Me.   104;    Sweetser  v. 

V.  Swingly  (Mont.),  13  Pac.  Rep.  375.  Lowell,  33  Me.  446  ;  Conner  v.  Whitmore, 

*  Edwards  v.  Wray,  11  Biss.  251.  52  Me.  185;  Kruse  v.  Scripps,  11  111.  98. 

5  Sahler  v.   Signer,  44  Barb.    (N.   Y.)  ^  Doyle  v.   Mellen  (R.  I.),  8  Atl.  Rep. 

606 ;   Minkler  v.  Minkler,  10  Johns.  (N.  709. 

y.)  480;    Merrit  v.   Boweu,  7  Cow.  (N.  »  AVhteler   v.   Bates,    21    N.    H.    460; 

Y.)  13;  Phyfe  v.  Riley,  15  Wend.  (N.  Y.)  Poignard  v.  Smith,  8  Pick.  (Mass.)  272. 
248. 

606 


THE   NATURE   OF    HIS   ESTATE    OR   INTEREST.  [§  704. 

But  a  mortgagee  as  well  as  a  mortgagor  may  be  disseised  by  a 
stranger  ;  provided  there  be  an  actual  ouster  and  exclusive  occu- 
pation, and  not  a  qualified  and  occasional  use  of  the  land.  While 
such  disseisin  continues,  the  mortgagee's  deed  will  not  pass  his 
interest  in  the  land.  The  disseisin  of  the  mortgagor  is  also  a 
disseisin  of  the  mortgagee.  This  is  so  even  before  the  mortgagee 
has  made  actual  entry,  and  though  he  has  no  notice  whatever  of 
the  disseisin.  An  exclusive  and  adverse  occupation  of  the  estate 
by  the  stranger  under  a  claim  of  title  operates  to  disseise  both 
the  raortcragor  and  mortfragee,^  and  while  this  continues  the  mort- 
gagee  cannot  make  a  valid  assignment  of  his  mortgage.^  If,  how- 
ever, the  equity  of  redemption  be  sold  by  the  sheriff  on  execution 
while  the  mortgagor  is  disseised,  the  sale  is  not  void,  but  the  pur- 
chaser by  the  sheriff's  deed  acquires  a  seisin  in  law,  which  gives 
him  a  right  of  entry,  and  after  actual  entry  he  may  maintain  a 
writ  of  entry. 

Exclusive  possession  by  the  mortgagor,  with  a  claim  of  exclu- 
sive ownership,  does  not  in  itself  amount  to  a  disseisin  of  the 
mortgagee  so  as  to  invalidate  a  power  of  sale  in  the  mortgage. 

Disseisin,  like  seisin,  once  proved  is  presumed  to  continue  until 
the  contrary  is  shown  ;  and  possession  under  a  disseisor  is  pre- 
sumed to  continue  under  his  heirs  after  his  death.^ 

704.  A  mortgage  to  two  or  more  persons,  to  secure  debts 
due  to  them  severally,  creates  a  tenancy  in  common,  and  not  a 
joint  tenancy.*  The  interest  of  each  is  not  necessarily  a  moiety, 
but  is  in  proportion  to  his  respective  claim.''  Each  may  enforce 
his  claim  under  the  mortgage  in  a  form  adapted  to  the  case.^ 
Upon  the  death  of  one  the  survivor  cannot  maintain  an  action  on 
the  mortgage  to  enforce  the  payment  of  the  debt  secured  by  it  to 
the  deceased  mortgagee.^  To  a  bill  in  equity  affecting  interests 
under  such  a  mortgage,  it  is  not  sufficient  to  make  the  surviving 
mortgagee  alone  a  party  ;  the  representatives  of  the  deceased 
mortgagee  must  be  joined.^  But  if  a  mortgage  be  made  to  part- 
ners to  secure  a  joint  debt,  inasmuch  as  the  debt  itself  woiiKl  in 

•  Dadmun  v.  Lam  on,  9  Allen  (Mass.),  617  ;  and  see  Beresford  v.  Ward,  1  Disney 
85;  Poignard   v.   Smith,  8   Pick.  (Mass.)      (Ohio),  1G9. 

•272;  Sheridan?.-.  Welch,  8  Allen  (Mass.),  «  Burnett   u.    Pratt,   22    Pick.    (Mass.) 

1  Of,.  SfjO. 

-  Poij,'n:ird  v.  Smith,  su/ira.  "  Buriielt  v.  Pratt,  suprd ;  Kinf^sley  v. 

■'  Currier  v.  Gale,  0  Allen  (Mass.),  522.  Ahhoit,  I'J  Me.  430. 

*  Brown  v.  Bates.  5.')  Me.  520.  ^  Smith  v.  Trenton  Delaware  Falls  Co. 
'  Donnels  v.  Edwards,  2  Pick.  (Mass)  4  N.  J.  Kq.  ('3  Green)  505. 

607 


§§  705,  706.]     A  mortgagee's  rights  and  liabilities. 

case  of  the  decease  of  one  partner  vest  in  the  survivor  for  the 
purpose  of  collection,  it  is  held  that  the  estate  is  a  joint  tenancy, 
so  that  the  mortgage  security  may,  by  the  principle  of  survivor- 
ship, accompany  the  debt.^  After  foreclosure,  however,  the  new 
absolute  estate  then  acquired  is  considered  as  a  tenancy  in  com- 
mon, such  as  would  ordinarily  be  created  by  a  conveyance  to  two 
or  more  persons.^ 

705.  When  mortgagees  may  have  partition.  —  Before  fore- 
closure, mortgagees  holding  under  one  mortgage,  or  by  simulta- 
neous mortgages,  as  joint  tenants  or  tenants  in  common,  have  no 
such  interest  as  can  be  the  subject  of  partition.-^  Until  foreclos- 
ure the  estate  is  for  most  purposes  in  the  mortgagor,  and  is  only 
a  lien  or  charge,  subject  to  which  it  may  be  conveyed,  attached, 
and  dealt  with  in  other  respects,  as  the  estate  of  the  mortgagor, 
who  may  wholly  defeat  the  estate  of  the  mortgagee  by  redemp- 
tion. An  entry  to  foreclose  does  not  change  this  defeasible  and 
redeemable  interest  of  the  mortgagee.  He  has  no  absolute  and 
certain  estate  till  foreclosure  is  complete. 

A  mortgagee  of  an  undivided  half  of  a  lot  of  land  upon  a  com- 
pleted foreclosure  may  have  partition  of  the  land,  against  the 
owner  of  the  other  half.^  But  until  foreclosure  is  complete  the 
mortgagee  does  not  become  a  tenant  in  common  with  the  owne»' 
of  the  other  undivided  part ;  he  is  merely  a  mortgagee  having  a 
lien  or  charge,  from  which  the  mortgagor  may  redeem  the  estate, 
and  subject  to  which  the  estate  may  be  convej^ed,  attached,  and 
in  other  respects  dealt  with,  as  the  estate  of  the  mortgagor.  He 
cannot  maintain  a  petition  for  partition  ;  neither  can  such  a  peti- 
tion be  maintained  against  him  by  the  owner  of  the  other  part,  or 
by  a  judgment  creditor  of  such  owner.^ 

706.  To  bind  the  mortgagee  of  the  interest  of  one  tenant 
in  common  by  a  partition  of  the  mortgaged  premises  between 
the  mortgagors,  he  must  be  made  a  party  to  the  suit,  or  must 
voluntarily  ratify  the  partition  made.^  The  effect  of  a  partition, 
in  which  the  mortgagee  has  joined,  as  to  his  interest,  and  that  of 
his  mortgagor,  is  to  substitute,  for  an  undivided  interest  in  the 
whole  land,  the  whole  of  the  portion  set  off  to  the  mortgagor  in 

1  Appleton  V.  Boyd,  7  Mass.  131.     In         3  Ewer  y.  Hobbs,  5  Met.  (Mass.)  1. 
Randall   v.   Phillips,  3  Mason,  378,  Mr.         *  Phelps  y.  Townsley,  10  Allen  (Mass ), 

•Justice  Story  held  that,  by  the  statute  of  554. 

Rhode  Island  of  1798,  such  a  mortgage  is         ^  Norcrosss  v.  Norcros,  105  Mass.  265. 
a  tenancy  in  common.  ^  Colton   v.  Smith,    11    Pick.    (Mass.) 

■2  Goodwin  v.  Richardson,  11  Mass.  469.  311  ;  Loomis  v.  Riley,  24  111.  307. 
608 


THE  NATURE   OF   HIS   ESTATE   OR   INTEREST.  [§  706. 

severalt3\  No  part  of  his  mortgagor's  estate  is  thereby  dis- 
charged from  the  mortgage. ^ 

But  as  a  general  rule,  prior  mortgagees  cannot  be  compelled  to 
become  parties  to  partition  proceedings  between  co-tenants ;  and 
the  rights  of  such  prior  mf)rtgagees  are  not  affected  by  such  pro- 
ceedings.2  ^  mortgage  executed  by  a  tenant  in  common  upon 
his  interest,  pending  a  suit  for  partition,  is  subordinate  to  the 
rights  of  the  other  co-tenants,  and  to  the  decree  rendered  in  such 
suit.^ 

If  a  tenant  in  common  executes  a  mortgage  of  his  undivided 
interest  in  the  land  to  one  of  his  co-tenants,  and  all  the  tenants 
be  made  parties  to  the  proceeding  for  partition,  though  no  men- 
tion be  made  of  the  mortgage,  this  may  be  foreclosed  and  en- 
forced after  partition  against  the  lot  set  apart  to  the  mortgagor.* 

In  case  the  tenancy  in  common  extends  to  several  separate  par- 
cels, and  one  tenant  has  mortgaged  his  undivided  interest  in  one 
parcel,  the  proper  course  is  to  treat  the  parcel  covered  by  the 
mortgage  as  a  separate  estate,  and  to  make  a  separate  partition 
of  such  parcel.  It  is  true  that  in  Massachusetts  it  is  held  that  a 
mortgage  made  by  a  tenant  in  common  of  an  undivided  interest 
in  a  specified  parcel  of  land  is  invalid  as  against  his  co-tenants  ; 
and  tiiat  partitioi^  may  be  made  of  the  whole  estate  held  in  com- 
mon without  regard  to  the  mortgage;  that  other  land  may  be 
allotted  to  the  mortgagor  in  place  of  the  mortgaged  parcel  ;  and 
that  if  money  be  awarded  to  the  mortgagor  in  place  of  such  par- 
cel, the  mortgagee  cannot  demand  that  the  sum  so  awarded  shall 
be  paid  to  him  upon  the  mortgage.^  This  doctrine  is  founded 
upon  several  dicta  and  decisions  that  a  tenant  in  common,  as 
against  his  co-tenants,  cannot  convey  his  interest  in  a  specified 
parcel  of  the  lands  held  in  common  ;  that  he  can  only  convey  an 
interest  in  the  entire  estate  held  in  common  ;  and  the  reason 
given  is  that  the  co-tenant  is  entitled,  on  partition,  to  have  his 

'  Torrcy  v.  Cook,  116  Mass.  163  ;  Brad-  Loomis  ;;.  Riley,  24  111.  307 ;  Thruston  v. 

Icy   V.    Fuller,   23    Pick.    (Mass.)    1,   per  Minkc,  32  Md.  .571  ;  Hull  i;.  Lyon,  27  Mo. 

Wilde,  J.  "  Tenants  in  common  have  sep-  570  ,  Jackman  v.  Beck.  37  Ark.  12.''>. 

arate  freeholds  or  estates  ;  they  have  no  -  Wotten   v.   Copelaiid,    7   Johns.   Ch. 

unity  of  interest,  but  unity  of  possession  140  ;    McArthnr  v.   Scott,  31    Fed.  Rep. 

only.    This  unity  of  possession  is  destroyed  .')21. 

hy  partition,  hut  the  estate  remains  tlic  "  United  N.   J.    R.  &  C.  Co.  v.  Long 

same."     Jackson  v.  Pierce,  10  Johns.  (N.  Dock  Co.  42  N.  J.  Eq.  547. 

Y.)   414  ;    Crosby  i'.   Allyn,   5    Me.  453  ;  ■•  Watson  v.  Priest,  K  Mo.  App.  263. 

Williams  College  v.  .Mallett,  12  Me.  308;  '  Marks  v.  Sewall,  120  Mass.  174. 

VOL.  I.              3'J  609 


§  706.]  A  mortgagee's  rights  and  liabilities. 

portion  assigned  in  one  entire  parcel,  according  to  his  aliquot 
part.^  This  doctrine,  to  the  extent  it  is  carried  in  Marks  v. 
Sewall^  where  the  mortgage  was  upon  a  distinct  parcel  wholly 
unconnected  with  the  other  parcel  held  in  common,  rests  upon  no 
sufficient  grounds,  and  is  contrary  to*the  weight  of  authority.^ 
The  doctrine  can  be  sustained  only  to  the  extent  of  preventing 
the  dismemberment  of  a  single  lot  or  parcel  of  land. 

But  a  decree  of  partition  cannot  extend  the  mortgage  to  any 
property  not  described  and  included  in  such  mortgage  ;  for  in- 
stance, if  the  mortgage  cover  the  undivided  interest  of  one  tenant 
in  common  in  several  parcels  of  land,  and  the  tenancy  in  common 
extends  to  other  parcels  or  estates,  the  aggregate  parcels  covered 
by  the  mortgage  must,  for  the  purpose  of  partition,  be  considered 
as  one  separate  estate.  The  whole  estate  held  in  common  can- 
not be  divided,  and  the  mortgage  be  made  to  cover  all  the  par- 
cels allotted  to  the  mortgagor,  though  not  all  described  in  the 
mortgage.^ 

If  the  mortgage  cover  less  than  the  entire  interest  of  the  mort- 
gagor in  the  whole  estate  held  in  common,  when  the  estate  is 
divided,  the  mortgage  will  cover  a  proportional  interest  in  the 
whole  of  the  part  allotted  to  the  mortgagor.^ 

If  the  common  property  be  incapable  of  partition,  and  a  sale 
is  rendered  necessary  in  order  to  effect  a  division,  the  existence  of 
mortgages  of  undivided  interests  presents  no  substantial  objection 
to  a  decree  of  sale  free  of  incumbrances,  and  the  discharging  of 

1  Adam   v.   Briggs   Irou   Co.   7    Cusli.  the  state  before  he  can  be  sure  he  is  not 

(Mass.)  361,  369,  and  cases  cited.  getting  an  invalid  title.     This  is  putting 

^  Green  r.  Arnold,  11  11.1.364.     Dur-  too  great   a   burden   on   purchasers   and 
fee,  C.  J.,  says  :  "  Two  persons   may  be  mortgagees.    It  is  enough  if  the  purchaser 
tenants  in  common  of  several  distinct  es-  or   mortgagee   of    an   undivided   interest 
tates,  purchased   at  different  times,  and  purchases  or  takes  a  mortgage  of  such  in- 
widely  separated  from  each  other,  though  terest  in  the  whole  of  any  separate  estate, 
all  in  the  same  state.     Is  it  reasonable  to  or  if  the  owner  of  such  interest  so  sells  or 
hold  that  neither  of  them  can  sell  his  in-  mortgages  and  conveys  the  same,  notwith- 
terest  in  any  one  of  the  estates  unless  he  standing  he  and  his  co-tenant  may  be  ten- 
sells  it  in  all  of  them  1    Or  that  no  person  ants  in  common  of  other  estates." 
can  safely  purchase,  or  attach,  or  take  a  See,  also,  Butler  v.  Roys,  25  Mich-  53, 
mortgage  of  the  interest  of  either  of  them  where  the  cases  are  elaborately  reviewed  ; 
in  any  one  of  the  estates,  unless  he  at  the  Freeman  on  Cotenancy  and  Partition,  §§ 
same  time  purchases,  or  attaches,  or  takes  201-204,  where  the   decisions   of  several 
a  mortgage  of  his  interest  in  all  of  them  ?  states  are  given. 
If  the  rule  is  so,  the  purchaser  or  mort-  ^  Green  v.  Arnold,  supra. 
gagee  of  an  undivided  interest  will  have  *  Randell  v.  Mallett,  14  Me.  51. 
to  search  the  records  of  every  registry  in 

610 


HIS   RIGHTS   AGAINST    THE   MORTGAGOR.  [§  707. 

these  out  of  the  proceeds.  If  there  be  any  doubt  or  uncertainty 
as  to  the  extent  of  the  liens,  the  court  should  direct  the  determi- 
nation of  their  amounts  before  the  sale.^ 

A  tenant  in  common  who  has  mortgaged  his  undivided  share 
in  the  land  may,  so  long  as  he  remains  in  possession,  maintain  a 
petition  for  partition  against  the  owner  of  the  other  shares  in  the 
land;^  but  if  his  mortgagee  be  the  owner  of  the  other  shares  he 
cannot,  without  his  consent,  have  partition  ;  for  it  is  an  adverse 
proceeding  afTecting  either  the  title,  or  the  possession,  or  both, 
and  the  mortgagee  has  both  the  legal  title,  and  after  default  at 
least  the  right  of  possession .^  But  in  such  case  the  mortgagee 
can  have  partition  if  he  desires  it.* 

If  one  tenant  in  common  take  an  assignment  of  a  mortgage 
upon  the  land,  his  co-tenant  cannot  maintain  a  petition  for  par- 
tition against  him,  but  his  only  remedy  is  by  redemption  of  the 
whole  mortgage,  or  contribution  of  his  share  of  the  incumbrance.^ 

II.    His  Rights  against  the  Mortgagor. 

707.  A  mortgagee  is  entitled  to  the  whole  mortgaged 
premises  as  security  for  his  debt,  and  cannot  be  compelled  to 
take  a  portion  of  the  premises  either  as  security  or  payment,  or 
to  submit  to  the  uncertain  result  of  a  sale  by  order  of  court.  A 
creditor  of  the  mortgagor,  by  levying  an  execution  on  the  equity 
of  redemption  and  having  an  undivided  part  set  off  to  himself, 
acquires  no  right  to  have  the  premises  sold  and  the  proceeds  di- 
vided between  himself  and  the  mortgagee,  though  the  premises 
are  worth  more  than  enough  to  pay  the  debts  to  both.^ 

Although  the  land  subject  to  a  mortgage  be  subsequently  laid 
out  in  lots  and  streets,  and  the  streets  opened  and  dedicated  to 
the  public  by  the  owner  of  the  land,  the  mortgagee's  lien  upon 
the  land  covered  by  the  streets  is  not  affected.^  But  if  sales  of 
lots  bounding  uf)on  the  streets  be  made,  and  the  mortgagee  re- 
leases those  lots  from  the  operation  of  his  mortgage  by  deeds 
referring  to  a  map  of  the  land  as  laid  out,  and  reciting  that  they 
are  the  lots  previously  conveyed  by  the  owner,  the  release  dis- 

1  Thruston  v.  Minke,  32  Md.  571.  6  BlotlgcU  r.  Ilildietli,  8  Allen  (Mass.), 

2  Upham  V.  Bradley,  17  Me.  423.  186. 

3  Fuller  V.  Brudley,  2.'3   Tick.    (Mass.)         «  Spencer  v.  Waterman,  .'M)  Conn.  342. 
1,8.  '  Moore  i-.  Little  Kuck,  42  Ark.  60. 


*  Green  r.  Arnold,  11  K.  I.  304. 


611 


§  708.]  A  mortgagee's  rights  and  liabilities. 

charges  not  only  the  lien  upon  the  lots,  but  upon  half  of  the 
street  in  front  of  them.^ 

708.  An  award  of  damages.  —  When  the  mortgaged  prop- 
erty has  been  turned  into  money,  or  a  claim  for  money  in  any 
way,  as,  for  instance,  by  the  taking  of  the  property  for  public 
uses,  or  for  the  use  of  a  corporation  under  authority  of  law,  the 
rights  of  the  mortgagee  remain  unaltered,  and  he  is  entitled  to 
have  the  money  in  place  of  the  land  applied  to  the  payment  of 
his  claim.2  Thus  if  a  street  be  laid  out  through  land  subject  to 
a  mortgage,  although  the  damages  be  assessed  to  the  mortgagor, 
the  mortgagee  is  entitled  to  them,  as  an  equivalent  for  the  land 
taken  for  the  street.^  The  mortgagee  has  such  an  interest  in  the 
mortgaged  property  as  to  entitle  him  to  notice  as  an  owner  within 
the  meaning  of  statutes  governing  proceedings  for  acquiring  land 
by  the  right  of  eminent  domain.* 

If  the  land  be  taken  without  such  notice,  the  mortgagee  might 
proceed  upon  his  mortgage  in  the  same  manner  as  if  a  sale  of  a 
part  of  the  premises  had  been  made  by  the  mortgagor  ;  selling 
first  that  which  still  belonged  to  the  mortgagor,  and  then  selling 
that  which  had  been  taken  under  the  exercise  of  the  right  of 
eminent  domain.^ 

If  the  damages  be  adjusted  with  the  owner,  he  is  regarded  as  a 
trustee  of  the  title,  and  whenever  the  courts  have  control  over 
the  damages  assessed,  they  will  see  that  the  mortgagee's  interests 
are  protected.  As  we  have  already  seen,  the  mortgagor's  settle- 
ment for  damages  is  not  binding  upon  the  mortgagee.  But  in  a 
case  where  the  damages  occasioned  to  the  property  arose  from  the 
construction  of  a  railroad  along  a  highway  adjoining  the  mort- 
gaged premises,  these  not  being  entered,  a  settlement  with  the 
mortgagor  was  held  to  be  conclusive  on  the  mortgagee  ;  the  mort- 
gagor being  trustee  of  the  title  for  this  purpose.^ 

1  Hague  r.  "West  Hobokeu,  23  N.  J.  Eq.  Quoted   with  approval,  Sherwood  v.  La 

354.  Fayette,  supra. 

-  §  681  a;  Brown  i'.  Stewart,  I  Md.  Ch.  *  Sherwood  v.  La  Fayette,  supra;  Sev- 

87;  Piatt  i>.  Bright,  31  N.  J.  Eq.  81  ;  Bank  erin  v.  Cole,  38  Iowa,  463;  Philadelphia, 

of  Auburn  v.  Roberts,  44  N.  Y.  192 ;  Ball  &c.  Co.  v.  Williams,  54  Pa.  St.  103  ;  Knoll 

V.  Green,   90  Ind.  75;    Sherwood  v.  La  ?;.  New  York,  C.  &  St.  L.  Ry.  Co.   (Pa.) 

Fayette  (Ind.),  10  N.  E.  Rep.  89;  Rail-  15  AtL  Rep.  571. 

road   Co.   v.   Chamberlain,    84    HI.   333 ;  ^  Knoll  v.  New  York,  C.  &  St.  L.  Ry. 

Union  Mut.  L.  Ins.  Co.  v.  Slee  (111.),  13  Co.  supra,  per  Williams,  J. 

N.  E.  Rep.  222 ;  Duff's  App.  (Pa.)  14  Atl.  ^  Knoll  v.  New  York,  C.  &  St.  L.  Ry. 

Rep.  364,  367.  Co.  supj-a. 

3  Astor  V.  Hoyt,  5  Wend.  (N.  Y.)  603. 

'612 


HIS   RIGHTS   AGAINST    THE   MORTGAGOR.       [§§  709,  710. 

Damages  awarded  to  a  mortgagor  for  land  taken  for  a  right  of 
way,  or  other  public  improvement,  become  a  substitute  for  the 
premises  taken,  and  the  mortgage  is  a  specific  lien  upon  the 
fund  ;  ^  as  also  do  damages  awarded  by  the  state,  for  an  injury 
done  to  the  property  by  the  abandonment  of  a  canal,  equitably 
belong  to  the  holder  of  the  mortgage.^  "  The  sum  awarded  arises 
from  or  grows  out  of  the  land,  by  reason  of  the  injury  which  has 
diminished  its  value.     In  equity  it  is  the  land  itself."  ^ 

The  mortgage  lien  attaches  to  the  surplus  arising  from  the  sale 
of  the  premises  under  a  prior  incumbrance,* 

709.  A  mortgagee  is  an  essential  party  to  any  proceeding 
affecting  his  rights  to  the  mortgaged  premises ;  as,  for  instance, 
to  a  bill  to  set  aside  a  previous  sale  of  the  property  under  pro- 
ceedings in  insolvency  ;  ^  to  a  bill  to  compel  performance  of  a 
contract  by  the  owner  to  convey  the  estate  ;*"  to  an  application  to 
set  apart  a  portion  of  the  mortgaged  premises  as  a  homestead  ;  '^ 
or  to  a  suit  to  set  aside  a  purchase  of  real  estate  by  an  adminis- 
trator who  had  given  a  mortgage  while  in  possession,  and  claims 
title  under  his  purchase.^  But  a  mortgagee  who  has  not  entered 
is  not  a  necessary  party  to  a  proceeding  which  relates  altogether 
to  an  injury  done  to  the  possession  ;  as,  for  instance,  to  a  com- 
plaint for  fiowage  under  the  mill  act ;  for  the  damages  in  such 
case  belong  exclusively  to  the  mortgagor  in  possession,  being  paid 
annually,  in  the  same  manner  that  any  other  annual  products  or 
damages  for  injury  to  them,  or  the  possession  of  the  land,  belong 
to  the  mortgagor  alone.^ 

710.  A  mortgagee  is  to  the  extent  of  his  claim  a  purchaser 
of  the  land,  and  is  entitled  to  the  same  protection  from  all  secret 
equities  and  trusts  of  which  he  had  no  notice  as  any  other  bond 
fide  purchaser.!*^  He  is  not  affected  by  his  mortgagor's  fraud  in 
acquiring  his  title. ^^ 

1  Astor  I'.  Miller,  2  Paige  (N.  Y.),  68 ;  '  Paine  v.  Woods,  108  Mass.  IGO. 

Re  John  and  Cherry  Sts.  19  Wend.  N.  Y.  ^"  §  458  ;  Pierce  v.  Faunce,  47  Me.  507 ; 

6.09  ;  Girnbel  v.  Stolte,  59  Ind.  446.  Martin  v.  .Jackson,  27  Pa.  St.  504  ;  Bropliy 

-  Bank  of  Auburn  v.  Roberts,  44  N.  Y.  Minin;;  Co.  v.  Biophy  &  Dale  Gold  and 

192;  S.  C.  45  Barb.  407.  Silver  Mining,'  Co.  15   Nev.   101;   llayden 

3  Per  Leonard,  C,  in  Bank  of  Auburn  r.  Drury,   3    Fed.  Rep.  782,    789 ;    Ilay- 

V.  Roberts,  SM/jra.  den  i'.  Snow,  9  Biss.    511  ;   14   Fed.  l{ep. 

♦  Bartlett  v.  (Jalc,  4  Pai;;c  (N.  Y.),  503.  70;  (luotcd  with   a|)provHl   in    IMaisted  u. 
6  CoiroH  V.  Miilaudon,  19  How.  113.  Holmes,  .58  N.  II.  619. 

•  Hoxie  o.  Carr,  1  Sumn.  173.  "  Slockton  v.  Craddick,  4  La.  Ann.  282, 
^  Lies  V.  I)e  Diablar,  12  Cal.  327.  285  ;  Bailey  i-.  Crim,  9  Biss.  95. 

»  Woodruff  I'.   Cook,  2   Edw.  (N.  Y.) 
259.  613 


§  711.] 


A  mortgagee's  rights  and  liabilities. 


If  the  mortgage  was  executed  by  the  mortgagor  for  the  pur- 
pose of  defrauding  his  creditors,  although  the  mortgagee  had  no 
notice  of  such  fraudulent  intent,  he  cannot  be  considered  a  bond 
fide  purchaser  beyond  the  amount  paid  by  him  at  the  time.^  But 
a  mortgagee  who  has  knowledge  of  a  previous  conveyance  of  the 
mortgaged  property,  although  it  be  fraudulent  as  to  the  mort- 
gagor's creditors,  cannot  call  in  question  its  validity.^  The  as- 
signee of  a  mortgage  is  also  a  purchaser.^ 

711.  That  a  mortg-agee  may  purchase  the  mortgagor's 
equity  of  redemption,  though  doubted  in  some  early  cases,  is  as 
a  general  proposition  true,'*  though  the  transaction  will  be  closely 
scrutinized,  so  as  to  prevent  any  oppression  of  the  debtor.^  The 
relation  between  them  is  not  so  far  analogous  to  that  between  a 
trustee  and  cestui  que  trust  as  to  preclude  the  mortgagee's  pur- 
chasing. The  real  reason  why  a  person  standing  in  the  relation 
of  trustee  cannot  purchase  from  his  cestui  que  trust  is,  that  he 
cannot  purchase  that  which  he  has  to  sell.  He  has  a  duty  to 
perform  as  a  trustee,  in  selling  for  the  best  advantage  of  the 
beneficiary ;  and  this  is  inconsistent  with  his  personal  interest  to 
obtain  the  property  on  terms  advantageous  to  himself.     But  there 


1  Tripp  V.  Vincent,  8  Paige  (N.  Y.), 
176;  Hall  v.  Arnold,  15  Barb.  (N.  Y.) 
599. 

2  Fox  V.  Willis,  1  Mich.  321. 

3  Hayden  v.  Drury  (C.  C.  111.  1880),  3 
Fed.  Rep.  782. 

*  §§  1038-1046;  Knight  v.  Majoribanks, 
2  Mac.  &  G.  10;  Villa  v.  Rodriguez,  12 
Wall.  333, 339  ;  Ten  Eyck  v.  Craig,  62  N. 
Y.  406  ;  S.  C.  2  Hun,  452  ;  5  Thomp.  &  C. 
65  ;  Remsen  v.  Hay,  2  Edw.  (N.  Y.)  535; 
Hicks  V.  Hicks,  5  Gill  &  J.  (Md.)  75; 
Hinkley  v.  Wheelwright,  29  Md.  341  ; 
Walker  !>.  Farmers'  Bank  (Del.),  10  Atl. 
Rep.  94,  98 ;  Green  v.  Butler,  26  Cal.  595  ; 
Shelton  v.  Hampton,  6  Ired.  (N.  C.)  L. 
216;  Dennis  v.  Tomlinson  (Ark.),  6  S.  W. 
Rep.  11. 

See,  however.  Whitehead  v.  Hellen,  76 
N.  C.  99;  Lee  v.  Pearce,  68  N.  C.  76; 
McLeod  r.  Bullard,  84  N.  C.  515,  531. 

In  Whichcote  v.  Lawrence,  3  Ves.  Jun. 
740,  Lord  Chancellor  Loughborough  states 
the  rule  with  force  and  accuracy :  "  The 
rule  is  laid  down  not  very  correctly,  in 
most  of  the  cases,  where  you  find  it.     It 

614 


is  stated  as  a  proposition,  thai  a  trustee 
cannot  buy  of  the  cestui  que  trust.  Cer- 
tainly that  naked  proposition  is  not  cor- 
rectly true ;  but  an  emanation  from  that 
which  prevails  in  all  cases,  in  all  laws 
and  countries  where  trusts  are  admitted, 
led  to  great  discussion  in  M'Enzie's  case, 
to  prove  that  the  sale,  where  the  trustee 
to  sell  is  the  purchaser,  is  ipso  jtire  null; 
that  there  is  no  sale,  no  contracting  party. 
That  is  not  the  real  sense  of  the  proposi- 
tion ;  but  it  is  this,  —  which  is  very  plain 
in  point  of  equity,  and  a  principle  of  clear 
reasoning,  —  that  he  who  undertakes  to 
act  for  another  in  any  matter  shall  not  in 
the  same  matter  act  for  himself.  There- 
fore a  trustee  to  sell  shall  not  gain  any 
advantage  by  being  himself  the  person  to 
buy.  He  is  not  acting  with  that  want  of 
interest,  that  total  absence  of  temptation, 
that  duty  imposed  upon  him,  that  he  shall 
gain  no  profit." 

5  Pugh  V.  Davis,  96  U.  S.  332,  337 ; 
Oliver  V.  Cunningham  (C.C.  Mich.  1881), 
7  Fed.  Rep.  689. 


HIS   RIGHTS   AGAINST   THE   MORTGAGOR.  [§  712. 

is  no  trust  relation  between  the  mortgagor  and  the  mortgagee. 
The  mortgagee  is  under  no  obligation  to  protect  the  equity  of 
redemption.  In  exercising  a  sale  under  the  power  which  usually 
accompanies  a  mortgage,  this  trust  relation  will  arise  so  as  to  pre- 
vent his  purchasing  unless  he  is  authorized  by  statute,  or  by  the 
contract  itself,  to  become  a  purchaser.  There  he  has  a  trust  to 
fulfil  in  selling  for  the  mortgagor.  But  until  this  trust  arises  he 
may  deal  with  the  mortgagor  himself  in  respect  to  the  mortgaged 
estate  ;  subject  only  to  the  qualification  that  the  courts  look  upon 
their  transactions  with  jealousy,  and  will  set  aside  a  purchase 
made  by  the  mortgagee,  when  by  the  influence  of  his  position,  or 
by  constructive  fraud,  he  has  gained  an  unconscionable  advantage, 
and  has  purchased  the  equity  of  redemption  for  a  less  price  than 
others  would  have  given. ^ 

The  general  rule  therefore  is  that  the  mortgagee  may  acquire 
the  equity  of  redemption  either  directly  from  the  owner,  or  at  a 
sale  by  his  assignee  in  bankruptcy,  or  by  his  creditor  upon  execu- 
tion.2  He  may  acquire  any  title  adverse  to  the  mortgagor,  what- 
ever it  may  be,  and  set  it  up  against  his  claim  to  redeem.^ 

If  the  mortgage  was  made  by  a  deed  absolute  upon  its  face, 
the  mortgagee  may  show  that  the  equity  of  redemption  was  sub- 
sequently released  to  him  by  a  parol  agreement  of  the  grantor.* 

712.  The  fact  that  the  mortgagee  is  in  possession  does  not 
change  the  rule.  By  taking  possession  he  does  not  become  a 
trustee,  except  in  a  limited  sense.  He  may,  perhaps,  be  called  a 
trustee  in  respect  to  his  liability  to  account  for  the  rents  and 
profits.^  "  No  trust  is  expressed  in  the  contract ;  it  is  only  raised 
by  implication  in  subordination  to  the  main  purpose  of  it;  and 
after  that  is  fully  satisfied  its  primary  character  is  not  fiduciary."^ 
A  purchase  by  tlie  mortgagee  in  possession  will  be  carefully  scru- 

1  Webb  I'.  Uorkc,   2  Sch.  &  Lei.  CGI,  vancement  of  a  further  sum,  equal,  with 

[ler  Lord  Redesihile;  Ford  v.  Olden,  L.  R.  the  previous  loan,  to  the  agreed  value  of 

■i  Eq.  461  ;  Oliver  v.  Cunningham  (C.  C.  the  land,  are  not  sufficient  to  divest  the 

Mich.  1881),  7  Fed.   Rep.  6S'J  ;  Russell  v.  title  of  the  mortgagor,  or  bar  his  right  of 

Southard,  12  IIow.  154.  redemption.     Jones   i-.    Blake,   33   Minu. 

-  Bl>the  V.  Richards,  10  S.  &  R.  (Ta.)  362. 

2f)l.  ^  Per  Chief  Justice  Shaw,  in   King  v. 

'   Walthall  V.  Rives,  34  Ala.  91  ;   Ilar-  State  Mat.  F.  Ins.  Co.  7  Cush.  (Ma.-s.)  1, 

rison  v.  Roberts,  6  Fla.  711.  7  ;  Ten  Eyck  v.  Craig,  62  N.  Y.  406,  422 ; 

♦  Shaw   V.  Walbridge,   .33  Oiiio  St.    1.  Clark  i-.  Bush,  3  Cow.  (N.  Y.)  151;  Duval 

Hut  it   ha8   bei-n   held    tiiat  a  Hub.sequent  v.  I*.  &  M.  Bunk,  10  Ala.  6.'t*). 

surrender  of  the  note  evidencing  the  iti-  "  Sir  Thomas  I'liimer,  in  Chohnoiuicley 

dcbtedncss  by  the  mortgagee,  and  tiie  ad-  (•.  Clinton,  2  Jac.  &  Walk.  183. 

615 


§  713.]  A  mortgagee's  rights  and  liabilities. 

tinized  when  fraud  is  charged  ;  and  to  avoid  the  purchase  in  equity 
it  is  not  necessary  to  show  actual  fraud,  but  constructive  fraud  is 
sufficient  for  that  purpose,  or  even  an  unconscientious  advantage 
taken  of  a  mortgagor  in  needy  circumstances,  which  ought  not  to 
be  retained.^  A  grossly  inadequate  price  paid  for  the  equity  of 
redemption  is  ground  for  such  relief.^ 

An  agreement  made  between  the  mortgagor  and  mortgagee, 
after  the  making  of  the  mortgage,  that  the  mortgagee  may  pur- 
chase the  equity  of  redemption  at  an  appraisal,  in  the  absence  of 
any  unfairness  in  its  terms,  has  been  held  valid,  and  enforced.^ 

The  mortgagee  in  possession  may  even  purchase  the  equity  of 
redemption  at  a  sale  upon  an  execution  in  his  own  favor  issued 
upon  a  judgment  for  a  debt  other  than  the  mortgage  debt ;  and 
may  hold  the  title  adversely  to  the  mortgagor  if  he  does  not  re- 
deem, as  from  a  sale  upon  execution.^ 

713.  There  is  a  limitation  of  this  rule  whenever  the  mort- 
gagee has  either  expressly  assumed  any  duty  to  protect  the  mort- 
gaged estate  in  any  particular,  or  such  a  duty  impliedly  arises 
from  the  relation  of  the  parties.  Thus,  for  instance,  it  is  gener- 
ally the  duty  of  the  mortgagee  in  possession  and  receiving  an  in- 
come from  the  estate  to  pay  the  taxes  upon  it ;  and  therefore  he 
is  not  allowed  to  suffer  the  estate  to  be  sold  for  taxes,  and,  upon 
purchasing  it  in,  to  set  up  this  title  as  a  bar  to  the  moi'tgagor's 
redeeming.  He  is,  on  the  contrary,  regarded  as  holding  this  title 
in  trust  for  the  mortgagor's  benefit.^  He  may,  however,  under 
some  circumstances,  acquire  a  tax  title,  and  hold  it  adversely  to 
the  owner  of  the  equity  of  redemption  ;  ^  but  this  is  only  when 

1  Russell  V.  Southard,  12  How.  139;  praisal  was  made,  and  the  balance  due  the 
Hyndman  v.  Hyndman,  19  Vt.  9;  Perkins  mortfragor  was  tendered  within  the  time 
V.  Drye,  3  Dana  (Ky.),  170;  Chapman  v.  specified  to  his  executors,  he  having  died, 
Mull,  7  Ired.  (N.  C.)  Eq.  292;  McLeod  v.  and  a  demand  made  of  a  conveyance. 
Bullard,  84  N.  C.  515,  531 ;  Lee  v.  Pearce,  The  court  held  that  the  agreement  should 
68  N.  C.  76.  be  enforced. 

2  McKinstry  v.  Conly,  12  Ala.  678.  *  Triram  v.  Marsh,  54  N.  Y.  599  ;  Wood- 

3  Austin  V.  Bradley,  2  Day  (Conn.),  lee  v.  Burch,  43  Mo.  231 ;  Walthal  v. 
466.  In  this  case  the  mortgagor,  after  a  Rives,  34  Ala.  92  :  Harrison  v.  Roberts,  6 
breach  of  the  condition,  agreed  in  writing  Fla.  711. 

to  make  an   absolute  conveyance  of  the  ^  Beckwith  v.  Scborn  (W.  Va.),  5  S.  E. 

premises  by  warranty  deed,  on  demand.  Rep.  453 ;  Gorham  v.  Farson  (111.),  10  N. 

at  an  appraisal,  and  that  if  the  appraised  E.  Rep.  1. 

value  should  be   more  than  the  sum  due  ^  §  680;  Williams  v.  Townsend,  31   N. 

on    the  mortgage,  the  balance  should  be  Y.  411;  Waterson   v.    Devoe,    18    Kans. 

paid  to  the   mortgagor  within    one  year  223;  Morrow  «;.  Dows,  28  N.J.   Eq.  459, 

from  the  date  of  the  agreement.     The  ap-  note  ;  Cornell  v.  Woodruff,  77  N.  Y.  203. 

616 


HIS   RIGHTS   AGAINST   THE   MORTGAGOR.  [§  714. 

he  is  under  no  obligation  himself  to  pay  the  taxes  on  which  the 
sale  was  made.  Generally  a  mortgagee  not  in  possession  is  under 
no  obligation  to  pay  the  taxes  on  the  mortgaged  property,  and 
there  is  no  reason  why  he  may  not  acquire  title  to  the  property 
by  a  fair  purchase  at  a  tax  sale.^ 

The  mortgagee  lawfully  acquires  for  his  own  benefit  and  pro- 
tection any  outstanding  paramount  title.- 

714.  When  the  payment  of  the  taxes  is  a  duty  on  his  part, 
he  is  like  a  trustee,  and  cannot  affect  the  rights  of  the  mortgagor 
by  purchasing  the  property  at  a  sale  for  such  taxes.^  Such  is  his 
position  when  he  has  taken  possession  of  the  premises  for  the 
purpose  of  foreclosing  his  mortgage.*  He  may  pay  the  taxes, 
and  add  the  amount  to  the  debt  secured  by  the  mortgage,  but  he 
cannot  acquire  an  adverse  title  by  a  purchase  at  a  sale  by  the  tax 
collector.^ 

Moreover,  if  the  mortgagee  has  bought  the  tax  title  for  the 
benefit  of  the  mortgagor  as  well  as  for  his  own  benefit,  he  cannot 
afterwards  set  it  up  against  the  mortgagor  to  defeat  a  redemption 


im 


by  hi 

If  a  mortgagee,  standing  in  the  relation  of  a  mortgagee  in  pos- 
session, acquires  a  tax  title,  and  afterwards  sells  the  property 
under  his  power  of  sale  and  becomes  the  purchaser,  he  cannot  set 
up  his  tax  title  as  against  a  right  of  dower  which  was  not  re- 
leased in  the  mortgage." 

A  junior  mortgagee  cannot,  before  foreclosure  of  his  mortgage, 
acquire  a  title  to  the  premises  paramount  to  a  prior  mortgage  by 
taking  a  tax  deed  of  the  same.  If  the  mortgagee  acquires  such 
title  after  foreclosui-e  of  his  mortgage  and  purchase  of  the  prem- 
ises, he  cannot  set  it  up  against  the  first  mortgagee  if  the  tax 
was  levied  after  he  took  possession,  because  he  would  then  stand 
in  the  place  of  a  purchaser,  who  is  bound  to  pay  the  taxes.^ 
Whether  he  could  gain  any  rights  superior  to  those  of  the  first 

'  §§  1080-1134;  Waterson  v.  Devoe,  18  per  Andrews,  J.;  Chickering  v.  Failcs,  26 
KiiMs.  L^2.3  ;    Siiiitli  )•.  Lewis,  20  Wis.  350  ;  III.  507  ;  Moore  v.  Titinaii,  44  111.  3G7. 
Chapman  ,:  Mull,  7  Ircd.  (N  C.)  Eq.  292 ;  *  Browu  v.  Simons,  44  N.  II.  475. 
Coombs  V.  AVarren,  ."54  Me.  89  ;  Beckwith  ''  Brown  v.  Simons,  supra;  Brevoort  i\ 
V.    Sehorn    (W.   Va.),  5    S.  E.  Hep.  453;  Randolph,  7  How.  (N.  Y.)  Pr.  398 ;  John- 
Summers    V.    Kanawha    Co.    26    W.    Va.  son  r.  Payne,  1 1  Neh.  269. 
159;  Eastman  j^  Thayer,  60  N.  II.  408.  "Martin    v.    Swofford,   59   Miss.    328; 

See,    however,    Maxfield    r.  Willey,  46  Moore  v.  Titman,  sujiru. 

Mich.  252.  7   Walsh  i-.  Wilson,  130  Mass.  124. 

■^  Gjerness  v.  Mathews,  27  Minn.  320.  *  Smith  v.  Lewis,  supra. 

*  Ten  Eyck  v.  Craig,  62  N.  Y.  406,  422, 

617 


§  715.]  A  mortgagee's  rights  and  liabilities. 

mortgagee  by  purchasing  a  tax  title,  outstanding  at  the  time  of 
the  foreclosure  of  his  mortgage,  or  issued  upon  a  sale  for  taxes 
assessed  before  that  time,  and  which  he  was  under  no  obligation 
to  pay,  has  not,  perhaps,  been  decided  ;  but  it  would  seem  that 
he  should  not  be  allowed  to  set  up  such  title  so  as  to  wholly  de- 
feat the  rights  of  the  prior  mortgagee.  Upon  the  ground  that 
taxes  are  charged  as  much  upon  the  mortgage  interest  as  upon 
the  equity  of  redemption,  it  lias  been  declared  that  a  subsequent 
mortgagee  cannot,  by  purchasing  the  tax  title,  use  it  adversely  to 
the  first  mortgage.  Such  title  in  his  hands  enures  to  the  pro- 
tection rather  than  the  destruction  of  the  title  of  the  prior  mort- 
gage.i 

Whether  the  mortgagee's  lien  is  affected  by  a  tax  sale  depends 
upon  the  statute  in  force  when  the  mortgage  was  made.  There 
is  no  doubt  the  legislature  has  power  to  make  taxes  a  lien  para- 
mount to  mortgages  and  other  liens  taken  after  the  enactment  of 
a  statute  to  that  effect.^  But,  generally,  the  mortgagee  has  the 
right  to  redeem  from  a  tax  sale,  within  a  limited  time  after  re- 
ceiving notice  of  the  sale.^ 

If  a  mortgagee  of  a  lease  obtain  a  renewal  of  it,  the  mortgagor 
is  entitled  to  the  benefit  of  it,  he  paying  the  mortgagee  for  his 
charges.  "  The  mortgagee  but  grafts  upon  his  stock,  and  it  shall 
be  for  the  mortgagor's  benefit."  "^  The.  rule  is  the  same  in  case 
the  lease  expired  before  the  renewal  of  it.  So  if  a  mortgagee, 
by  an  agreement  with  the  mortgagor,  purchases  an  outstanding 
prior  incumbrance,  the  mortgagor  is  entitled  to  redeem  from  such 
outstanding  title  on  payment  of  the  sum  paid  by  the  mortgagee 
for  it. 

715.  A  mortgagee  cannot  be  divested  of  possession  until 
payment.  Even  where  a  mortgagor  cannot  be  divested  of  his 
possession  without  a  foreclosure  and  sale,  if  the  mortgagee,  or 
any  one  standing  in  his  place,  has  with  the  assent  of  the  mort- 
gagor obtained  possession,  neither  the  latter,  nor  any  one  claim- 
ing under  him,  can,  by  an  action  of  ejectment  or  otherwise,  re- 
cover possession  until  the  debt  is  paid.'' 

1  Hortou  V.  Ingersoll,  13  Mich.  409.  968,  §  121 ;  Becker  v.  Howard,  66  N.  Y. 

-  Public  Schools  v.  Trenton,  30  N.  J.  5.    Massachusetts:  G.  S.  eh.  12,  §36. 
Eq.  667;  S.  C.  2  N.  J.  L.  J.  142;  Mor-  4  Lord  Cham  ellor  Nottingham  in  Rush- 
row  V.  Dows,  28  N.  J.  Eq.  459  ;  Dale  v.  worth's  case,   Freem.    12  ;    Riikestraw  v. 
M'Evers,  2  Cow.  (N.  Y.)  118  ;  Parker  v.  Brewer,  2  P.  Wms.  511  ;  Nesbett  v.  Tre- 
Baxter,  2  Gray  (Mass.),  185.  dennick,  Ball  &  B.  29;  Moore  v.  Titman, 

3  As  in    New   York:  1    R.   S.    1875,  p.  44  lU.  367. 

Qlg  5  New  York  :  Hubbell  v.  Moulson,  53 


HIS   RIGHTS   AGAINST    THE   MORTGAGOR. 


[§  715. 


A  mortgagee  who  has  acquired  possession  before  his  mortgage 
became  due,  by  virtue  of  some  other  title,  is  to  be  deemed  at  the 
maturity  of  his  mortgage  as  holding  as  a  mortgagee  in  possession 
upon  a  forfeiture ;  and  therefore,  although  he  has  lost  the  title 
under  which  he  originally  entered,  he  may  defend  his  possession 
under  his  mortgage.^ 

The  mortgagee's  right  to  enter  in  any  lawful  mode  and  hold 
possession  of  the  mortgaged  premises  may  be  presumed  from  the 
mortgage  itself,  unless  there  be  some  agreement  modifying  the 
presumption.  Although  he  cannot  recover  possession  by  eject- 
ment, being  in  possession  he  may  hold  possession.  Even  when 
one  is  a  trespasser  in  the  first  instance,  and  while  holding  in  this 
way  takes  an  assignment  of  a  mortgage,  it  wovild  seem,  after  for- 
feiture at  least,  that  the  mortgagor's  consent  to  his  holding  pos- 
session would  be  inferred  from  the  mortgage  itself.^  At  any  rate 
one  who  has  entered  in  this  way  may,  after  forfeiture,  defend  his 
possession  as  assignee  of  the  mortgagee  ;  ^  but  the  mortgage  be- 
fore default  would  not,  it  would  seem,  enable  him  to  defend  his 
wrongful  possession  of  the  premises.* 


N.  Y.  225  ;  Pell  v.  Ulmar,  18  N.  Y.  139  ; 
Watson  V.  Spence,  20  Wend.  260  ;  Fox  v. 
Lipe,  24  lb.  164;  Phyfe  v.  Riley,  15  lb. 
248  ;  Van  Dyne  v.  Thayre,  14  lb.  2.33  ; 
Fogal  V.  Pirro,  17  Abb.  Pr.  113  ;  S.  C.  \0 
Bosw.  100;  Chase  v.  Peck,  21  N.  Y.  581, 
586.  Oregon  :  Roberts  v.  Sutherlin,  4 
Oreg.  219.  Illinois  :  Dickason  v.  Dawsou, 
85  111.  53  ;  Nicholson  v.  Walker,  4  Bradw. 
404.  Minnesota  :  Martin  i;.  Fridley,  23 
Minn.  13.  Wisconsin  :  Hennesy  v.  Far- 
rell,  20  Wi.s.  42,  46  ;  Brinkman  v.  Jones, 
44  Wis.  498,  Montana :  Fee  v.  Swingly, 
13  Pac.  Rep.  375. 

In  Kortright  v.  Cady,  21  N.  Y.  343, 
365,  Chief  Justice  Comstock,  in  the  Court 
of  Appeals  of  New  York,  speaking  of  the 
use  of  this  action  for  the  recovery  of  po.s- 
session  of  the  mortgaged  premises,  .said  : 
"  When  the  legislature  by  ex|)ress  enact- 
ment denied  this  remedy  to  mortgagees, 
they  undoubtedly  supposed  tliey  had  swept 
away  the  only  remaining  vestige  of  the 
ancient  rule  of  the  common  law,  wliicli 
regarded  a  mortgage  as  a  conveyance  of 
the  freehold  ;  yet  I  sec  nothing  inconsis- 
tent or  anomalous  in  allowing  the  posses- 
sion, once  acquired  for  the  purpose  of  sat- 


isfying the  mortgage  debt,  to  be  retained 
until  that  purpose  is  accomplished.  When 
that  purpose  is  attained,  the  possessory 
right  instantly  ceases,  and  the  title  is,  as 
before,  in  the  mortgagor,  without  a  recon- 
veyance. The  notion  that  a  mortgagee's 
possession,  whether  before  or  after  de- 
fault, enlarges  his  estate,  or  in  any  respect 
changes  the  simj)le  relation  of  debtor  and 
creditor  between  him  and  his  mortgagor, 
rests  upon  no  foundation.  We  may  call 
it  a  just  and  lawful  possession,  like  the 
possession  of  any  other  pledge  ;  but  when 
its  object  is  accomplished  it  is  neither  just 
nor  lawful  for  an  instant  longer."  To. 
like  effect  see  Brinkman  i,'.  Jones,  44  Wis. 
496. 

1  Winslow  V.  McCall,  32  Barb.  (N.  Y.) 
241  ;  Bolton  v.  Brewster,  lb.  389.  Contra, 
Cable  V.  E!li.s,  86  III.  525. 

■^  Madison  Av.  Church  v.  Oliver  St. 
Church,  41  N.  Y.  Superior  Ct.  369,  per 
Sedgwick,  J.  ;  >'.  C.  73  N.  Y.  82. 

•■'  lb. 

*  Madison  Av.  Church  v.  (jliver  St. 
Church,  73  N.  Y.  82;  5.  C.  19  Abb.  (N. 
Y.)  Pr.  105. 

619 


§§  716,  717.]     A  mortgagee's  rights  and  liabilities. 

But  possession  obtained  by  a  mortgagee  through  collusion  with 
the  mortgagor's  tenant  is  unlawful,^  and  confers  no  right,  where 
a  mortgage  does  not  vest  the  fee  in  the  mortgagee  upon  breach  of 
the  condition. 

716.  If  the  mortgagee  la^wfuUy  obtains  possession  after 
forfeiture,  the  mortgagor  cannot  recover  possession  without  satis- 
fying the  mortgage.  He  cannot  maintain  ejectment  for  the  prem- 
ises ;  his  remedy  is  by  a  bill  to  redeem.'-^  An  assignee  of  the 
mortgage  has  the  same  rights  in  this  respect  although  he  hold 
only  an  equitable  assignment  of  it.^ 

By  the  purchase  of  an  overdue  mortgage,  one  already  in  lawful 
possession  of  the  premises,  as,  for  instance,  when  he  has  entered, 
with  the  owner's  consent,  under  a  contract  to  purchase  them,  may 
by  virtue  of  such  title  hold  them  until  the  debt  is  paid.*  But  if 
he  has  not  acquired  the  mortgage  title  at  the  time  of  the  bring- 
ing of  suit  against  him  to  recover  possession  of  the  mortgaged 
premises,  his  subsequent  purchase  of  the  mortgage  will  not  avail 
him  as  a  defence.^ 

The  beneficiary  under  a  trust  deed  after  condition  broken  en- 
tered upon  the  premises,  and  without  any  sale  under  the  trust 
deed  conveyed  the  estate.  The  maker  of  the  deed  of  trust 
brought  an  action  of  ejectment  against  the  purchaser,  and  it  was 
held  that  although  tiie  conveyance  did  not  pass  to  him  the  legal 
title,  it  operated  as  an  assignment  of  the  equity  of  the  benefi- 
ciary ;  and  that  being  in  possession,  he  could  defend  successfully 
against  the  grantor,  unless  he  paid  the  debt  secured.^  He  is  not 
a  mere  stranger  setting  up  a  title  in  another.^ 

717.  In  a  few  states,  however,  by  virtue  of  peculiar  provi- 
sions of  statute,  the  mortgagor  may  recover  possession  from  the 
mortgagee  at  any  time  before  his  rights  have  in  some  manner 
been  foreclosed.^     If  he  goes  into  possession  without  permission 

1  Russell  V.  Ely,  2  Black,  575;  Sahler  Church,  2  Robert.  (N.  Y.)  642;  S.  C.  3 
V.  Signer,  44  Barb.  (N.  Y.)  606.  lb.  570;  19  Abb.  Pr.  105;  1  Abb.  Pr.  N. 

2  Brobst  V.  Brock,  10  Wall.  519;  Den     S.  214;  73  N.  Y.  82. 

V.  Wright,  7  N.  J.  L.  (2  Halst.)  175 ;  Hen-         5  Hall  v.  Bell,  6  Met.  (Mass.)  431. 
nesy  v.  Farrell,  20  Wis.  42 ;  Gillett  v.  Ea-         ^  Johnson  v.  Houston,  47  Mo.  227. 
ton,  6  Wis.  30 ;  Tallman  v.  Ely,  6  Wis.         ''  Woods  v.  Hilderbrand,  46  Mo.  284. 
244;  Stark  v.  Brown,  12  Wis.  572;  Pace         »  Humphrey  v.  Hurd,  29  Mich.  44;  Lee 
V.  Chadderdon,  4  Minn.  499  ;  Harper  v.  v.  Clary,  38  Mich.  223  ;  Caruthersy.  Hum- 
Ely,  70  111.  581  ;  Wells  v.  Rice,  34  Ark.  phrey,  12  Mich.  270;  Morrow  t;.  Morgan, 
346.  48  Tex.  304;  Mills  v.  Heaton,  52  Iowa, 

3  Kilgour  V.  Gockley,  83  111.  109.  215,  217. 
*  Madison   Av.    Church    v.   Oliver   St. 

620 


HIS   EIGHTS   AGAINST    THE   MORTGAGOR.       [§§  718,  719. 

of  tlie  mortgagor,  he  may  be  removed  by  suit  in  ejectment.^ 
Having  a  right  of  possession  by  statute,  it  is  held  that  he  may 
enforce  the  right.  His  right  to  possession  must  exclude  the  mort- 
gagee's right  to  hold  it.  "  It  would  be  absurd,"  said  Mr.  Justice 
Campbell,  "  to  hold  there  could  be  a  right  of  possession  which 
could  not  lawfully  be  enforced."-  When  the  mortgagee  has  en- 
tered by  permission,  it  would  seem  that  his  possession  could  not 
be  disturbed  by  the  mortgagor  without  redemption  ;  but  in  such 
case  his  authority  would  be  regarded  as  resting  upon  the  license, 
and  not  upon  the  mortgage.^ 

718.  Writ  of  entry.  —  If  the  possession  of  a  mortgagee  after 
entry  is  interfered  with  by  the  mortgagor  or  those  claiming  under 
him,  the  mortgagee  may  maintain  his  title  and  his  right  to  pos- 
session by  a  writ  of  entry,  declaring  on  his  own  seisin,  and  may 
have  an  absolute  judgment  for  possession  as  at  common  law,  with 
damages  for  tlie  rents  and  profits  of  which  he  was  wrongfully  de- 
prived.'* Such  judgment  does  not  interfere  with  the  mortgagor's 
right  to  redeem,  and  upon  redemption  to  claim  the  rents  and 
profits  so  recovered.  Moreover,  when  the  mortgagee  has  not  been 
disturbed  in  his  possession,  but  he  has  either  before  or  after  con- 
dition broken  the  right  of  posssession,  he  may  have  judgment  at 
common  law  against  the  mortgagor  in  a  writ  of  entry,  unless  the 
defendant  claims  the  conditional  judgment  where  foreclosure  may 
be  had  by  this  process.^ 

719.  Ejectment.  —  After  the  maturity  of  the  mortgage,  a  mort- 
gagee, without  foreclosure  or  sale,  may  maintain  ejectment  against 
the  mortgagor,  without  giving  him  previous  notice.^  A  second 
mortgagee  may  maintain  the  action,  although  there  be  an  out- 
standing first  mortgage  still  unsatisfied.  The  first  mortgagee  is  re- 
garded as  holding  the  legal  title  only  for  the  purpose  of  enforcing 
payment  of  the  debt." 

If  the  mortgagee  bring  ejectment  for  possession  of  the  prop- 

1  Newton  v.  McKay,  30  Mich.  380.  ^  Howard  v.  Houghton,  64  Me.  445  ; 

2  Newton  v.  McKny,  supra.  Treat  v.  rierce,  53  Me.  71,  77. 

3  Newtou  1-.  McKay,  supra,  per  Camp-  «  Allen  i-.  Kauson,44  Mo.  2G3 ;  Carroll 
I)cll,  J. ;  Heading  r.  Waterman,  40  Mich.  v.  Ballance,  26  111.  9  ;  Johnson  v.  Wat- 
107.  son,  87  III.  535  ;  Ford  v.  Steele,  54  Vt. 

*  Stewart  v.   Davis,  63    Me.   539  ;  Mi-  562. 

ner  w.  StevenH,  1   Cush.  (.Mass.)  408,  per  '  Savage    v.    Dooley,   28    Conn.   411  ; 

Shaw,  C.  J.      "  The   action    is   tliercfore  Hosevelt  v.   Slackhouse,   1   Cow.  (N.  Y.) 

against    wrong-doers,    and     not    against  122  ;  Gray  v.  Jcuks,  3  Mason,  520. 
mortgagors." 

621 


§  720.]  A  mortgagee's  rights  and  liabilities. 

erty,  the  defendant  may  prove  by  parol  that  the  mortgage  debt 
has  been  paid.  After  the  mortgage  debt  has  been  satisfied,  the 
mortgagee  cannot  maintain  an  action  at  hiw  to  recover  possession, 
although  the  mortgage  has  not  been  formally  discharged. 

In  such  suit,  however,  the  mortgagor  cannot  introduce  evidence 
to  show  that  the  mortgage  is  one  of  indemnity,  and  that  the  mort- 
gagee has  suffered  no  damage.^  Even  the  admissions  of  the  mort- 
gagee that  the  mortgage  is  not  a  lien  are  not  admissible,  except 
in  favor  of  a  subsequent  purchaser  or  incumbrancer,  who  has  been 
misled  b}'  them.^  The  mortgage  alone,  duly  executed,  acknowl- 
edged, and  recorded,  is  admissible  in  evidence  of  the  mortgagees 
title  to  the  land  mortgaged,  without  first  producing  the  notes 
which  it  was  given  to  secure.'' 

A  cestui  que  trust  in  a  trust  deed  is  not  a  mortgagee,  and  has 
no  such  title  as  will  enable  him  to  maintain  ejectment.^ 

Where  a  mortgage  is  regarded  as  a  lien  merely,  the  legal  title 
remaining  in  the  mortgagor,  the  mortgagee  cannot  maintain  eject- 
ment against  him.^  Even  if  the  mortgage  be  in  the  form  of  an 
absolute  deed,  neither  the  grantee,  nor  a  purchaser  from  him  with 
notice  of  the  nature  of  the  deed  as  a  security,  has  such  a  title  to 
the  land  as  will  sustain  ejectment  against  the  mortgagor.^ 

In  Michigan  ejectment  of  the  mortgagor  by  the  mortgagee  is 
forbidden  by  statute.  The  mortgagor  cannot  be  disturbed  in  his 
possession  until  foreclosure  is  absolute.  The  parties  cannot  even 
by  an  agreement  in  the  mortgage  abridge  the  mortgagor's  right  of 
possession.' 

720.  Forcible  entry  and  detainer.  —  This  process  is  not  ap- 
plicable to  the  case  of  a  mortgagee  who  has  attempted  to  take 
possession  under  a  mortgage  for  a  breach  of  condition,  and  whose 
attempt  has  been  repelled  by  force.  The  remedy  is  by  a  writ  of 
entry.  The  defendant  has  the  right  to  have  the  court  inquire 
and  determine  how  much  is  due  upon  the  mortgage,  and  also 
has_^a  right  to  have  a  conditional  judgment  entered,  which,  under 
the  practice  in  Maine  and  Massachusetts,  delays  for  two  months 
the  issue  of  the  execution,  and  gives  a  chance  for  redemption.^ 

■  1  Jackson  v.  Jackson,  5  Cow.  (N.  Y.)  e  Berdell  v.  Berdell,  33  Hun  (N.  Y.), 

173.  535. 

-  Jackson  v.  Jackson,  sripra.  '^  Batty  v.  Snook.  5  Mich.  231 ;  Hazel- 

3  Smith  V.  Johns,  3  Gray  (Mass.),  517.  tine  i'.  Granger,  44  Mich.  503. 

*  Barnum  v.  Cook,  14  Mo.  App.  590.  «  Walker  v.  Thayer,  113  Mass.  36 ;  Gcr- 

5  Murray  v.   Walker,  31    N.    Y.   399;  rish  i;.  Mason,  4  Gray  (Mass.),  432 ;  Has- 

Teal  i;.  Walker,  111  U.  S.  242.  tings  v.  Pratt,  8  Cush.  (Mass.)  121  ;  Lamed 
622 


HIS   RIGHTS   AGAINST    THE   MORTGAGOR.  [§  721. 

Neither  a  mortgagee  who  has  not  taken  possession  of  the  mort- 
gaged premises,  nor  a  purchaser  at  a  sale  under  the  power,  can 
maintain  this  process  for  the  purpose  of  obtaining  possession  of 
the  property.  The  object  of  the  statute  is  to  give  a  speedy  rem- 
edy to  those  who,  being  in  possession  of  land,  are  unlawfully  dis- 
possessed by  force,  and  not  to  permit  questions  of  title  to  be  tried 
by  a  summary  process  before  an  inferior  tribunal.^ 

For  the  same  reason  a  lessee,  who  has  never  been  in  possession 
of  the  premises,  and  who  acquires  title  through  a  purchaser  at  a 
mortgagee's  sale,  neither  the  purchaser  nor  the  mortgagee  having 
ever  been  in  possession,  cannot  maintain  this  process.'-^ 

Where  a  party,  in  giving  a  trust  deed,  acknowledges  himself 
the  tenant  of  the  trustee,  and  covenants  that,  if  he  fails  to  sur- 
render immediate  possession  to  the  purchaser  in  case  of  a  sale 
under  the  power  therein,  an  action  of  forcible  detainer  may  be 
employed  to  dispossess  him,  the  action  will  lie  against  him  upon 
the  happening  of  the  contingency.^ 

721.  A  mortgagee  who  has  entered  for  condition  broken 
may  maintain  trespass  for  mense  profits  against  one  who  is 
in  possession  of  the  premises  under  the  mortgagor,  and  refuses  to 
yield  possession,  although  the  entry  may  not  have  been  sufficient 
for  the  purpose  of  foreclosure.*  A  mortgagee  in  possession  may 
maintain  a  complaint  in  his  own  name  for  damages  caused  by 
flowing  under  a  mill  act.^  For  an  injury  to  the  freehold  rather 
than  to  the  possession,  a  mortgagee  not  in  actual  possession  may, 
after  condition  broken,  maintain  trespass  against  the  mortgagor  ; 
as,  for  instance,  for  cutting  and  carrying  to  market  timber  trees 
standing  on  the  mortgaged  land.  After  condition  broken  the 
mortgagee's  right  to  possession  accrues,  and  carries  with  it  the 
right  to  sue  in  trespass  for  such  an  injury.  The  possession  of 
the  mortgagor  is  not  adverse,  and  an  injury  to  the  freehold  is 
beyond  a  matter  of  possession  of  the  mortgagor ;  and  whoever  be 
the  wrong-doer,  he  is  amenable  to  the  mortgagee  for  a  violation 
of  his  rights.^ 

V.  Clarke,  8  Cush.    (Mass.)  29;  Clement         *  Northamptou  Paper  Mills  i-.  Ames,  8 

i".  Bennett,  70  Me.  207  ;  iJunniug  ;;.  Kin-  Met.  (Mass.)  1 ;  and  bee  Miner  r.  Stevens, 

son,  46  Me.  546,  5.^)3;  Keed  v.  Elwell,  46  1  Cush.  (Mass.)  482. 
Me.  270;  Necklace  v.  West,  33  Ark.  682.         ^  IJallard  v.  Ballard  Vale  Co.  5  Gray 

1  Boyle  V.  Boyle,  121  Mass.  85.  (Mass.),  468. 

^  Woodside  f.  Uidgeway,  126  Mass.  292.         "  §  696  ;   Pago   v.   Robinson,  10  Cush. 

3  Chapiu  V.  Billings,  91  111.  539.  (Mass.)  99  ;  Stowell  v.  Tike,  2  Me.  387. 

623 


§  722.]  A  mortgagee's  rights  and  liabilities. 

III.   His  Liahility  to   Third  Persons. 

722.  As  between  the  original  parties  the  release  of  a  part 
of  the  premises  does  not  affect  the  mortgagee's  lien  upon  the 
residue.  This  is  bound  for  the  whole  debt.^  But  as  against 
others  who  have  liens  upon  portions  of  the  mortgaged  premises, 
a  mortgagee  with  notice  of  such  liens  has  no  right  to  release  any 
portion  of  the  mortgaged  premises  to  the  injvu-y  of  the  owners 
of  such  liens.^  It  is  only  after  receiving  notice  of  such  liens  that 
he  becomes  responsible  for  his  acts  in  releasing  portions  of*,  the 
land.^  But  if  the  mortgagee  receives  a  fair  value  for  the  prop- 
erty released,  and  applies  this  to  the  payment  of  a  prior  incum- 
brance which  the  mortgagor  had  assumed  the  payment  of,  the 
latter  is  not  discharged  from  his  liability,  especially  if,  knowing 
of  the  intended  release,  he  advises  the  making  of  it.* 

This  rule,  however,  does  not  apply  when  the  unreleased  por- 
tions subsequently  mortgaged  are  ample  security  for  both  mort- 
gages.^ 

The  mortgagee,  by  releasing  one  of  two  parcels  of  land  which 
are  charged  with  the  burden  of  the  incumbrance,  may,  to  the 
extent  of  the  value  of  the  lot  so  released,  diminish  his  security ; 
because  in  such  case  the  purchaser  of  the  other  parcel  cannot 
compel  the  purchaser  of  the  parcel  so  released  to  contribute,  and 
the  mortgagee  who  has  interfered  and  discharged  a  portion  of  his 
lien  must  in  effect  make  contribution,  by  abating  such  a  propor- 
tion of  the  sum  due  on  the  mortgage  as  the  value  of  the  parcel 
released  bore,  at  the  time  of  the  execution  of  the  mortgage,  to  the 
value  of  both  parcels.^ 

A  mortgagee  who  knows  that  portions  of  the  mortgaged  prem- 
ises have  been  subsequently  conveyed  or  incumbered  is  not  al- 
lowed in  equity  to  release  those  parts  of  the  land  on  which  he 
has  the  only  lien,  and  to  enforce  his  entire  claim  upon  those  poi*- 
tions  in  which  others  have  become  interested.  Justice  may  re- 
quire that  the  lien  of  the  mortgage  be  extinguished  as  to  those 

1  §§  981,  982;   Coutant   v.    Servoss,  3  Eq.  376;  Kelley  v.  Whitney,  45  Wis.  110; 
Barb.  (N.  Y.)  128.  Wolf  v.  Smith,  36  Iowa,  454. 

2  Paxton    V.    Harrier,   11  Pa.  St.  312;         3  Vanorden  u.  Johnson,  swpra. 
M'Lean   v.   Lafayette   Bank,   3  McLean,         *  Williams  v.  Wilson,  124  Mass.  257. 
587;    Blair   v.    Ward,    10   N.   J.   Eq.    (2         ^  Kelley  i;.  Whitney,  supra. 

Stockt.)  119;  Cogswell  v.  Stout,  32  N.  J.        6  Parkman  v.  Welch,  19  Pick.  (Mass.) 
Eq.  240;    Harrison   v,  Guerin,  27  N.  J.     231. 
Eq.  219;  Vanorden  v.  Johnson,  14  N.  J. 

624 


AS   TO    THIRD   PERSONS.  [§  722. 

parts  in  which  subsequent  parties  have  become  interested.^  But 
if  they  can  be  protected  without  that,  he  may  still  enforce  his 
mortgage  against  the  remaining  portions  of  the  land,  so  far  as  he 
can  be  allowed  to  do  so  consistently  with  their  protection.  If  the 
mortgagee,  after  actual  notice  of  an  absolute  sale  of  a  portion  of 
the  premises  by  the  mortgagor  releases  other  portions,  the  mort- 
gage is  discharged  wholly  or  pro  tanto,  according  to  the  circum- 
stances, upon  that  part  owned  by  such  subsequent  purchaser. 
The  purchaser  or  mortgagee  of  the  part  of  the  property  remain- 
ing may  insist  on  a  credit  upon  the  mortgage  debt  of  a  sum  equal 
to  the  value  of  the  property  released.^ 

Where  a  mortgagee  releases  several  parcels  of  land  covered  by 
the  mortgage,  upon  payment  of  amounts  proportionate  to  the 
value  which  they  bear  to  the  mortgage  debt,  and  all  the  remain- 
ing lots,  except  one  in  possession  of  a  purchaser  from  the  mort- 
gagor, are  subsequently  sold  under  foreclosure  of  the  mortgage 
for  amounts  not  proportionate  to  the  actual  value  which  they 
bear  to  the  mortgage  debt,  but  without  any  fault  on  the  part  of 
the  mortgagee,  the  remaining  lot  is  subject  to  the  payment  of  the 
balance  of  the  mortgage  debt.'^ 

A  provision  in  a  mortgage  that  the  mortgagee  shall  release 
parts  of  the  mortgaged  premises,  on  request  of  the  mortgagor  or 
his  heirs  or  assigns,  upon  the  payment  of  a  fixed  price  per  acre, 
is,  so  far  as  the  price  is  concerned,  for  the  protection  of  the  mort- 
gagee ;  and  if  the  mortgagee,  at  the  request  of  a  grantee  of  the 
mortgagor,  release  parts  of  the  premises  at  a  less  price,  but  for  a 
price  not  less  than  the  value  of  the  land,  the  liability  of  the  mort- 
gagor to  pay  a  deficiency  is  not  affected,  in  the  absence  of  any 
notice  to  the  mortgagee  of  the  assumption  of  the  mortgage  debt 
by  the  grantee,  and  notice  not  to  release  for  a  less  sum  than  that 
stipulated  for.* 

The  rights  of  parties  claiming,  under  separate  conveyances 
from  the  mortgagor,  different  parts  of  the  mortgaged  premises, 
are  several  and  not  joint,  as  to  any  question  arising  upon  releases 
of  other  parts  of  the  mortgaged  property  by  the  mortgagee.'' 

'  Parkman  v.  Welch,  19  Pick.  (Mass.),  v.  De  Witt  Co.  Nat.  Bank,  4  Bradw.  (111.) 

231  ;  Deuster  v.  McCamus,  14  Wis.  307  ;  305;  Ilall  v.  Edwards,  43  Mich  473. 

Kelley  v.  Whitney,  45  Wis.  110;  Stevens  2  Hawhe  v.  Snydaker,  86  III.  197. 

V.   Cooper,   1    Johns.    (N.    Y.)    Ch.   425  ;  ''  Barney  v.  Myers  28  Iowa,  472. 

Guion    V.  Knapp,  6   Paige  (N.  Y.),   35;  *  Woodruff  i».  Stiiklo, 28  N.  J.  Eq.  549  ; 

BcDton  V.  Nicoll,  24  Minn.  221 ;  Warner  Hawhe  r.  Snydaker,  supra. 

*  Hawhe  v.  Snydaker,  supra. 

vou  I.               40  625 


§  723.]  A  mortgagee's  rights  and  liabilities. 

723.  The  mortgagee  who  has  actual  or  constructive  notice 
of  the  equity  of  such  purchaser  must  regard  it ;  and  therefore 
if  he  releases  a  part  of  the  mortgaged  estate,  he  must  abate  a 
proportionate  part  of  the  mortgage  debt  as  against  such  pur- 
chaser.i  But  the  mere  record  of  a  subsequent  conveyance  by  the 
mortgagor  of  a  part  of  the  premises  is  not  constructive  notice  of 
it  to  him.2  If,  however,  the  mortgagee  subsequently  takes  a  deed 
or  mortgage  of  a  part  of  the  same  property,  he  is  thereby  driven 
to  the  record,  and  is  bound  by  the  notice  which  the  record  affords 
at  that  time.^  Neither  is  it  the  duty  of  the  mortgagee  to  make 
inquiry  whether  a  junior  incumbrancer  has  intervened.'*  It  would 
not  be  reasonable  to  subject  the  mortgagee  to  the  constant  ne- 
cessity of  investigating  transactions  between  the  mortgagor  and 
third  persons  subsequent  to  the  mortgage.  A  notice  by  letter 
giving  the  names  of  the  purchasers  is  sufficient,  if  the  deed  be 
on  record  so  that  full  information  can  be  obtained  from  that.'' 
It  is  enough  if  notice  of  facts  out  of  which  the  subsequent  equity 
arises  is  brought  home  to  him  in  such  a  way  as  to  make  it  his 
duty  to  inquire  further  before  acting.*^ 

Neither  does  mere  possession,  standing  alone,  without  the  mort- 
gagee's knowing  who  has  possession,  and  without  notice  of  any 
facts  which  should  provoke  inquir}^  affect  him  with  notice."  But 
where  a  purchaser  of  a  portion  of  the  mortgaged  premises  situ- 
ated near  the  residence  of  the  mortgagee  recorded  his  deed  and 
went  into  actual  possession  of  the  property,  improved  it,  and  lived 
upon  it,  the  mortgagee's  knowledge  of  these  facts  was  held  to  be 
enough  to  put  him  on  inquiry  before  releasing  other  parts  of  the 
premises  from  the  mortgage.^ 

A  subsequent  purchaser  takes  his  title  with  full  knowledge  of 

1  Gilbert  v.  Haire,  43  Midi.  283.  3  Alexander  v.  Welch,  supra. 

2  §§  568,  1624  ;  George  v.  Wood,  9  *  Mcllvain  v.  Miit.  Assurance  Co.  93 
Allen  (Mass.),  80,  and  cases  cited  ;  Dens-  Pa.  St.  30;  Gage  v.  McGregor,  61  N.  11. 
ter  V.  McCamus,  14  Wis.  307  ;  Straight  47. 

V.  Harris,  14  Wis.  509 ;  Patty  v.  Pease,  8  Neither  is  an  attaching  creditor  bound 

Paige  (N.  Y.),    277  ;  Guion  v.  Knapp,  6  to  inquire  whether  there  is  a  junior  iu- 

Ib.  35;  Brown  v.  Simons,  44  N.  H.  475;  cunibrance  of  a  part  of  the  premises,  be- 

Wheelwright  v.  Depeyster,  4  Edw.  (N.  Y.)  fore  releasing  a  part  from  his  attachment. 

232  ;  Taylor  r.  Maris,  5  Rawle  (Pa.),  51 ;  Johnson  iv  Bell,  58  N.  H.  395. 

Vanorden  v.  Johnson,  14  N.  J.  Eq.  376;  5  jjall  v.  Edwards,  43  Mich.  473. 

Cogswell  V.  Stout,  32  N.  J.  Eq.  240  ;  Kipp  6  Cogswell  v.  Stout,  supra ;  Mcllvain  v. 

V.  Merselis,  30  N.  J.  Eq.  99 ;  Dewey  v.  In-  Mut.  Assurance  Co.  supra. 

gersoll,  42  Mich.  17;  Meacham  r.  Steele,  '•  Cogswell  u.  Stout,  supra. 

93  111.  135;  Alexander  v.  Welch,  10  111.  «  Dewey  v.  IngersoU,  supra. 
App.  181. 

626 


AS    TO   THIRD   PERSONS.  [§§  724,  725. 

the  mortgage,  and  if  he  wishes  to  protect  himself  he  should  no- 
tify the  mortgagee  of  his  purchase.  The  record  is  constructive 
notice  only  to  subsequent  purchasers,  or  those  claiming  under  the 
same  grantor.^ 

724.  In  like  manner  one  holding  a  mortgage  to  secure  a 
debt  for  which  another  is  liable  as  surety  has  no  right  to  re- 
lease the  mortgage  and  still  hold  the  surety  liable  ;  for  the  surety 
is  entitled  to  the  benefit  of  the  secui'ity  given  by  the  principal 
debtor,  and  the  creditor  is  not  allowed,  as  against  him,  to  do  any 
act  impairing  or  releasing  such  security .^ 

If  a  mortgagee  discharges  a  surety  by  his  laches  or  conduct,  he 
also  discharges  any  mortgage  the  surety  has  given  to  secure  the 
debt.'^  And  so  where  a  principal  debtor  and  his  surety  join  in  a 
mortgage  of  lands  of  which  the  legal  title  is  in  the  surety  and 
the  equitable  title  is  in  the  principal  debtor,  and  the  surety  is  dis- 
charged by  the  negligence  of  the  mortgagee,  the  mortgage,  which 
is  but  an  incident  of  the  debt,  is  discharged  so  far  as  it  affects 
the  rights  and  property  of  the  surety.  But  the  mortgage  remains 
a  valid  security  as  against  the  principal  debtor  and  his  equitable 
interest  in  the  lands.'* 

725.  The  holder  of  a  junior  mortgage  upon  one  of  two  lots 
embraced  in  a  prior  mortgage  may  compel  the  prior  mort- 
gagee to  resort  in  the  first  place  to  the  other  lot,  upon  which 
there  is  no  other  incumbrance ;  •''  but  if  the  other  lot  be  incum- 
bered by  a  mortgage  to  another  person,  the  prior  mortgagee  will 
be  required  to  satisfy  his  claim  out  of  the  proceeds  of  both  lots, 
in  proportion  to  the  amount  which  each  may  produce.^ 

But  although  generally  a  second  mortgagee  has  an  equitable 
right  to  have  other  security  in  the  hands  of  the  first  mortgagee 
applied  to  the  payment  of  the  mortgage  before  resorting  to  the 
land,  when  this  course  is  likely  to  occasion  much  delay  to  the 
prior  mortgagee  in  obtaining  satisfaction,  the  court  will  decree 
the  satisfaction   of  his  claim  from  the  mortgaged  property,  but 

1  Cheeveri'.  Fair,  5  Cal.  337 ;  Mcllvain  ^  Stephens  v.  Monongahela  Bank,   88 

I.-.  Mut.  Assurance  Co.  93  Pa.  St.  30;  Lake  Pa.  St.  IT)?, 

i;.  Shumate,  20  S.  C.  23,  32.  •»  White   v.   Life   Association,   63   Ala. 

■^  §  678  a;   Haves  v.  Ward,   4  Jolms.  419. 

(N.  Y.)  Ch.  123;  Alexander  r.  Welch,  10  ^  Ilenshaw  v.  Wells,  0  Humph.  (Tenn.) 

111.  App.  181  ;  Worcester  Mechanics'  Sav-  568. 

ings  Bank  r.  Tliaycr,  130  Mass.  4."j9.  •>  Green  r.  Ramagc,  18  Ohio,  428. 

627 


§  726.]  A  mortgagee's  rights  and  liabilities. 

will  at  the  same  time  provide  for  the  subrogation  of  the  second 
mortcjagee  to  the  other  security.^ 

726.  A  mortgage  to  a  surety  to  secure  him  is,  in  effect,  a 
security  to  the  principal  creditor,  and  he  is  entitled  to  the 
benefit  of  it.^  If  it  be  a  mortgage  of  indemnity  the  surety  can- 
not enforce  it  until  he  has  been  injured,  or  has  paid  the  debt  for 
which  he  was  surety  ;  ^  and  in  like  manner  the  security  does  not 
in  the  first  instance  attach  to  the  debt,  as  an  incident  to  it,  but 
whatever  equity  may  arise  in  favor  of  the  creditor  with  regard  to 
the  security  arises  afterward,  and  comes  into  existence  only  when 
the  surety's  right  to  call  upon  the  security  becomes  fixed.* 

A  surety  holding  such  a  mortgage  cannot,  while  the  debt  re- 
mains unpaid,  impair  the  rights  of  the  principal  creditor,  by  dis- 
charging the  mortgage  or  entering  satisfaction  of  record  ;  and  a 
purchaser  of  the  mortgaged  property  from  the  debtor,  after  such 
discharge  or  satisfaction,  is  chargeable  with  notice  of  the  cred- 
itor's rights  under  the  mortgage.^ 

But  although  a  mortgage  to  indemnify  a  surety  attaches  to  the 
debt  for  the  benefit  of  the  creditor,  this  is  a  secondary  use  of  the 
security,  which  is  to  be  used  primarily  for  the  benefit  of  the  mort- 
gagee ;  therefore,  if  it  be  taken  to  indemnify  one  who  is  surety  on 
several  notes,  and  he  is  discharged  upon  some  but  continues  liable 
upon  others,  he  has  the  right  to  use  the  security  for  the  payment 
in  the  first  place  of  those  notes  upon  which  he  is  liable,  while  the 
other  notes  have  the  incidental  benefit  of  the  remainder  of  the 
security.^  For  instance,  suppose  the  original  security  was  taken 
to  indemnify  a  surety  against  several  notes,  part  of  which  were 
attested  by  a  witness  and  part  were  not  so  attested ;  and  that 
after  the  lapse  of  six  years  the  surety  was  discharged  upon  the 
unattested  notes  by  the  bar  of  the  statute  of  limitations,  but  not 
discharged  upon  the  others,  —  he  is  entitled  to  pay  out  of  the  secu- 
rity the  notes  upon  which  he  is  still  liable ;  not  only  because  he 
has  a  superior  equity,  but  because  he  stands  upon  the  ground  of 

1  King  V.  McVickar,  3  Sandf.  (N.  Y.)  3  §  ngT  ;  Hall  v.  Cushman,  16  N.  H. 

Ch.  192.  462. 

"^  Moore  v.  Moberly,  7  B.  Mon.  (Ky.)  *  Jones  v.  Quinnipiack  Bank,  29  Conn. 

299;  Rice  u.  Dewey,  13  Gray  (Mass),  47;  25.     See,  however,  M'Lean  v.  Lafayette 

Dick  V.  Truly,  1   Sm.   &  M.  (Miss.)  Ch.  Bank,  3  McLean,  .587. 

557 ;  National  Shoe  &  Leather  Bank  v.  5  McMullen  v.  Neal,  60  Ala.  552. 

Small  (D.  C.  Me.  1881),  7  Fed.  Rep.  837 ;  6  Eastman  v.  Foster,  8  Met.  (Mass.)  19. 

Durham  V.  Craig,  79  Lid.  117.  See  Miller  v.  Wack,  1  N.  J.  Eq.  (Sax.) 

204. 
628 


AS   TO   THIRD   PERSONS.  [§§  727,  728. 

another  rule  of  law,  that,  of  two  or  more  having  equal  claims  in 
equity,  he  who  has  a  legal  title  is  preferred. ^ 

A  mortgagee  having  a  specific  demand  secured  by  a  mortgage 
upon  his  debtor's  property,  and  other  claims  not  secured,  upon  a 
conveyance  by  the  debtor  of  his  equity  of  redemption  and  other 
property  in  trust  to  pay  all  his  debts,  is  entitled  to  secure  the 
whole  amount  of  his  mortgage  out  of  the  land,  and  to  come  in 
pro  rata  with  other  creditors  as  to  his  other  claims.^ 

727.  If  a  mortgagee  release  the  mortgagor  from  personal 
liability,  he  thereby  diminishes  the  security  of  a  subsequent  pur- 
chaser of  part  of  the  premises,  and  therefore  the  lien  of  the  mort- 
gage, so  far  as  the  rights  of  such  subsequent  purchaser  are  con- 
cerned, is  discharged.  The  fact  that  another  person  at  the  same 
time  assumed  the  debt  does  not  prevent  the  discharge,  if  the  sub- 
sequent purchaser  did  not  assent  to  the  substitution.^  This  rule 
is  applicable  as  well  to  the  case  of  a  subsequent  mortgagee, 
though  in  some  cases  the  effect  of  the  release  of  the  mortgagor's 
personal  liability  might  be  to  give  the  second  mortgage  priority 
over  the  first,  instead  of  absolutely  discharging  the  premises  from 
the  lien.'* 

In  like  manner  if  a  mortgagee  release  a  grantee  of  the  mort- 
gaged premises  from  his  liability  to  pay  the  mortgage  debt  in 
accordance  with  his  agreement  of  assumption  contained  in  the 
deed  to  him,  the  mortgagor  is  thereby  released  from  his  liability 
for  a  deficiency  arising  upon  a  foreclosure  of  the  mortgage.^ 

728.  A  mortgagee  having  other  security  for  the  payment 
of  the  debt  secured  by  the  mortgage,  and  having  notice  of  a  sub- 
sequent mortgage  upon  the  same  premises,  is  bound  in  equity  to 
apply  in  the  first  instance  to  the  payment  of  the  debt  the  security 
in  which  the  subsequent  mortgagee  does  not  share  ;  and  if  the 
prior  mortgagee  under  such  circumstances  releases  the  other  se- 
curity, his  mortgage  is,  to  the  extent  of  the  value  of  that  security, 
satisfied  so  far  as  such  subsequent  mortgagee  is  concerned.^  In 
like  manner,  if  he  also  holds  personal  property  as  security  for  the 
same  debt,  he  also  may  be  compelled  by  the  heir  or  widow  of  the 

•  Eastman  v.  Foster,  8  Met.  (Mass.)  19,  «  §§  875,  1628;  Wasliington  Build.  & 
j)er  Sliaw,  C.  J.  Loan  Asso.  v.  IJiaf^licn,  27  N.  J.  Eq.  98  ; 

2  §  1631  ;  Bull   I'.  Ilamniond,    2  Lei<rh     Herbert  v.   Mechanics'    Build.    &    Loan 

( Va.),  410.  Asso.  17  N.  J.  Eq.   497  ;  Bergen   Savings' 

»  Co)le  V.  iJavis,  20  Wis.  564.  Bank  i'.  Barrows,  30  N.  J.  Eq.  89  ;  M'Lean 

*  Se.xton  V.  Pickett,  24  Wis.  34C.  v.  Lafayette  Bank,  3  McLean,  587  ;  Alex- 
6  Paine  v.  Jones,  76  N.  Y.  274.  ander  v.  Welch,  10  111.  App.  181. 

029 


§  729.]  A  mortgagee's  rights  and  liabilities. 

mortgagor  to  resort  in  the  first  instance  to  the  personal  property, 
so  as  to  relieve  the  land  to  that  extent  from  the  burden,  ^ 

Upon  the  same  principle,  a  building  association  holding  a  mort- 
gage upon  the  real  estate  of  one  o£  its  stockholders,  whose  stock 
is  also  pledged  as  collateral  security  for  the  loan,  cannot  have  re- 
course to  the  mortgaged  premises  as  against  one  holding  a  second 
mortgage  upon  them,  until  it  has  sold  the  stock  and  applied  the 
proceeds  of  it  to  the  payment  of  the  mortgage  debt.^  This 
equity  cannot  be  defeated  by  a  levy  upon  the  stock  under  a  judg- 
ment obtained  by  a  creditor  against  the  mortgagor.  As  against 
such  creditor,  the  holder  of  a  subsequent  mortgage  is  entitled  to 
have  the  stock  sold  and  applied  to  the  payment  of  the  first  mort- 
gage before  recourse  is  had  to  the  land.^  The  court  may  order  a 
senior  mortgagee  liolding  other  security  for  his  claim  to  exhaust 
that  before  resorting  to  the  security  covered  by  the  junior  mort- 
gage.* 

But  an  equity  in  the  mortgagor  may  intervene  to  prevent  the 
application  of  this  principle.  Thus  where  one  mortgage  covers 
two  tracts  of  land,  one  of  which  is  a  homestead,  and  another 
mortgage  covei's  only  the  tract  not  a  homestead,  the  holder  of 
the  former  mortgage  will  not  be  compelled  to  resort  to  the  home- 
stead tract  first,  in  order  to  leave  the  other  tract,  so  far  as  may 
be,  for  the  other  mortgagee.^ 

The  doctrine  of  marshalling  is  purely  a  doctrine  of  equity,  and 
will  not  be  enforced  to  the  prejudice  of  either  the  creditor  or  of 
third  persons,  or  even  so  as  to  do  an  injustice  to  the  debtor.  It 
will  not,  therefore,  be  applied  where  the  mortgage  creditors  are 
numerous,  none  of  whom  have  exclusive  liens  on  any  particular 
fund,  and  the  application  of  the  rule  must  necessarily  work  injus- 
tice to  some  one  of  them.  In  such  a  case  the  several  mortgage 
debts  should  be  paid  -pro  rata  in  the  order  of  priority,  out  of  the 
proceeds  of  the  funds  covered  by  each.^ 

729.  So  in  like  manner,  upon  the  insolvency  or  bankruptcy 
of  the  mortgagor,  the  mortgagee  may  do  as  he  pleases  about 
proving  his  claim  against  the  estate  of  the  debtor.     He   may,  if 

1  Harrow   v.   Johnson,    3    Mete.  (Ky.)         *  Swift  d.  Conboy,  12  Iowa,  444. 

578 ;  Davis  v.  Eider,  5  Mich.  423.  &  §  731 ;  McArthur  v.  Martin,  23  Minn. 

2  Red  Bank  Mut.  Build.  &  Loan  Asso.     74. 

V.  Patterson,  27  N.  J.  Eq.  223.  6  Gilliam  v.  McCormack  (Tenu.),  4  S. 

3  Phillipsburg    Mut.    Loan    &    Build.     W.    Rep.   521  ;  Marr  v.   Lewis,  31  Ark. 
Asso.  V.  Hawk,  27  N.  J.  Eq.  355 ;  and  see     203. 

cases  cited. 

630 


AS   TO   THIRD   PERSONS.         ,  [§§  730,  731. 

he  choose,  pay  no  regard  to  his  personal  claim,  and  rely  upon  the 
land  alone. ^  Or,  if  his  security  be  inadequate,  lie  may  have  it 
valued,  and  prove  his  demand  for  the  balance.  But  if  he  prove 
liis  whole  claim  against  the  estate  of  his  debtor,  without  refer- 
ence to  his  mortgage,  he  thereby  waives  his  mortgage  security  ; 
and  in  this  respect  the  law  is  the  same  when,  upon  the  death  of 
the  mortgagor,  his  estate  is  represented  insolvent,  and  the  mort- 
gagee has  his  whole  claim  allowed,  and  receives  a  dividend  upon 
the  whole  ;  he  thereby  releases  his  security.^  It  is  by  force  of 
statute,  however,  that  a  mortgagee  is  prevented  from  proving  his 
whole  claim  against  the  estate  of  his  debtor,  either  during  his 
lifetime  or  after  his  decease,  and  also  resorting  to  the  mortgage 
for  the  balance.  Upon  the  death  of  the  mortgagor,  the  holder  of 
the  mortgage  is  not  bound  to  seek  payment  of  his  debt  out  of  the 
personal  estate,  by  presenting  his  claim  to  the  personal  represen- 
tative, and  the  only  effect  of  his  not  doing  so  within  the  time 
allowed  is  to  deprive  him  of  all  benefit  of  tlie  personal  estate. 
He  may  resort  to  the  land  after  his  claim  against  the  personal 
estate  of  the  deceased  is  barred  ;  ^  or  under  the  statutes  as  they 
exist  in  some  states,  he  may  prove  the  debt  against  the  estate  of 
a  deceased  mortgagor,  receive  a  dividend,  and  enforce  his  mort- 
gage lien  for  any  portion  of  the  debt  remaining  unpaid.* 

730.  As  against  a  subsequent  mortgagee  the  parties  to  a 
prior  mortgage  cannot  change  its  terms.  A  junior  mortgagee 
has  the  right  upon  the  maturity  of  the  senior  mortgage  to  redeem 
it,  and  this  right  cannot  be  affected  by  an  agreement,  between  the 
parties  to  such  prior  mortgage,  fixing  upon  a  higher  rate  of  inter- 
est than  that  specified  in  the  mortgage.^  A  subsequent  mortgagee 
is  presumed  to  have  acquired  his  interest  with  reference  to  the 
existing  liens  as  they  appear  of  record,  and  his  rights  cainiot  be 
prejudice<l  by  private  arrangements  between  the  parties." 

731.  Where  a  homestead  is  included  with  other  realty  in 
a  mortgage,  tliere  is  no  implied  obligation  on  the  mortgagee  that 
he  shall  first  exhaust  his  remedy  on  the  land  other  than  the  home- 

1  §§    1231-1236;    Bennett   v.    Callioun  Collcfje  i>.  Dickson,  1   Fieem.  (Miss.)  Ch. 

Loan  &  Jiiiil.l.  Asso.  9  Rich.  (S.  C.)  Kq.  474;  Patton  r.  Page,  4  Hen.  &  M.  (Va.) 

1G.3;     Walker    i-.    Baxter,    26    Vt.    710;  44'J. 

Slack  i\  Emery,  30  N.  J.  Kq.  458.  *  Scliuelenbtirg  v.  Martin,  1   McCrary, 

-  Hooker  i-.   Olmstcad,  0    I'ick.  (Mass.)  .348. 

481.  ^  Gardner  v.  Erner.son,  40  Hi.  290. 

3  Grafton    Bank    v.  Doe,    19  Vt.   463;  ^  Whittacrc  v.  Puller,  T)  Minn.  508. 
Inge  V.  Boardman,  2  Ala.  331  ;  Jefferson 

031 


§  731.]  A  mortgagee's  rights  and  liabilities. 

stead  ;  bat  be  may  release  the  other  land  and  still  maintain  his 
lien  on  the  homestead.^  "  It  is  said  that  the  homestead  belongs 
to  and  is  designed  by  the  law  for  the  family,  and  that  their  rights 
are  paramount  to  the  rights  of  creditors.  We  cannot  assent  to 
the  claim  as  thus  broadly  stated.  It  means  that  when  a  creditor 
takes  a  mortgage  on  the  homestead  and  other  property,  though 
nothing  is  expressed,  there  is  an  implied  agreement  to  consider 
the  homestead  as  a  sort  of  secondary  security,  —  a  security  for 
security ;  that  the  other  property  mortgaged  is  the  primary  secu- 
rity ;  and  that  if  that  proves  insuflScient,  and  only  when  that 
proves  insufficient,  can  the  lien  on  the  homestead  be  enforced. 
That  parties  may  make  such  a  contract,  is  unquestionable  ;  that 
the  legislature  may  establish  such  a  rule,  is  probable."  ^  Thus, 
in  Iowa,  the  rule  is  so  established  by  reason  of  the  provisions  of 
the  Code  of  tliat  state.^  And  such  is  the  rule  in  California;* 
and  it  was  there  held,  that  when  one  member  of  a  partnership 
mortgaged  his  homestead  to  secure  a  partnership  debt,  after  an 
assignment  by  the  firm  for  the  benefit  of  creditors,  the  mortgagee 
must  first  look  to  the  partnership  assets,  and  then  to  the  home- 
stead onl}^  for  the  deficiency.^ 

But  in  the  absence  of  legislation,  of  express  contract,  or  of 
intervening  rights,  the  courts  are  not  warranted  in  interpolating 
such  a  stipulation.^  If  other  equities  intervene,  as,  for  instance, 
where  a  judgment  has  been  obtained  against  the  mortgagor  after 
the  mortgage,  the  equity  of  the  mortgagor's  family  being  superior 
to  the  claim  of  the  judgment  creditor,  it  is  proper  to  order  that 
the  real  estate  other  than  the  homestead  be  first  sold." 

The  Constitution  of  Texas  Drohibits  a  forced  sale  of  a  home- 
stead,  and  provides  that  no  mortgage  of  it,  although  executed  by 
both  husband  and  wife,  shall  be  valid. ^  A  former  Constitution  of 
the  state  containing  the  former  provision,  but  not  the  latter,  was 
construed  as  not  only  prohibiting  a  sale  of  a  homestead  under 
a  mortgage,  but  also  as  preventing  the  mortgagee's  recovering 
possession  of  it  by  ejectment.^ 

1  And  see  §§  731, 1286, 1632;  Chapman         *  McLaughlin  v.  Hart,  46  Cal.  638. 
V.  Lef-ter,  12  Kaus.  592;  Searle  v.  Chap-         5  Dickson  v.  Chorn,  6  Iowa,  19. 
man,  121  Mass.  19;  White  v.  Polleys,  20         6  Chapman  v.  Lester,  supra. 

Wis.  503;  Jones  v.  Dow,   18  Wis.  2ll ;  ^  La  Rue  v.  Gilbert,  18  Kan s.  220. 

Abbott  V.  Powell,  6  Sawyer,  91.  »  Art.  16,  §  50,  of  Const,  of  1875.     The 

2  Per  Brewer,  J.,  in  Chapman  v.  Lester,  Const,  of  1868,  art.  12,  §  15,  did  not  con- 
supra.  tain  the  latter  provision. 

3  Twogood  V.  Stephens,  19  Iowa,  405;  ^  Lanahan  v.  Sears,  102  U.  S.  318. 
Barker  v.  Rollins,  30  Iowa,  412.  In  Sampson  v,  Williamson,  6  Tex.  102, 

632 


AS    TO   THIRD   PERSONS.  [§  732. 

When  a  first  mortgage  is  made  without  a  release  of  homestead, 
and  a  subsequent  mortgage  is  made  with  such  release,  the  junior 
mortgage  has  priority  to  the  extent  of  the  homestead  right. ^ 
There  are  cases,  however,  that  support  the  principle  that  a  debtor 
who  waives  his  homestead  privilege  as  to  one  creditor,  waives  it 
as  to  all ;  for  instance,  if  he  waives  it  as  to  a  second  judgment 
creditor  or  mortgagee,  he  waives  it  as  to  the  first  ;^  and  the  sec- 
ond gains  no  preference  over  the  first ;  but  they  take  rank  in  the 
distribution  of  the  proceeds  according  to  the  dates  of  the  liens.^ 

732.  It  is  clear  enough  that  rights  of  subsequent  mort- 
gagees cannot  be  defeated  by  any  arrangement  between  a 
prior  mortgagee  and  the  mortgagor,  or  by  any  adjudication  of 
their  respective  rights.  But  when  the  first  mortgage  is  in  the 
form  of  an  absolute  deed,  it  is  sometimes  difficult  to  determine 
what  the  rights  of  subsequent  incumbrancers  are,  or  how  these 
rights  may  be  affected  by  subsequent  dealings  of  the  grantor  and 
the  grantee.  This  is  illustrated  by  a  case  in  lowa,^  where  the 
owner  of  land  sold  it  and  received  payment  for  it,  but  afterwards 
loaned  a  sum  of  money  to  the  purchaser,  and  having  made  no 
deed  of  the  land,  it  was  agreed  that  he  should  retain  the  title  of 
the  land,  and  should  convey  it  upon  payment  of  the  sum  loaned. 
Subsequently,  and  while  the  purchaser  had  no  title  other  than 
this  contract,  he  mortgaged  a  part  of  the  land  to  secure  a  debt. 
Several  years  after  this  the  purchaser  brought  an  action  upon 
the  contract,  asking  for  a  conveyance  of  the  land,  or  judgment  for 
the  amount  of  the  purchase  money  paid  upon  it,  in  case  the  re- 
conveyance could  not  be  enforced.  A  judgment  was  rendered 
in  behalf  of  the  purchaser,  which  was  satisfied  by  the  payment 
of  a  sum  of  money.  Soon  after  this  a  suit  was  brought  to  fore- 
close the  mortgage,  and  a  decree  of  foreclosure  was  sustained. 
It  was  said  that  the  transaction  between  the  vendor  and  purchaser 
of  the  land  amounted  to  a  mortgage  ;  that  the  purchaser  could 

this  prohibition,  while  applyinjj  to  a  sale  much  within  the  prohibition   as  a.  forced 

under  process  of  court,  was  not  rcfjardcd  sale  under  judicial  ]iroctss. 

as  ajiplying  to  a  sale  under  a  power.     A  '  Eldrid;j;c  v.  Pierce,  90  Til.  474  ;  S.  C. 

sale   by   a   mort(;a;;;ce   or   trustee   in    the  11  Chicai^o  L.  N.  201  ;  Shaver  »-•.  Williams, 

mode  contemplated  by  the  parties  to  the  87  111.  4G9. 

deed  was  not  regarded  as  a  forced  .sale.  -  I'ittman's  Apjical,  48  I'a.  St.  315. 

This  view  was  aflirnicd  in  several  cases,  "  Slielly's    A|)peal,    .'JO    Pa.    St.    373  ; 

the  latest  of  which  i.s  Jordan  i-.  Peak,  38  White  v.  Polleys,  20  Wis..'J03  ;  In  »«  Cog- 

Tex.  42!».      In  Lanahan  v.  Scars,  102  U.S.  bill,  2  IIughcH,  313. 

318,    Mr.   Justice    Field    declared    that  a  ■«  Davis  w.  Kogers,  28  Iowa,  413. 

forced   dispossesbion    in    cjcetineut    Ih    as 

633 


§§  733,  734.]     A  mortgagee's  rights  and  liabilities. 

have  conveyed  his  interest  or  estate  in  the  land  absolutely,  and 
that  he  could  mortgage  it  as  well.  It  is  plain  that  the  first  mort- 
gagee, by  payment  of  the  judgment  against  him,  acquired  only 
that  interest  in  the  land  Avhich  the  mortgagor  could  have  con- 
veyed to  him  by  deed.  If  the  subsequent  mortgage  was  valid 
when  it  was  made,  it  could  not  be  defeated  by  such  conveyance 
or  judgment ;  and  accordingly  it  was  held  that  tlie  first  mort- 
gagee acquii-ed  the  mortgagor's  interest  subject  to  the  subsequent 
mortgage,  and  that  a  decree  should  be  entered  for  a  sale  of  the 
land  to  satisfy  it.^ 

733.  A  second  mortgagee  of  a  portion  of  the  preraises 
takes  his  title  subject  to  the  whole  amount  of  the  prior  mort- 
gage. In  view  of  the  rule  that  a  conveyance  of  a  portion  of  the 
mortgaged  premises  by  warranty  deed  leaves  the  remainder  of  the 
premises  primarily  liable  in  equity  for  the  whole  amount  of  the 
mortgage,  it  should  be  borne  in  mind  that  one  taking  a  mortgage 
of  such  residue  takes  it,  in  like  manner,  subject  to  the  whole 
amount  of  the  prior  mortgage.^  The  mortgagor  can,  of  course, 
give  no  greater  rights  than  he  himself  possesses.  He  has  no 
equity  to  compel  the  purchaser  to  contribute  to  the  payment  of 
the  prior  mortgage,  and  therefore  he  cannot  confer  upon  his  sec- 
ond mortgagee  of  the  remainder  any  such  equity. 
•  There  may  be  circumstances,  however,  under  which  a  subse- 
quent mortgagee  may  be  entitled  to  his  mortgagor's  equity  to 
compel  another  person  to  discharge  a  prior  mortgage  ;  as,  for  in- 
stance, where,  upon  the  dissolution  of  a  partnership,  one  of  the 
partners  has  agreed  to  pay  a  certain  partnership  debt  secured  by 
a  mortgage  upon  the  land  of  the  other  partner,  and  the  latter  has 
afterwards  mortgaged  it  again.^ 

734.  A  mortgagee  may  be  estopped  to  assert  his  mort- 
gage. A  mortgagee  who  stands  by  at  an  auction  sale  of  the 
property  by  the  mortgagor,  and  hears  the  announcement  made 
that  the  purchaser  will  get  an  unincumbered  title,  and  says  noth- 
ing, is  estopped  from  setting  up  his  mortgage  against  one  who 
buys  at  such  sale  and  pays  his  money  under  the  impression  that 
he  is  getting  an  unincumbered  title,  even  though  the  mortgage 
was  duly  recorded  at  the  time  of  the  sale.  To  allow  the  mort- 
gage to  be  set  up  would  be  a  fraud  on  the  purchaser,  although  the 

1  Davis  V.  Rogers,  28  Iowa,  413.  ^  Kinney  v.  M'Cullough,  1   Sandf.  (N. 

2  Kellogg  V.  Rand,  11  Paige  (N.  Y.),     Y.)  Ch.  370. 
59. 

634 


AS   TO   THIRD   PERSONS.  [§  734. 

mortgagee  had  no  fi'audulent  intent  in  not  correcting  the  an- 
nouncement.^ 

But  the  mortgagee  is  not  estopped  to  enforce  his  mortgage  by- 
reason  of  his  being  present  and  omitting  to  state  his  title  at  a  sale 
of  the  mortgaged  premises  by  the  mortgagor's  assignee  in  bank- 
ruptcy, when  the  auctioneer  offers  only  the  right,  title,  and  inter- 
est of  the  bankrupt,  and  no  inquiry  is  made  of  the  mortgagee  in 
regard  to  his  mortgage,  which  is  duly  recoi'ded.^ 

In  like  manner,  if  by  a  statement  that  his  mortgage  is  dis- 
charged he  lead  another  to  buy  the  propert}^  or  to  take  a  mort- 
gage upon  it,  he  cannot  afterwards,  as  against  such  purchaser  or 
mortgagee,  set  up  his  mortgage  as  against  such  purchaser  or  mort- 
gagee.^ 

A  mortgagee  xnsij  be  estopped  from  asserting  his  mortgage  for 
a  larger  sum  than  he  states  to  a  purchaser  of  the  equity  of  re- 
demption to  be  due  him,  especially  if  he  uses  any  active  efforts 
to  induce  a  sale  of  the  property.  But  the  proof  of  the  facts  out 
of  which  the  estoppel  is  claimed  to  arise  should  be  clear  and  satis- 
factory. If  the  statement  of  the  mortgagee  as  to  the  amount  due 
is  a  mere  matter  of  opinion,  and  the  purchaser  relies  upon  the 
assurances  of  the  mortgagor  from  whom  he  purchases,  when  he 
might  by  the  use  of  reasouable  diligence  ascertain  the  true  amount 
of  the  incumbrance,  the  mortgagee  is  not  estopped  from  claim- 
ing the  amount  due  him  as  against  the  purchaser.  If  a  written 
agreement  as  to  the  amount  of  the  incumbrance  be  taken  from 
the  mortgagee  before  completing  the  purchase,  the  latter  will  not 
be  allowed  to  prove  verbal  statements  and  assurances  made  by 
the  mortgagee  as  to  the  nature  and  extent  of  the  incumbrance, 
unless  a  mistake  be  shown  in  the  agreement  as  written  ;  and  on 
the  other  hand,  the  mortgagee  will  be  estopped  from  claiming  any 
more  than  the  written  agreement  calls  for.^ 

1  Markham  v.  O'Connor,  52  Ga.  183.  »  Lasselle  i'.  Barnctt,   1  Blackf.  (Ind.) 

^  Masou  V.  Philbrook,  69  Me.  57.  150. 

*  Preble  V.  Conger,  60  III.  370. 
635 


CHAPTER   XVII. 


A  purchaser's  rights  and  liabilities. 


I.  Purchase  subject  to  a  mortgage,  735- 
739. 
II.  Assumption    of     mortgage     by    pur- 
chaser, 740-747. 


III.  Personal  liability  of  purchaser,  748- 
785. 


I.  Purchase  Subject  to  a  Mortgage. 

735.  The  clause  in  a  deed  referring  to  the  existence  of  a 
prior  mortgage  is  of  much  importance  in  other  ways  than  in  de- 
termining whether  the  purchaser  engages  to  pay  the  mortgage, 
or  merely  buys  subject  to  it.  In  the  first  place,  it  may  qualify  the 
grantor's  liability  upon  the  covenants  of  the  deed  against  incum- 
brances by  showing  the  existence  of  the  mortgage,  and  that,  as 
between  him  and  the  grantee,  the  latter  is  to  pay  it.^  It  may 
prevent,  by  a  statement  as  to  what  an  incumbrance  upon  the 
property  is,  any  liability  on  the  part  of  the  grantor  to  the  penal- 
ties imposed  by  statute  upon  one  who  sells  incumbered  property 
without  disclosing  the  incumbrance.  It  may  preclude  the  grantee 
from  impeaching  the  validity  of  the  mortgage  existing  upon  the 
property  conveyed.^  It  may  subject  the  land  to  the  burden  of 
the  mortgage  without  imposing  upon  the  grantee  any  personal 
liability  to  pay  it.^  It  may  have  an  important  bearing  upon  the 
liability  of  the  grantor  in  case  an  extension  of  the  mortgage  is 
afterwards  made  without  his  consent.^  It  may  render  the  grantee 
directly  liable  for  the  mortgage  debt  to  the  mortgagee,  or  it  may 
make  him  liable  merely  to  his  grantor.^  Moreover,  under  this 
clause  arise  questions  of  notice  affecting  others  who  may  claim 
under  the  deed.^     The  mode,  therefore,  in  which  this  clause  is 


1  Collins  V.  Rowe,  1  Abb.  (N.  Y.)  N.  C. 
97. 

2  Ritter  V.  Phillips,  53  N.  Y.  586. 

3  Collins  V.  Rowe,  sujira ;  McCouihe  t'. 
Fales  (N.  Y.),  14  N.  E.  Rep.  285. 

*  Calvo  V.  Davies,  8  Hun  (N.  Y.),  222  ; 
S.  V.  73  N.  Y.  211. 

636 


5  Ganisey  v.  Rogers,  47  N.  Y.  233: 
Binsse  v.  Paige,  1  Abb.  (N.  Y.)  App.  Dec. 
138. 

6  Campbell  v.  Vedder,  1  Abb.  (N.  Y.) 
App.  Dec.  295. 


PURCHASE   SUBJECT   TO   A  MORTGAGE.  [§  735. 

expressed  is  of  extreme  importance,  both  in  the  drawing  of  the 
instrument  and  in  the  interpretation  of  its  effect. 

One  having  purchased  land  by  a  deed  with  covenants  of  seisin 
and  warranty,  mortgaged  it  to  his  grantor  for  the  purchase  money, 
by  a  deed  containing  the  same  covenants.  Being  evicted  by  a 
paramount  title,  he  brought  an  action  against  his  grantor  on  his 
covenant  of  seisin.  The  action  was  held  to  be  maintainable,  the 
mortgagor's  covenants  not  operating  as  a  rebutter.^ 

When  land  is  conveyed  "subject  to"  a  mortgage,  and  the 
amount  of  it  is  deducted  from  the  consideration,  with  the  inten- 
tion that  it  shall  be  paid  by  the  grantee,^  it  is  important  that 
the  mortgage  be  excepted  from  the  covenants  of  the  deed  ;  oth- 
erwise the  grantor  may  be  held  to  have  covenanted  against  the 
incumbrance,  and  to  have  made  himself  liable  for  its  payment.^ 
The  fact  that  the  incumbrance  is  mentioned  in  a  deed  to  which 
reference  is  made  does  not  avail  to  qualify  the  covenants  of  a 
deed."^  Oral  evidence  that  the  parties  intended  or  agreed  that 
the  incumbrance  should  be  excepted  from  the  covenants  is  not 
admissible,  because  its  effect  would  be  to  vary  or  control  the 
deed.^ 

The  mention  of  an  existing  mortgage  for  a  certain  amount  is 
only  by  way  of  description  and  identification  of  the  mortgage, 
which,  to  the  extent  of  all  sums  due  thereon  for  principal  or  in- 
terest, is  a  single  incumbrance.  A  covenant  that  the  premises 
"  are  fi'ee  from  all  incumbrances  except  as  aforesaid,"  is  not  a 
covenant  that  there  was  no  interest  due  upon  the  mortgage  at 
the  time  of  the  conveyance ;  and  therefore  the  grantee  cannot 
recover  from  the  grantor,  in  an  action  upon  the  covenant,  the 
amount  of  accrued  interest  he  has  been  obliged  to  pay  to  prevent 
a  foreclosure  of  the  mortgage.^ 

'  §68,-  Sumner  v.   Barnard,    12    Met.  ^  Estabrook  v.  Smith,  6  Gray  (Mass.), 

(Mass.)  459.  572.     In  this  case  the   covenant  ajrainst 

■^  A  clause  binding  the  grantee  to  as-  incumbrances  excepted  tlie  mortgage,  but 

sume   an   existing   mortgage   may   be  as  the  covenant  of  warranty  did  not ;  and  it 

Coilows :  "  Said  premises  are  hereby  con-  was  held  tliut  tlie  mortgagor  was  bound 

veyed    subject    to    a    certain    mortgage,  to  pay  it. 

ilated,   etc.,    and    recorded,   etc.,   and   of  *  Harlow  v.  Thomas,  15  Tick.  (Mass.) 

which  the  sum  of  i is  now  due,  whicii  60. 

mortgage  tlie  said  grantee,  his  heirs  and  ''  Sjjurr   v.   Andrew,   G    Allen    (Mass.), 

a.s8igus,  are  to  assume  and  pay,  the  said  420. 

amount    forming    a   part    of    the  above-  ®  Shanahan  v.  Perry,  130  Mass.  460. 

named   consideration."      Crocker's   Com. 

Forms,  .'J8. 

637 


§  736.]  A  purchaser's  rights  and  liabilities. 

736.  One  who  purchases  an  equity  of  redemption  by  a 
deed  without  covenants  takes  the  estate  charged  with  the  pay- 
ment of  the  mortgage  debt.  It  is  presumed,  in  the  absence  of  a 
special  contract  or  of  any  unusual  circumstance,  that  the  amount 
paid  was  the  price  of  the  property  purchased,  less  the  amount  of 
the  mortgage,  and  it  would  be  for  the  purchaser,  and  not  the 
seller,  to  discharge  the  incumbrance.^  In  such  case,  therefore,  the 
purchaser  cannot  pay  off  the  debt,  and  then  keep  the  mortgage 
alive  by  taking  an  assignment  of  it  to  himself,  and  set  it  oft" 
against  an  unpaid  balance  still  due  from  him  to  his  vendor.^  If 
it  appear  that  the  incumbrances  were  not  deducted  from  the  con- 
sideration paid,  and  the  purchaser  has  given  back  a  mortgage  for 
the  purchase  money,  although  his  deed  be  without  covenants,  and 
he  knew  of  the  existence  of  the  incumbrances,  he  may  pay  them 
off,  and  deduct  the  amount  from  the  mortgage  he  has  given.^ 
In  such  case  the  mortgagor  remains  the  debtor,  and  the  land  is 
simply  security  for  the  debt.'* 

When  one  purchases  land  expressly  subject  to  a  mortgage,  the 
land  conveyed  is  as  effectually  charged  with  the  incumbrance  of 
the  mortgage  debt  as  if  the  purchaser  had  expressly  assumed  the 
payment  of  the  debt,  or  had  himself  made  a  mortgage  of  the 
land  to  secure  it.^  The  conveyance  of  land  subject  to  a  mortgage 
operates  to  give  priority  to  the  mortgage,  both  as  against  the  pur- 
chaser and  those  claiming  liens  under  judgments  subsequently 
rendered.^  The  amount  of  an  existing  mortgage  having  been 
deducted  from  the  purchase  money  of  the  incumbered  property, 
the  grantee  in  effect  undertakes  to  pay  the  amount  of  the  pur- 
chase money  represented  by  the  mortgage  to  the  holder  of  it, 
and  he  is  as  effectually  estopped  to  deny  its  validity  as  he  would 
be  had  he  in  terms  agreed  to  pay  such  mortgage."     The  differ- 

1  Shuler  v.  Hardin,  25  Ind.  386  ;  Gayle  ^  Sweetzer  v.  Jones,  35  Vt.  317  ;  Guern- 
w.  Wilson,  30  Gratt.  (Va.)  166;  S.  C.  5  sey  r.  Kendall,  swjora ;  Cobb  v.  Dyer,  69 
Reporter,  667  ;  Savings  Bank  y.  Grant,  41  Me.  494;  Fuller  r.  Hunt,  48  Iowa,  163; 
Mich.  101 ;  Dickason  v.  Williams,  129  Manwaring  v.  Powell,  40  Mich.  371  ; 
Mass.  182 ;  Scheppelmann  j;.  Feurth,  87  Berry  v.  Whitney,  40  Mich.  65  ;  Chad- 
Mo.  351  ;  Guernsey  v.  Kendall,  .55  Vt.  wick  v.  Island  Beach  Co.  (N.J.)  12  At). 
201,  quoting  text.  Rep.  380. 

-  Atherton    v.    Toney,    43    Ind.    211;  6  Bundy  r.  Iron  Co.  38  Ohio  St.  300. 

Bunch  y.  Grave  (Ind.),  12  N.  E.  Rep.  514.  "§744;   Johnson   v.   Thompson,    129 

5  Wolbert  y.  Lucas,  10  Pa.  St.  73.  Mass.  398;    Tuite   v.    Stevens,   98  Mass. 

*  Wadsworth  v.  Lyon,  93  N.  Y.  201 ;  305  ;  Hancock  v.  Fleming,  103  Ind.  533  ; 

45  Am.  Rep.  190;  Bennett  v.  Bates,  94  Washington,  0.  &  W.  R.  R.  Co.  v.  Caze- 

N.  Y.  354  ;  26  Hun,  364.  nove,  83  Va.  744,  749. 
638 


PURCHASE   SUBJECT   TO   A   MORTGAGE.  [§  736. 

ence  between  the  purchaser's  assuming  the  payment  of  the  mort- 
gage, and  simply  buying  subject  to  the  mortgage,  is  simply  that 
in  the  one  case  he  makes  himself  personally  liable  for  the  pay- 
ment of  the  debt,  and  in  the  other  case  he  does  not  assume  such 
liability.^  In  both  cases  he  takes  the  land  charged  with  the  pay- 
ment of  the  debt,  and  is  not  allowed  to  set  up  any  defence  to  its 
validity,  as,  for  instance,  that  the  mortgage  is  void  wholly  or  in 
part  on  account  of  usury .^ 

A  statement,  however,  in  a  deed  of  a  portion  of  the  premises 
covered  by  a  mortgage,  made  by  a  purchaser  from  the  original 
mortgagor,  that  the  grant  is  subject  to  such  mortgage,  does  not 
alone  make  this  mortgage  a  specific  charge  upon  the  portion  or 
interest  granted  by  such  deed."^ 

If  the  equity  of  redemption  be  sold  on  execution,  the  purchaser 
cannot  either  legally  or  equitably  claim  that  the  mortgagor  shall 
pay  off  the  mortgage.  The  purchase  is  made  subject  to  the  mort- 
gage, and  the  premises,  as  between  the  purchaser  and  the  mort- 
gagor, become  primarily  liable  for  the  debt.*  In  a  levy  of  an 
execution  on  an  equit}--  of  redemption,  the  amount  of  an  existing 
mortgage  having  been  allowed  in  the  creditor's  favor  in  the  ap- 
praisal of  the  interest  set  off  to  him,  he  cannot  set  up  the  inva- 
lidity of  the  incumbrance.^  A  purchaser  at  an  execution  sale  is 
in  the  same  position,  in  respect  to  previous  incumbrances,  as  one 
who  takes  title  by  a  quitclaim  deed,  or  by  a  deed  made  expressly 
subject  to  incumbrances.^ 

If  the  premises  be  conveyed  to  the  mortgagee  by  a  deed  which 
recites  that  the  conveyance  is  made  subject  to  the  mortgage  which 
forms  part  of  the  consideration  of  the  conveyance,  the  mortgage 
is  paid,  and  the  mortgagee  cannot  maintain  a  suit  against  the 
mortgagor  upon  the  mortgage  debt  for  a  deficiency." 

Under  a  deed  containing  general  covenants  of  warranty,  with 
a  recital  of  an  existing  mortgage  upon  it,  the  grantor  really  as- 

1  Woodbury  v.  Swan,    58  N.  H.   380;  "»  Kusstli   v.  Allen,    10  Vav^c   (N.  Y.), 

Strohauer  I'.  Voltz,  42  Micli.444;  Winans  249;  Vamleikcmp  v.  Siulton,  11   II).  28; 

V.  Wilkic,  41  Mich.  264.  S.  C.  Clarke  Cli.  321  ;  Lovdiue  v.  Webb, 

-  Green  v.  Turner,  38  Iowa,  112;  Grei-  62  Ala.  271. 

thcr  V.  Alexander,  15  Iowa,  470;  Perry  ''  Delaware  &  Hudson  Canal  Co. ;?.  Bon- 

V.  Kearns,  13  Iowa,  174;  Pinnell  u.  Boyd,  nell,  46  Conn.  9;  Lord  v.  Sill,  23  Conn. 

33  N.  J.  Eq.  190  ;  Dolman   v.  Cook,  14  319  ;  Waterman  v.  Curtis,  26  Conn.  241  ; 

N.  J.  Eq.  56,  63;  Conover  v.  Ilobart,  24  Kusscll  ;;.  Dudley,  3  Met.  (Ma.ss.)  147. 

N.  .J.  Eq.  120  ;  Lee  v.  Sti;;cr,  30  N.  J.  Eq.  n  Buucli  r.  Grave  (Ind.),  12  N.  E.  Rop. 

610;  Fuller  v.  Hunt,  48  Iowa,  163.  514. 

'■^  Slater  v.  BrecHe,  36  Mich.  77.  "  Dickason  t-.  William.s,  129  Mass.  182. 


§§  737,  738.]     A  purchaser's  rights  and  liabilities. 

sumes  the  payment  of  the  mortgage  ;  and  when  he  pays  it  he 
pays  his  own  debt,  and  cannot  enforce  it  or  hold  it  against  the 
purchaser.  The  grantoi-'s  assignee  in  insolvency,  or  for  the  ben- 
efit of  creditors,  stands  in  the  same  position,  and  if  he  pays  the 
mortgage  and  takes  an  assignment  of  it,  he  cannot  enforce  it 
against  the  purchaser.^ 

737.  One  who  has  purchased  subject  to  a  mortgage  is  not 
entitled  to  the  benefit  of  collateral  security  placed  in  the  hands 
of  the  mortgagee  by  the  vendor  after  the  execution  of  the  mort- 
gage. By  purchasing  in  this  way,  the  land  becomes  the  primary 
fund  for  the  payment  of  the  mortgage  debt,  and  the  purchaser 
has  nothing  to  do  with  any  other  security  taken  for*the  debt  not 
a  part  of  the  original  transaction.^ 

The  principles  of  equity  in  regard  to  the  marshalling  of  secu- 
rities are  not  applicable  to  the  case  of  a  mortgagee  and  a  subse- 
quent j^urchaser  of  the  equity  of  redemption  ;  but  are  confined  to 
cases  where  two  or  more  persons  are  creditors  of  tiie  same  debtor, 
and  have  successive  demands  upon  the  same  property,  the  one 
prior  in  right  having  other  securities.  The  purchaser  takes  what 
he  purchases,  —  the  equity  of  redemption,  —  and  nothing  more. 
He  acquires  no  equitable  interest  in  other  securities  held  by  the 
mortgagee,^  and  he  has  no  right  to  have  the  mortgage  debt  charged 
upon  the  mortgagor  personally  in  exoneration  of  the  land.* 

738.  If  the  purchaser  buys  a  mere  equity  of  redemption, 
he  is  not  personally  liable  for  the  mortgage  debt ;  ^  or  liable 
either  legally  or  equitably  to  indemnify  his  grantor  against  the 
mortgage.^  He  may  give  up  the  property  at  any  time  in  satis- 
faction of  the  lien.^  The  mortgage  debt  remains  an  incumbrance 
upon  the  estate,  and  a  debt  of  the  mortgagor  ;  but  not  a  debt  of 
the  person  buying.  In  the  absence  of  a  special  agreement  to  as- 
sume the  mortgage,  or  words  in  the  grant  importing  in  some  form 

1  Bjles  t'.  Kellogg  (Mich.),  34  N.  W.  557  ;  Rourke  v.  Coulton,  4  Bradw.  (111.) 

Rep.  671.  259  ;  Hall  v.  Mobile  &  Montgomery  Ry. 

-  Brewer  v.   Staples,  3  Sandf.  (N.  Y.)  Co.  58  Ala.  10;  Merrimau  v.  Moore,  90 

Ch.  579.  Pa.  St.  78 ;  Lawrence  v.  Towle,  59  N.  H. 

3  Stevens  y.  Church,  41  Conn.  369.  28;    Guernsey   v.    Kendall,    55  Vt.   201; 

*  Cherry  v.  Monro,  2  Barb.  (N-  Y.)  Ch.  Shepherd  v.  May,  115  U.S.  505  ;  Elliott 

618;  Brewer  v.  Staples,  3  Sandf.  (N.  Y.)  v.  Sackett,  108  U.  S.  132. 

Ch.  579  ;  Mathews  v.  Aikin,  1  N.  Y.  595.  6  Smith  ;;.  Truslow,  84  N.  Y.  660. 

s  §  748  ;   Fiske  v.   Tolman,  124  Mass.  '^  Tichenor  v.  Dodd,  3   Green  (N.  J.) 

254  ;  Strong  v.  Converse,  8  Allen  (Mass.),  Ch.  454,  and  cases  cited. 

640 


PURCHASE   SUBJECT    TO   A   MORTGAGE.  [§  739. 

that  he  assumes  the  payment  of  it,  the  purchaser  is  not  person- 
ally liable  for  it.^ 

Where,  by  the  terms  of  contract  for  the  purchase  of  real  estate, 
the  vendee  is  to  take  it  subject  to  a  certain  mortgage,  he  may 
properly  refuse  to  accept  a  deed  containing  a  clause  reciting  that 
he  assumes  the  payment  of  such  mortgage.^  If  having  made  such 
a  contract  he  accepts,  without  inspection,  a  deed  wherein  he  is 
made  to  assume  the  mortgage,  and  he  does  not  discover  this  until 
judgment  for  a  deficiency  has  been  entered  against  him  in  a  fore- 
closure suit,  he  may  have  the  judgment  opened,  and  may  show  by 
the  contract  that  he  was  not  liable  for  the  deficiency,^  and  may 
have  the  mortgage  reformed  by  striking  out  the  assumption 
clause,  unless  an  estoppel  has  arisen  in  favor  of  a  third  person.* 
An  innocent  purchaser  for  value  of  a  mortgage  note  has  a  right 
to  rely  upon  recitals  in  a  deed  from  the  mortgagor  to' a  subse- 
quent grantee  by  which  the  latter  assumes  the  mortgage  debt.^ 

The  proof  of  the  recording  of  a  deed  in  which  there  is  a  cove- 
nant that  the  grantee  shall  assume  and  pay  an  existing  mortgage, 
raises  a  presumption  that  the  title  vested  in  the  grantee,  and  that 
he  is  bound  by  the  covenant,  unless  there  be  evidence  tending  to 
show  the  contrary.^  In  the  absence  of  fraud,  a  grantee  who  has 
assumed  a  mortgage  cannot  show  by  parol  evidence  that  he  never 
agreed  to  assume  it,  and  that  he  never  authorized  or  knew  of  the 
insertion  of  such  an  agreement  in  the  deed.^ 

On  the  other  hand,  if  the  contract  of  sale  provides  that  the 
purchaser  shall  assume  and  pay  an  existing  mortgage,  but  the 
deed  omits  to  provide  for  this,  it  would  seem  that  the  contract 
might  be  enforced  specifically  when  it  is  established  that  there 
will  be  a  deficiency,  and  the  amount  of  this  has  been  definitely 
ascertained.^ 

739.   The  purchase  of  a  paramount  title  by  the  grantee  of 

»  Shepherd    r.    May,    115    U.    S.    505;  77  N.  Y.  226,  affirming  43  Superior  Ct. 

Johni-on  v.  Monell,  13  Iowa,  300.  461. 

-  Lewis  V.  Day,  53  Iowa,  575  ;   Man-  ^  Ilayden  v.  Snow,  9  Biss.  511. 

haitan  L.  Ins.  Co.  v.   Crawford,  9  Abb.  ''  Lawrence  v.  Farley,  9  Abb.  N.  C.  (N. 

N.  C.  (N.  Y.)  365.  Y.)371. 

•^  Northern  Dispensary  of  N.  Y.  i;.  Mer-  '  Muhiigi-.  Fiskc,  131  Mas.s.  110;  Cool- 

riam,  59  How.  (N.  Y.)  Pr.  226;  Deyer-  idge   v.  Smith,  129    Mass.  554 ;   Blyer  v. 

mand  i-.  Chamberiin,  22  Hun  (N.  Y.),  110;  MonhoUand,  2  Sandf.  (N.  Y.)  Ch.  478. 

Waring  i;.  Somborn,  82  N.  Y.  604.  »  Slauson  v.  Watkius,  44  N.  Y.  Supe- 

*  Real  Kstate  Trust  Co.    v.  Balcli,  45  rior  Ct.  73. 
N.  Y.  Superior  Ct.  528;  Kilmer  v.  Smith, 

VOL.  I.              41  641 


§  740.]  A  purchaser's  rights  and  liabilities. 

the  mortgagor  does  not  enure  to  the  benefit  of  the  mortgagee,  nor 
does  it  operate  in  any  way  to  confirm  the  mortgage  title.^ 

II.  Assumption  of  Mortgage  by  Purchaser. 

740.  Generally,  one  purchasing  hmd  subject  to  an  existing 
mortgage  does  not  merely  purchase  the  equity  of  redemption,  but 
purchases  the  whole  estate,  and  assumes  the  payment  of  the  mort- 
gage as  a  part  of  the  purchase  money  of  it.^  The  vendor,  espe- 
cially if  he  be  also  the  mortgagor,  usually  requires  such  an  under- 
taking on  the  part  of  the  purchaser,  so  that  the  debt  may  be  a 
charge  upon  him,  and  not  merely  a  charge  upon  ^he  land.  As 
between  these  parties  the  purchaser  thus  becomes  primarily  lia- 
ble, and  the  mortgagor  only  a  surety  for  the  payment  of  the  debt. 
The  mortgaged  property,  moreover,  becomes,  as  between  them, 
the  primary  fund  for  the  payment  of  the  debt.  The  purchaser, 
having  made  the  mortgage  debt  his  own  debt,  cannot  take  an 
assignment  of  the  mortgage,  and  hold  it  as  an  independent  title, 
but  it  is  thereupon  merged  and  discharged.^  If  a  senior  mort- 
gagee becomes  the  purchaser,  and  assumes  the  payment  of  a 
junior  mortgage,  his  own  mortgage  is  merged  and  discharged,  so 
that  the  junior  mortgage  takes  precedence.* 

One  who  has  assumed  the  payment  of  a  mortgage  cannot  de- 
fend against  a  claim  of  dower  by  the  widow  of  the  grantor,  by 
setting  up  an  assignment  of  the  mortgage  to  himself  upon  pay- 
ment of  the  amount  due,  she  having  joined  to  release  dower  in 
the  mortgage,  but  not  in  the  deed  to  him.^  In  like  manner,  one 
who  has  assumed  the  payment  of  two  mortgages  upon  the  granted 
premises  cannot,  by  taking  an  assignment  of  the  first  mortgage, 
defend  against  the  second.^ 

When  the  lands  have  thus  become  the  primary  fund  for  the 
payment  of  the  debt,  subsequent  purchasers  are  chargeable  with 
notice  of  this  equitable  right  to  resort  to  the  land,  equally  as  if 

1  Knox  r.  Easton,  38  Ala.  345.  Blyer   v.  Monholland,  2  Sandf.  Ch.  478  ; 

2  George  v.  Andrews,  60  Md.  26;  S.  C.  Gilbert  v.  Averill,  15  Barb.  20;  Andrews 
45  Am.  Kep.  706.  i;.  Wolcott,  16  lb.  21.     Virginia :  Gay le  w. 

3  Illinois :  Lilly  v.  Palmer,  51  111.  331 ;  Wilson,  30  Gratt.  166  ;  S.  C.  5  Reporter, 
Comstock  V.  Hitt,  37  111.  542  ;  Fowler  v.  667. 

Fay,  62  111.  375  ;  Drury  v.  llolden,  13  N.         *  Fowler  v.  Fay,  62  111.  375. 

E.  Rep.  547.    New  York:   Russell  v.  Pis-         ^  McCabe  r.  Swap,  14  Allen  (Mass.), 

tor,  7  N.  Y.  171 ;  Jumel  v.  Jumel,  7  Paige,  188. 

591 ;   Mills   v.  Watson,  1    Sweeny,  374 ;         6  Converge  v.  Cook,  8  Vt.  164. 

642 


ASSUMPTION   OF   MORTGAGE   BY   PURCHASER. 


[§  "^41. 


their  own  deeds   in   terms  disclosed  that  they  were  to  take  the 
premises  subject  to  the  payment  of  the  mortgage.^ 

741.  A  purchaser  who  assumes  the  mortgage  becomes  as 
to  the  mortgagor  the  principal  debtor,  and  the  mortgagor  a 
surety  ;  -  bat  the  mortgagee,  unless  he  has  assented  to  such  an 
arrangement,  ma}'  treat  both  as  principal  debtors,  and  may  have 
a  personal  decree  against  both.-^  The  mere  assignment  by  the 
mortgagor  of  his  interest  in  the  mortgaged  premises  to  a  third 
person,  who  agrees  to  pay  off  the  mortgage,  does  not  release  the 
mortgagor.  There  is  no  novation  unless  there  be  something  to 
show  that  the  mortgagee  has  released  the  mortgagor,  and  has 
agreed  to  look  solely  to  the  purchaser  for  payment  of  the  mort- 
gage debt.  The  acceptance  by  the  mortgagee  of  a  second  mort- 
gage upon  the  property  from  the  purchaser  would  not  release  the 
first  mortgagor."*  The  mortgagee  may  release  the  mortgagor  from 
his  personal  liability  in  such  case  without  discharging  the  land,  or 
the  grantee,  who  assumed  the  debt.^  But  he  cannot  release  the 
grantee,  who  has  thus  become  the  principal  debtor,  without  re- 
leasing the  mortgagor  who  has  become  the  surety.^  He  may,  by 
his  dealings  with  the  purchaser  and  mortgagor,  recognize  the 
former  as  the  principal  debtor,  and  the  latter  as  surety  towards 
himself.     Any  material  alteration  of  the  mortgage  contract  will 


1  \yeber  v.  Zeimet,  30  Wis.  283  ;  Free- 
man V.  Auld,  44  X.  Y.  50  ;  6\  C.  37  Barb. 
587,  and  eases  cited;  Calvo  r.  Davies,  8 
Hun  (N.  Y.),  222;  Sidwell  v.  Wheaton, 
114  111.  2G7. 

-  §  1713.  New  York  :  Wales  v.  Sher- 
wood, 52  How.  Pr.  413  ;  Calvo  v.  Da- 
vies,  supra;  S.  C.  73  N.  Y.  211,  215; 
Fleishhauer  v.  Doellner,  9  Abb.  N.  C. 
373;  Marshall  v.  Davies,  78  N.  Y.  414; 
S.  C.  58  How.  Pr.  231  ;  Cornell  v.  Pres- 
cotf,  2  Barb.  16;  Knobloch  v.  Zschwetzke, 
21  J.  &  S.  391;  Mutual  L.  Ins.  Co.  v. 
Davies,  44  N.  Y.  Superior  Ct.  172;  Corn- 
stock  i\  Drohan,8  lb.  373;  S.  C.  71  N.  Y. 
9  ;  Atlantic  Dock  Co.  v.  Leavitt,  54  N.  Y. 
35  ;  Trotter  v.  Hu;:hc8,  12  N.  Y.  74  ;  Bel- 
mont V.  Conian,  22  N.  Y.  438;  Burr  v. 
Beers,  24  N.  Y.  178;  'i'horp  v.  Keokuk 
Ci.al  Co.  48  N.  Y.  253  ;  Kubeiis  v.  Prindle, 
44  Barb.  33G ;  Johnson  v.  Zink,  52  lb. 
396;  Avers  v.  Dixon,  78  N.  Y.  318; 
Miirsh  V.  Pike,  10  Paige,  595,  596.     Ver- 


mont :  Willson  v.  Burton,  52  Vt.  394  ; 
Crenshaw  v.  Thackston,  14  S.  C.  437. 
Illinois:  Fla<:<,'  v.  Geltinachcr,  98  111.  293 ; 
Dean  v.  Walker,  107  111.  540,  545,  quoting 
text.  Wisconsin:  I'alineter  v.  Carey,  63 
Wis.  426.  Maryland  :  George  v.  Andrews, 
60  Md.  28 ;  45  Am.  Hep.  706.  Connecti- 
cut:  Boardman  r.  Lurrabee,  51  Conn.  39. 
Indiana :  Ellis  i*.  Johnson,  96  Ind.  377  ; 
Figart  V.  Ilalderman,  75  Ind.  564.  Vir- 
ginia :  Willard  v.  Worsham,  76  Va.  392. 

3  Shepherd  v.  May,  115  U.  S.  505;  Cor- 
bett  r.  Waterman,  1 1  Iowa,  86 ;  Tiiomp- 
son  r.  Bertram,  14  Iowa,  476;  James  v. 
Day,  37  Iowa,  164;  llebert  v.  Doussan, 
8  La.  Ann.  267;  Waters  v.  Hubbard,  44 
Conn.  .340. 

''  Connecticut  Mut.  L.  Ins.  Co.  y.  Tyler, 
8  Ri.s.s.  369. 

'^  Tripp  r.  Vincent,  3  Baib.  (X.  Y.)  Ch. 
613. 

"  Paine  r.  Jones,  76  N.  Y.  274  ;  Mutual 
L.  Ins.  Co.  V.  Davies,  supra. 

643 


§  742.]  A  purchaser's  rights  and  liabilities. 

discharge  the  mortgagor.^  Accordingly  a  clause  in  a  mortgage 
to  the  effect  that  the  mortgagee  would,  upon  request,  release  por- 
tions of  the  mortgaged  premises,  from  time  to  time,  upon  receipt 
of  a  certain  sum  per  acre,  having  been  abrogated  by  agreement 
between  the  holder  of  the  mortgage  and  a  purchaser  of  the  prop- 
erty who  had  assumed  the  payment  of  the  mortgage,  it  was  held 
that  such  a  change  had  been  made  in  the  mortgage  contract  as  to 
release  the  mortgagor  from  all  liability  under  it.^  Doubtless  the 
abrogation  of  this  clause  impaired  a  valuable  privilege  which  the 
mortgagor  had  provided  as  to  the  mode  of  discharging  the  debt : 
but  however  that  may  be,  it  is  the  settled  rule  that  the  court  will 
not  inquire  whether  the  alteration  be  beneficial  or  injurious  to  the 
surety,  if  it  be  a  material  one.^ 

If  the  grantee,  who  has  assumed  the  mortgage,  by  any  arrange- 
ment between  himself  and  tlie  mortgagee,  discharges  his  personal 
liability  for  the  mortgage  debt,  his  surety,  the  mortgagor,  is  also 
discharged.  If  after  such  discharge  the  mortgagor  pays  a  sum 
of  money  for  a  discharge  from  the  mortgagee's  claim  upon  the 
mortgage  debt,  he  cannot  recover  the  amount  so  paid  by  him 
from  the  grantee,  though  the  latter  failed  to  advise  him  of  the 
transaction  with  the  mortgagee  which  resulted  in  the  discharge 
of  the  grantee  from  personal  liability.* 

742,  When  extension  discharges  the  mortgagor.  —  A  pur- 
chaser having  assumed  the  payment  of  an  existing  mortgage,  and 
thereby  become  the  principal  debtor,  and  the  mortgagor  a  surety 
of  the  debt  merely,  an  extension  of  the  time  of  payment  of  the 
mortgage  by  an  agreement  between  the  holder  of  it  and  the  pur- 
chaser, without  the  concurrence  of  the  mortgagor,  discharges  him 
from  all  liability  upon  it.^  The  holder  cannot  enlarge  the  time  of 
payment  and  protect  himself,  by  reserving  his  rights  against  the 
surety  in  the  agreement  of  extension.  Such  a  reservation  has  no 
effect  unless  the  mortgagor  agree  to  it.*" 

If  the  mortgagor  request  the  mortgagee  upon  the  maturity  of 
the  mortgage  to  foreclose  it,  on  the  ground  that  the  premises  are 

1  George  v.  Andrews,  60  Md.  26.  Murray  v.  Marshall,  94  N.  Y.  611  ;  Union 

2  Paiue  V.  Jones,  14  Hun  (N.  Y.),  577.       Mat.  L.  Ins.  Co.  v.  Hanford,  27  Fed.  Rep. 

3  Per   Gilbert,  J.,   in   Paine   v.   Jones,     588;  George  i'.  Andrews,  sj/pra. 

supra.  «  §942;   Calvo  v.  Davies,  8  Hun  (N. 

*  Knobloch  v.  Zschwetzke,  21  J.  &  S.  Y.),  222;  affirmed  73  N.  Y.  211 ;  Metz  r. 

(N.  Y.)  391.  Todd,  36  Mich.  473;  George  v.  Andrews, 

5  Fish   V.  Hayward,  28    Hun  (N.  Y.),  su/jru. 
456 ;  Spencer  v.   Spencer,  95  N.  Y.  353  ; 

644 


ASSUMPTION   OF   MORTGAGE   BY   PURCHASER.  [§  742  a. 

then  sufficient  to  satisfy  the  mortgage,  but  might  depreciate  so  as 
to  become  inadequate,  the  mortgagor  will  not  be  liable  for  a  defi- 
ciency which  occurs  through  the  mortgagee's  neglect  to  comply 
with  such  request.^ 

But  the  mere  neglect  of  the  holder  of  a  mortgage  to  enforce  it, 
when  he  has  not  been  requested  to  do  so,  does  not  discharge  one 
who  has  become  a  surety  or  guarantor  of  the  mortgage  debt, 
though  the  land  depreciates  so  as  to  be  inadequate  to  pay  it.^  A 
purchaser  of  mortgaged  land  cannot  restrain  a  foreclosure,  or  have 
the  land  declared  free  of  the  lien,  on  tlie  ground  that  the  land  has 
depreciated  through  delay  and  the  mortgagor  has  become  insol- 
vent.^ 

A  purchaser  who  lias  assumed  no  personal  liability  to  the  mort- 
gagor which  the  latter  can  enforce  is  in  no  sense  the  surety  of 
his  vendor  ;  and  an  extension  of  the  time  of  payment  made  be- 
tween the  mortgagor  and  the  mortgagee  does  not  release  or  dis- 
charge the  lien  of  the  mortgage  upon  the  land  in  favor  of  the  pur- 
chaser.^ 

742  a.  In  other  courts,  however,  it  is  held  that  the  relation 
of  surety  between  the  grantor  and  the  grantee  does  not  in 
any  case  involve  the  mortgagee  in  its  legal  effects.  His  rights 
are  held  to  remain  unchanged.  Both  the  mortgagor,  and  the  pur- 
chaser who  has  assumed  the  mortgage,  are  as  to  him  principals  ; 
and  he  may  have  a  personal  decree  against  either  or  both.  The 
obligation  of  the  purchaser  is  treated  as  a  collateral  obligation, 
which  the  creditor  is  entitled  to  the  benefit  of.  In  short,  the  rela- 
tion of  suretyship  exists  between  the  grantor,  and  the  grantee  who 
assumes  the  payment  of  the  mortgage,  but  it  does  not  affect  the 
relations  of  the  mortgagor  and  mortgagee.^  The  contract  rights 
of  the  mortgagee  cannot  be  changed  by  acts  of  the  mortgagor  and 
hi.s  grantee  to  which  the  former  is  not  a  party.  "  He  may  there- 
fore continue  to  hold  the  mortgagor  as  a  principal  debtor,  and 
while  he  so  holds  him  there  can  be  no  discharge  of  liability  on  the 

'  Remsen  v.  Beekman,  25  N.  Y.  552  ;  Crawford  v.  Edwards,  33  Mich.  354 ;  Huy- 

Kiissell  1-.  Weinberg,  2  Abb.  N.  C.  (N.  Y.)  ler  v.  Atwood,  26  N.  J.  Eq.  504 ;  Connec- 

422.  ticut  Mut.  Life  lus.  Co.  i-.  Mayer,  8  Mo. 

-  Ilurd    V.    Callahan,   9    Abb.    N.    C.  App.  18;  Meyer  v.  Lathrop,  10  Hun  (N. 

(N.  Y.)  374.  Y.),  GO  ;  but  the  latter  case  is  overruled 

■'  Case   V.   O'Brien    (Mich.),  33    N.  W.  in   I'ainc  y.  Jones,   14   Hun   (N.  Y.),  577. 

Kep.  405  ;  Elder  o.   Ha.sche  (Wis.),  31  N.  See  Soliier  v.  Lorin>r,  f.  Cush.  (Mass.)  537  ; 

\V.  R(;p.  57.  Hoanhnan  v.  Ijarrai)ce,  51  Conn.  39;   Wa- 

•   Mahcr  v.  Latifroni,  8r,  III.  513.  ters  v.  Hubbard,  44  Conn.  340. 

'■'  Corbett  V.   Walcrniaii,    1 1    Iowa,  8G  ; 

645 


§  743.]  A  purchaser's  rights  and  liabilities. 

ground  of  indulgence  to  one  who,  for  certain  purposes  not  affecting 
the  creditor,  stands  towards  the  original  debtor  in  the  rehition  of  a 
principal  to  his  surety."  ^ 

The  assumption  of  a  mortgage  by  a  purchaser  does  not  consti- 
tute a  novation  of  the  mortgage  debt,  even  if  the  mortgagee  subse- 
quently agrees  to  accept  the  purchaser  as  the  debtor  and  to  release 
the  mortgagor,  so  that  the  mortgage  debt  is  extinguished. ^ 

743.  A  purchaser  of  a  portion  of  the  mortgaged  premises, 
who  assumes  the  payment  of  a  proportionate  part  of  the  mort- 
gage debt,  is  bound  to  pay  such  part  in  exoneration  of  the  resi- 
due.3  If  the  purchaser  agrees  to  pay  a  certain  sum  upon  the 
mortgage  debt  when  due,  he  is  only  bound  to  pay  that  sum  with- 
out intei'est.'* 

A  purchaser  who  has  agreed  to  pay  the  interest  on  a  mortgage 
will  not  be  required  to  accept  a  deed  which  provides  that  he  shall 
pay  the  mortgage.^ 

A  purchaser  of  part  of  a  tract  of  land,  who  pays  off  a  mortgage 
upon  the  whole,  is  entitled  to  be  subrogated  to  the  mortgage  ;  ^ 
because  the  burden  of  such  a  mortgage  rests  only  in  part  upon  his 
land,  and  is  in  part  to  be  borne  by  the  owners  of  the  remaining 
portions  of  it.  But,  on  the  other  hand,  if  one  purchase  a  portion 
of  the  mortgaged  premises,  under  an  agreement  that  he  will  as- 
sume and  pay  the  whole  of  the  mortgage  debt,  then  the  whole  bur- 
den of  the  debt  is  annexed  to  that  portion  by  express  contract,' 
and  he  cannot  keep  the  mortgage  alive  by  taking  an  assignment 
of  it.8 

A  purchaser  of  a  portion  of  the  estate  subject  to  a  mortgage 
has  no  equity  to  have  his  land  relieved  from  the  burden  of  the 
mortgage,  as  against  a  subsequent  purchaser,  when  it  was  a  pai't 
of  his  contract  of  purchase  that  he  should  pay  the  purchase  money 

1  Connecticut  Mut.  Life  Ins.  Co.  v.  «  Edwards  i;.  Thostensou,  64  Iowa,  680. 
Mayer,  8  Mo.  App,  18,  per  Lewis,  P.  J. ;  5  Manhattan  L.  Ins.  Co.  v.  Crawford,  9 
Boardman  v.  Larrabee,  .51  Conn.  39.  Abb.  N.  C.  365. 

2  Kelso  V.  Fleming,  104  Ind.  180.  6  galem    v.    Edgerlj,    33    N.    H.   46; 

3  Torrey  v.  Bank  of  Orleans,  9  Paige  Champlin  v.  Williams,  9  Pa.  St.  341 ; 
(N.  Y.),  649  ;  S.   C.  7  Hill   (N.  Y.)  260;  Wright  v.  Briggs,  99  Ind.  563. 

Hilton   V.   Bissell,  1    Sandf.  (N.  Y.)  Ch.  '  Welch  i;.  Beers,  8  Alien  (Mass.),  151  ; 

407  ;  Ayers  u.  Dixon,  78  N.  Y.  318;  Har-  Iowa  Loan  and  Trust  Co.  i-.  Mowery,  67 

lem    Savings   Bank   v.   Mickelsburgh,  57  Iowa,  113;  Rugg  y.  Brainerd,  57  Vt.  364 ; 

How.  (N.  Y.)  Pr.  106;  Wright  v.  Briggs,  Johnson  v.  Walter,  60  Iowa,  315. 

99  Ind.  563;  Willard  v.  Worsham,  76  Va.  «  Johnson  v.  Walter,  supra. 
392;    Higham   v.   Harris,   108   Ind.   246; 
Bowne  v.  Lynde,  91  N.  Y.  92. 

646 


ASSUMPTION    OF   MORTGAGE   BY   PURCHASER.  [§  744. 

directlj'  in  satisfaction  of  the  mortgage.  On  the  contrary,  the 
subsequent  purchaser  has  an  equitable  right  to  have  the  purchase 
money  so  applied  in  exoneration  of  his  own  land;  and  as  against 
him  a  subsequent  agreement  between  the  mortgagor  and  the  first 
purchaser  making  a  different  application  of  the  purchase  money 
is  invalid. 1 

The  purchaser  who  has  assumed  the  payment  of  the  mortgage 
ma}'  even  be  held  to  respond  in  damages  to  a  later  purchaser 
who  is  entitled  to  be  protected  from  the  mortgage,  for  allowing 
the  mortage  to  be  foreclosed ;  and  the  measure  of  damages  will 
be  the  value  of  that  portion  of  the  land  conveyed  to  such  later 
purchaser.- 

744.  The  purchaser  is  not  allowed  to  defend  against  the 
mortgage  he  has  assumed  to  pay,  on  the  ground  that  it  was 
made  without  consideration,  or  that  the  consideration  has  failed, 
and  therefore  is  not  valid  against  his  grantor;  for  the  latter 
having  appropriated  a  portion  of  the  purchase  price  of  the  land 
to  the  payment  of  a  sum  of  money  to  a  third  person^  and  made  it 
a  charge  upon  the  land,  it  does  not  matter  whether  there  was  any 
legal  obligation  upon  him  to  pay  it,  or  whether  it  was  at  the  time 
of  the  sale  a  lien  upon  the  land  ;  his  grantee,  having  undertaken 
to  pay  it,  is  precluded  from  assailing  its  validity.'^  The  same  rule 
applies  to  one  who  has  purchased  subject  to  a  mortgage,^  the 
amount  of  which  is  deducted  from  the  consideration  paid.^  But 
it  seems  that  the  grantor  may  confer  upon  the  purchaser  the  right 
to  question  the  validity  of  the  mortgage.^ 

One  who  has  assumed  the  payment  of  a  mortgage  cannot  con- 
test the  validity  of  it,  or  show  that  the  amount  assumed  by  him 
is  not  due  upon  it;'^  or  that  the  mortgagee  has  collateral  security 

1  Baring  i-.  Moore,  4  Paige  (N.  Y.),  *  Essley  r,  Sloan,  16  111.  App.  63  ;  6  N. 
166  ;  Bowne  v.  Lynde,  91  N.  Y.  92.  E.  Rep.  449  ;  Hancock  v.  Fleming  103  Ind. 

2  Wilcox  V.  Campbell,  35  Hun,  254.  5.33 ;  3  N.  E.  Kep.  254 ;  Forgy  v.  Merry- 
The  covenant  to  pay  tlie  mortgage  was  man,  14  Neb.  513;  16  N.  W.  Rep.  836; 
regarded  as  running  witii  the  title.  Af-  Skinner  v.  Reynick  10  Neb.  323  ;  6  N.  W. 
lirmed  106  N.  Y.  325.  Rep.  369  ;  Millington   v.  Hill  (Ark.),  1   S. 

•'  Crawford  i-.  Edwards,  33  Mich.  354  ;  W.  Rep.  547;  Riley  v.  Rice,  41   (^hio  St. 

.Miller  v.  Thompson,  34  Mich.  10;  Haile  441. 

r.  Nichols,  16  Hun  (N.  Y.),  37;  Parkin-  ''  Maliouey  v.  Mackubiu,  54  Md.  268; 

son    V.    Sherman,   74  N.  Y.  88;  Bond  v.  Flanders  f.  Doyle,  16  111.  App.  508. 

iJolby  17  Neb.  491  ;  23  N.  W,   liep.  351  ;  ''  Bennett  t;.  Bates,  94  N.  Y.  354. 

Clapp  I.  Halliday  (Ark.),  2   S.    W.  Rep.  '   Ritter  i'.  Phillips,  53  N.  Y.  586  ;  John- 

853;  McConihe  y.  Fales  (N.  Y.),  14  N.  E.  son    v.    Parmely,    14    Hun   (N.  Y,),  398; 

Rep.  285  ;  Pidgcon  v.  Trustees,  44  111.  501  ;  Scarry  v.  Eldridge,  63  Ind.  44  -,8.   C.I 

Dean  v.  Walker,  107  HI.  540;  47  Am.  Rep.  Cent.    L.  J.   418;  Kennedy  v.   Brown,  61 

467.  047 


§  744.]  A  purchaser's  rights  and  liabilities. 

for  the  same  debt ;  ^  or  that  the  debt  is  different,  or  is  payable 
in  a  manner  different,  from  its  terms  ;2  or  that  the  real  estate 
was  not  properly  described  in  the  mortgage.^  He  cannot  object 
to  the  mortgage  on  the  ground  of  an  alleged  defect  in  the  manner 
of  execution,  as  that  it  was  executed  by  an  attorney  whose  author- 
ity is  not  shown,  when  the  mortgagor  himself  does  not  interpose 
that  objection.'* 

Although  the  consideration  of  the  mortgage  assumed  has  not 
been  fully  paid,  the  grantee  cannot  redeem  except  by  paying  the 
mortgage  in  full.  Tims,  where  a  mortgage  was  given  to  secure  a 
loan  and  certain  advances  which  the  mortgagee  agreed  to  make, 
one  claiming  under  the  grantee  sought  to  redeem  on  paying  the 
amount  of  the  loan  secured,  without  the  advances,  which  had  not 
at  that  time  been  made ;  and  in  fact  the  condition  on  which  they 
were  to  be  made  had  not  been  performed  ;  but  it  was  determined 
that  the  plaintiff  must  pay  the  amount  of  the  mortgage  in  full  in 
order  to  redeem,  and  that  the  mortgagee  would  hold  the  balance 
above  the  amount  advanced  by  him  in  trust  for  the  mortgagor,  or 
for  the  holder  of  the  agreement  for  the  advances,  when  that  had 
been  assigned.^ 

Even  one  who  has  bought  subject  to  a  mortgage,  without  as- 
suming the  pay^ment  of  it  so  as  to  make  himself  personally  liable, 
cannot  contest  the  validity  of  the  mortgage  lien.  When  the 
amount  of  the  mortgage  has  been  deducted  from  the  amount  of 
the  consideration  of  the  purchase,  it  is  in  effect  an  agreement  that 
30  much  of  the  purchase  money  shall  be  paid  to  the  person  hold- 
ing the  mortgage,  and  the  mortgage  is  thus  made  a  lien  to  the 
full  amount  of  its  face,  although  the  mortgagee  has,  in  fact,  paid 
only  a  part  of  the  consideration,  or  although  the  mortgage  is 
subject  to  other  defences  in  the  hands  of  the  mortgagor.  By 
conveying  the  land  subject  to  a  mortgage,  the  mortgagor  provides 

Ala.  296 ;  Green  v.  Houston,  22  Kans.  35  ;  470.     In  Goodman  v.  Randall,  44  Conn. 

Fitzgerald  v.  Barker,  85  Mo.  13.  321,  it  was  held  that  a  purchaser  who  had 

See,  however,  Mansur  v.  Bartholomew  expressly  assumed  a  mortgage  described 
(Superior  Court,  Ind.  1878),  8  Cent.  L.  J.  for  a  certain  amount  was  not  estopped  to 
72,  where  action  was  by  mortgagee ;  Sid-  show  that  the  incumbrance  had  no  exist- 
well  V.  Wheaton,  114  111.  267.  ence  in    fact,  the  mortgage  having  been 

^  Ferris   v.   Crawford,  2  Den.  (X.  Y.)  witnessed,  acknowledged,  delivered,    and 

595.  recorded   without    being    signed    by    the 

2  Klein  v.  Isaacs,  8  Mo.  App.  568.  mortgagor.      This    part  of  the   decision 

^  Figart  v.  Halderman,  75  Ind.  564.  seems  to  be  against  authority  and  reason. 

*  Pidgeon    v.  Trustees    of   Schools,  44  5  Cqx  i>.  Hoxie,  115  Mass.  120. 
111.  501  ;  Greither  ;•.  Alexander,  15  Iowa, 

648 


ASSUMPTION   OF   MORTGAGE   BY  PURCHASER.  [§  745. 

for  its  payment  in  full  out  of  the  purchase  money.^  A  purchaser 
of  land  upon  execution,  "subject  to  whatever  sum  might  be  due 
upon  the  property  by  virtue  of  a  certain  mortgage,"  cannot  dis- 
pute the  fact  of  the  mortgage  or  its  validity. ^ 

If  a  clause  whereby  a  grantee  is  made  to  assume  an  existing 
mortgage  be  inserted  in  a  deed  through  the  mistake  of  the  scriv- 
ener, and  the  deed  be  accepted  by  the  grantee  in  ignorance 
thereof,  he  may  have  the  deed  reformed  by  striking  out  such 
clause.'^  But  a  purchaser  who  has  made  payments  of  interest 
upon  a  mortgage  without  compUiining  of  the  assumption  clause 
in  his  deed,  will  not  be  heard  afterwards  to  urge  in  defence  that 
this  clause  was  fraudulently  inserted  in  his  deed.* 

Of  course  the  parties  may,  by  agreement,  release  a  purchaser 
from  his  assumption  of  a  mortgage.^ 

745.  Such  a  purchaser  cannot  set  up  usury  in  the  mortgage 
assumed  by  him.^  But  one  who  buys  land  with  the  expressed  in- 
tention on  his  part,  and  on  the  part  of  the  grantor,  to  avoid  a 
previous  mortgage  on  the  ground  of  usury,  may  take  this  de- 
fence." When  the  purchaser  has  in  no  way  agreed  to  pay  the 
mortgage  debt,  or  agreed  that  it  should  be  paid  out  of  the  land, 
he  may  take  advantage  of  usury  in  the  mortgage  to  avoid  it.^ 
And  so  where  an  absolute  deed  had  been  made  of  an  equity  of 
redemption,  but  in  fact  as  security,  and  the  grantee  did  not  as- 

1  Freeman  v.  Auld,  44  N,  Y.  50;  S.  C.  Busby  v.  Finn,  1  lb.  409 ;  Bearce  v.  Bar- 

.•J7  Barb.  587,  and  cases  cited;  Hardin  v.  stow,  9  Mass.  45  ;  Spaulding  v.  Davis,  51 

Hyde,  40  Barb.   (N.  Y.)  435.     See,  how-  Vt.  77;  Conover  v.  Hobart,  24  N.  J.  Eq. 

ever,  Hartley  v.  Tatham,  2  Abb.  (N.  Y.)  120;  Mahoney  v.  Mackuhin,  54  Md.  208  ; 

App.  Dec.  333;  S.  C.  10  Bosw.  273,  hold-  Hartley  v.  Harrison,  24   N.  Y.  170,  and 

ing   that   such    grantee   m.ay    show   part  cases  cited  ;  Sands  r.  Cliurcli,  6  N.  Y.  347  ; 

payment   of    the    mortgage.      Foster    v.  Shufelt  r.  Shufelt,  9  Paige  (N.  Y.),  137; 

Wightman,  123  .Mass.  100;  Manwaring  i-.  Cope  v.   Wheeler,  41  N.  Y.  .303;  Koot  v. 

rowell,  40   Mich.   371.     See  §§  736,746,  Wright,  21   Hun  (N.  Y.),  344;  Hitter  v. 

1303.  rhillips,  53  N.  Y.  586;  Barthel  v.  Elias,  2 

-  Conkling   v.   Secor   Sewing   Machine  Abb.  (N.  Y.)  N.  C.  364 ;  Frost  v.   Sliaw, 

Co.  55  How.  (N.  Y.)  Pr.  269.  10  Iowa,  491  ;  Cleaver  v.  Burcky,  17  111. 

3  O'Neill  V.  Clark,  33  N.  J.  Eq.  444.  App.  92  ;  Stephens  v.   Muir,  8  Ind.  352; 

*  Miller  y.  Thompson,  34  Mich.  10;  or  Studabaker  v.   Marquardt,  55    Ind.  341  ; 

when  the  purchaser  has  afterwards  recog-  Austin  v.  Chittenden,  33  Vt.  553  ;  Baskins 

iiized  the  mortgage  by  an  agreement  with  i;.    Calhoun,    45   Ala.    582;    Heading    v. 

tlie  mortgagee  for  forbearance.     Smith  u.  Weston,   7   Conn.   409,   413  ;   Loomis   v. 

Graham,  34  Mich.  302.     See  §  738.  Eaton,  32  Conn.  550  ;   Millington  r.  Hill 

•'  O'Neill  V.  Clark,  33  N.  J.  Ecj.  444.  (Ark.),  1  S.  W.  liep.  547. 

''  §  644  ;  De  Wolf  r.  Johnson,  10  Wheat.  ^   Newman    v.    Kcr.shaw,    10   Wis.  333; 

.'!67,  392  ;  ("ramer  i'.  Lepper,   26   Ohio  St.  Ludington  ?;.  Harris,  21  Wis.  239. 

59;  Jones   u.    Ins.  Co.  40  (Jliio   St.   583;  »  Mahcr  u.  Lanfrom,  80  111.  513. 

G4y 


§  746.  J  A   PURCHASER'S   RIGHTS    AND   LIABILITIES. 

sume  the  mortgage,  but  afterwards,  upon  reconveying  the  prop- 
erty to  the  wife  of  the  former  owner,  he  inserted,  without  their 
knowledge,  a  clause  by  which  the  wife  assumed  and  agreed  to 
pay  the  mortgage,  it  was  held  that  inasmuch  as  this  grantor  was 
under  no  liability  to  pay  the  mortgage,  the  clause  whereby  the 
grantee  assumed  the  mortgage  was  of  no  effect,  and  such  grantee 
was  not  estopped  from  setting  up  the  defence  of  usury .^ 

A  voluntary  assignee  of  the  mortgagor  for  payment  of  his  debts 
may  set  up  usury  in  the  mortgage.^ 

746.  When  a  purchaser  may  contest  the  mortgage.  —  But 
one  who  has  bought  the  equity  of  redemption  by  a  deed  with 
covenants  of  warranty  has  a  right  to  prove  a  payment  by  the 
mortgagor,  by  which  the  land  is  relieved  wholly  or  in  part  from 
the  incumbrance.^  When  the  description  of  the  premises  as  sub- 
ject to  a  mortgage  is  merely  for  the  purpose  of  protecting  the 
grantor  from  liability  upon  his  covenants,  the  grantee  is  not 
charged  with  the  payment  of  the  mortgage  debt.  Accordingly  it 
is  held  that  a  recital  in  a  deed  containing  covenants  of  warranty 
that  the  property  is  subject  to  a  mortgage,  which  is-excepted  out 
of  the  covenants  in  the  deed,  does  not  estop  the  grantee  to  dis- 
pute the  validity  of  the  mortgage,* 

And  so  if  one  purchases  land  from  a  mortgagor  without  any 
deduction  from  the  price  on  account  of  an  incumbrance  upon  it, 
the  purchaser  may  interpose  the  same  defences  that  the  mort- 
gagor himself  might  have.  Equity  and  good  conscience  demand 
that  when  the  mortgagor  conceals  the  existence  of  the  incum- 
brance, and  his  grantee  purchases  without  actual  notice,  he  should 
be  permitted  to  set  up  any  defence  there  may  be  to  the  validity 
of  the  mortgage.  In  such  case  the  purchaser  is  authorized  to 
interpose  the  defence  of  usury. '^ 

When  the  grantee's  promise  to  pay  an  existing  mortgage  is 
void  between  the  grantor  and  grantee,  for  fraud,  or  want  of  con- 
sideration, or  failure  of  consideration,  the  mortgagee  cannot  en- 

1  Smith  V.  Cross,  16  Hun  (N.  Y.),  487.  Bosw.  273  ;  Bennett  v.  Keehn,  57  Wis. 
To  like  effect,  Stevens  Institute  v.  Sheri-     582. 

dan,  30  N.  J.  Eq.  23 ;  6\  C.  7  Reporter,  *  §§  736,  744 ;  Weed  Sewing  Machine 

245.  Co.   V.   Emerson,    115    Mass.   554.     The 

2  Pearsali  v.  Kingsland,  3  Edw.  (N.  Y.)  grantor  in  this  case  was  not  the  mort- 
195.  gagor,  though  this  fact  was  not  noticed 

^  §  644 ;  Williams  i'.  Thurlow,  31  Me.  in  the  opinion.     See  §  744. 
392.     See  Hartley  v.  Tatham,  2  Abb.  (N.         ^  Maher  v.  Lanfrom,  86  111.  513;  Flan- 

Y.)   Dec.  333;  S.  C.   1    Keyes,  222;    10  ders  i\  Doyle,  16  111.  App.  508. 
650 


PERSONAL   LIABILITY    OF    PURCHASER.       [§§  747-748. 

force  the  promise.     There  is  such  a  failure  of  consideration  when 
the  grantee  has  been  evicted  by  paramount  title. ^ 

747.  A  purchaser  at  execution  sale  of  land  incumbered  by 
a  mortgage  which  the  judgment  debtor  had  in  his  deed  of  pur- 
chase expressly  agreed  to  pay,  succeeds  merely  to  the  debtor's 
rights  in  the  property,  and  is  estopped,  as  the  debtor  was,  from 
denying  the  validity  of  such  mortgage.^  Where  by  statute  only 
incumbered  land  can  be  sold  on  execution,  an  execution  in  other 
cases  being  levied  upon  the  land,  a  purchaser  of  an  equity  of 
redemption  on  execution  is  estopped  to  deny  the  existence  and 
validity  of  the  mortgage,  because  he  bought  only  an  equity  of 
redemption,  and  if  there  is  no  mortgage  there  can  be  no  such 
equity.  When,  however,  there  are  more  mortgages  than  one,  if 
any  of  them  are  fraudulent,  or  void,  or  fully  paid,  the  purchaser 
on  execution  may  contest  such  and  redeem  from  the  valid  incum- 
brances.^ 

747  a.  A  grantee  who  has  not  agreed  to  pay  the  mortgage 
debt  is  not  affected  by  an  agreement  to  do  so  made  by  his 
grantor.  But  after  the  first  grantee  has  covenanted  to  pay  the 
mortgage  debt,  a  like  covenant  in  his  deed  to  the  second  grantee 
makes  the  latter  personally  liable  to  pay  it,  in  exoneration  of  the 
mortgagor,  who  is  in  equity  entitled  to  the  benefit  of  such  under- 
taking, in  the  same  manner  as  if  it  had  been  recited  in  a  convey- 
ance by  him  directly  to  the  second  grantee.* 

III.   Personal  Liability  of  Purchaser. 

748.  A  deed  which  is  merely  made  subject  to  a  mortgage 
specified  does  not  alone  render  the  grantee  personally  liable  for 
the  mortgage  debt.  To  create  such  liability  there  must  be  such 
words  as  will  clearly  import  that  the  grantee  assumed  the  obliga- 
tion of  paying  the  debt.^     It  is  not  necessary  that  any  particular 

'  Dunning  v.  Leavitt,  85  N.  Y.  30 ;  39  Middaugh  v.  Bachelder,  33  Fed.  Rcj).  706; 

Am.  ]{(■[).  017.  Bumgardner  v.  Allen,  6  Munf.  (Va.)  439; 

2  Kennedy  v.  Brown,  61  Ala.  296.  Foster  v.  Atwater,  42  Conn.  244  ;  Wood- 

3.  Stebbins  v.  Miller,  12  Allen  (Mass.),  bury  v.  Swan,  58  N.  H.  380;  Walker  r. 

591.    See  Russell  i;.  Dudley,  3  Met.  (Mass.)  Goldsmith,  7  Orcg.  161;  Fowler  i-.  Fay, 

147-151,  per  Shaw,  C.  J.  62  111.  375  ;  Comstock  v.  Ilitt,  37  III.  542, 

■•  Torrcy   v.  Bank  of  Orleaus,  9   Paige  546;  Dunn  r.  Kodgers,  43  111.  2G0  ;  Dean 

(N.  Y.),  649.  t;.  Walker,  107  III.  540;  47  Am.  Ucp.  467  ; 

^  §738;  Weed  Sewing  Machine  Co.  y.  Uapp  v.   Stoner,  104   111.  018;  Sehlcy  c. 

Emerson,  115  Ma8.s.  554  ;  Strong  v.  Con-  Fryer,   100  N.  Y.  71  ;  Collins  v.  Itowc,  1 

verse,  8  Allen  (Mass.),  557  ;  Drury  v.  Tre-  Abb.  (N.  Y.)  N.  C.  97  ;  Trotter  v.  Hughes, 

mont   Iniproveiiieiit  Co.    13  lb,   168,  171  ;  12  N.  Y.  74;  Belmont  i;.  Coman,  22  N.  V. 

G61 


§  748.]  A  purchaser's  rights  and  liabilities. 

formal  words  should  be  used,^  but  that  the  intention  to  impose 
upon  the  grantee  this  obligation  should  clearly  appear.^  The  in- 
tention will  be  sought  from  the  whole  instrument,  and  any  incon- 
sistent part  will  be  rejected  or  modified  according  to  the  intent  of 
the  whole.  Thus  in  a  clause,  "subject,  nevertheless,  to  a  certain 
mortgage,  which  the  party  hereto  of  the  first  part  assumes  and 
agrees  to  pay  as  part  of  the  consideration  hereinbefore  expressed," 
the  word  first  will  be  construed  to  read  and  mean  second^  and  the 
clause  will  constitute  an  agreement  by  the  grantee  to  pay  the 
mortgage.^ 

A  clause  in  a  deed  which  recites  that  the  premises  are  subject  to 
a  certain  mortgage  which  the  grantee  "  assumes,"  means  the  same 
as  if  it  were  "  assumes  to  pay  ;  "  and  amounts  to  a  personal  cove- 
nant by  the  grantee  to  pay  the  mortgage.* 

A  personal  liability  on  the  part  of  the  grantee  to  pay  a  mort- 
gage cannot  be  implied  from  a  statement  that  the  conveyance  is 
subject  to  the  mortgage,  the  amount  of  which  "forms  part  of  the 
consideration,  and  is  deducted  therefrom."  ^ 

In  case  the  terms  of  the  deed  leave  it  doubtful  whether  the 
grantee  is  personally  bound  to  pay  an  existing  incumbrance,  evi- 
dence of  the  value  of  the  premises  or  of  the  agreed  consideration 
for  them,  as  also  evidence  as  to  whether  the  grantee  retained  any 
of  the  consideration  to  pay  the  debt,  is  admissible  to  aid  in  con- 
struing the  deed.^ 

A  purchaser  of  land  accepting  a  deed  expressly  conveying  it 
subject  to  a  mortgage,  and  excepting  it  from  the  covenants,  is  not 
himself  personally  liable  to  pay  it,  unless  he  covenants  to  do  so. 
The  land  in  such  case  is  primarily  liable  as  between  the  vendor 
and  purchaser ;  and  the  vendor  is  liable  for  any  deficiency  after 

438;  Binsse  v.  Paige,  1  Keyes  (N.  Y.)  87  ;  464;  Moore's  Appeal,  88  Pa.  St.  450;  S. 

S.  C.  1  Abb.  App.  Dec.  138;  Stebbins  v.  C.  19  Alb.  L.  J.  257. 

Hall,  29  Barb.   (N.  Y.)  524;  Tillotson  v.  i  Belmont   v.   Coman,    22    N.   Y.  438; 

Boyd,  4  Sandf.   (N.  Y.)  516  ;  Murray  v.  Wright  v.  Briggs,  99  Ind.  563. 

Smith,   1   Duer  (N.  Y.),  412;  Johnson  v.  -  Stebbins  i'.  Hall,  sw/sra. 

Monell,  13  Iowa,  300 ;  Hull  v.  Alexander,  3  Fairchild  v.  Lynch,  42  N.  Y.  Superior 

26   Iowa,    569 ;   Lewis   v.  Day,  53  Iowa,  Ct.  265. , 

575;    Winaus  v.  Wilkie,  41    Mich.   264;  *  Schley  v.  Fryer,  100  N.  Y.  71  ;  Vree- 

Gage  V.  .Jenkinson,  58  Mich.  169  ;  Ritchie  land  v.  Van  Blarcom,  35  N.  J.  Eq.  .530. 

V.  McDuffie,  62  Iowa,  46 ;  Patton  v.  Ad-  5  Equitable  L.  Asso.  Soc.  v.  Bostwick, 

kins,  42  Ark.  197;  Hall  v.  Morgan,  79  100  N.  Y.  628.      And  see  Ludington  v. 

Mo.  47  ;  Tanguay  v.  Felthousen,  45  Wis.  Low,  21  J.  &  S.  (N.  Y.)  374. 

30;  Campbell  v.  Patterson,  58   Ind.  66;  ^  Winans  y.  Wilkie,  S!(/jra. 

Ayres   v.    Randall  (Ind.),   9  N.  E.  Rep. 

652 


PERSONAL   LIABILITY    OF   PURCHASER.  [§  749. 

a  foreclosure  sale  fairly  made.^  A  personal  judgment  cannot  be 
rendered  against  a  subsequent  purchaser  who  has  not  assumed  the 
payment  of  a  mortgage,  although  in  a  foreclosure  suit  he  answers 
that  he  is  ready  and  willing  to  redeem  and  to  bring  the  money 
into  court.^ 

If  a  purchaser  by  collusion  with  the  mortgagee  buys  the  land 
at  the  foreclosure  sale  for  a  sum  less  than  its  value,  and  less  than 
the  mortgage  debt,  the  vendor  may  have  the  sale  set  aside  ;  and 
such  collusion  would  be  a  defence  in  a  suit  against  him  for  the 
deficiency.^ 

When  the  mortgage  has  been  thus  assumed  by  a  purchaser 
he  may  be  made  a  party  to  a  proceeding  to  foreclose,  and  a  per- 
sonal judgment  had  against  him  ;  or  he  may  be  sued  on  his  per- 
sonal liability  without  any  proceeding  to  foreclose.^ 

It  is  unusual  for  the  grantor  to  take  any  note  or  other  security 
from  a  grantee  who  has  assumed  the  payment  of  a  mortgage ;  but 
if  notes  be  taken  for  the  amount  of  the  debt  assumed,  in  the  ab- 
sence of  fraud  or  undue  advantage  on  the  part  of  the  grantor,  a 
court  of  equity  will  not  compel  the  surrender  of  the  notes,  or  in- 
quire into  the  authority  of  the  grantor's  agent  who  took  them,  but 
will  leave  the  purchaser  to  his  remedy  at  law.'' 

The  assumption  of  the  mortgage  covers  all  the  incidents  of  the 
mortgage  debt,  as,  for  instance,  a  stipulation  for  the  payment  of 
an  attorney's  fee  in  case  of  a  foreclosure.*^ 

Although  a  stipulation  in  a  deed  for  the  assumption  of  a  mort- 
gage may  be  absolute  and  certain,  the  effect  of  it  may  be  modi- 
lied  by  a  contemporaneous  agreement  of  the  parties;  sucli,  for 
instance,  as  an  agreement  that  the  grantor  may  within  a  certain 
time  demand  a  reconveyance  of  the  property  subject  to  the  same 
incumbrances." 

The  agreement  to  pay  an  existing  mortgage  may  be  made  by  a 
separate  writing,  as,  for  instance,  in  the  agreement  to  purchase, 
and  in  such  case  the  liability  of  the  vendor  is  not  affected  by  the 
fact  that  at  his  request  the  deed  is  made  to  his  wife.^ 

749.  An  agreement  that  the  amount  of  a  mortgage  upon 

1  Jolinson  V.  Zink,  51  N.  Y.  333;  Com-  v.  Dalliuj  Dist.  Court,  12  Iowa,  13'J;  Bun- 
stock  1-.  lliit,  37  111.  542;  Giiyle  i-.  Wil-  i-.  Beers,  24  N.  Y.  178;  Wright  y.  Briggs, 
son,  30  Gratt.  (Va.)  106.  99  Ind.  563. 

-  Taiiguiiy  V.  Fehliousen,  45  Wis.  30.  '^  Dorr  v.  Teters,  3  Kdw.  (N.  Y.)  132. 

■'  Clevtlaiid  v.  Southard,  25  Wis.  479.  •>  Jolinson  v.  Harder,  45  Iowa,  077. 

••  Thompson  i;.  Herlram,  14  Iowa,  470;  '  GafTney  r.  Ilieks,  124  Mass.  301. 

Corbett  v.  Waterman,  11  Iowa,  80 ;  Moacs  "  Pike  v.  Seiter,  15  Hun  (N.  Y.),  402. 

653 


§  749.]  A  purchaser's  rights  and  liabilities. 

the  granted  premises  shall  be  paid  as  a  part  of  the  purcliase 
money  is  in  effect  an  assumption  to  pa}'^  the  mortgage,  and  not 
merely  a  taking  of  the  property  subject  to  the  mortgage.  The 
mortgage  in  such  case  is  charged  upon  the  purchase  money,  and 
not  upon  the  hind  merely.^  So  much  of  the  consideration  as  is 
requisite  to  pay  the  mortgage  is  taken  from  the  consideration,  and 
appropriated  by  the  parties  to  the  payment  of  the  mortgage,  and 
equity  raises  upon  the  conscience  of  tlie  purchaser  an  obligation 
to  indemnify  the  mortgagor  against  the  mortgage  debt.  If  he 
be  compelled  to  pay  it,  he  may  in  equity  compel  the  purchaser 
to  refund  the  money  so  paid.  There  is  an  implied  promise  on 
the  part  of  the  purchaser  to  pay  the  mortgage  when  it  is  due,  or, 
if  it  be  already  due,  to  pay  it  forthwith,  or  within  a  reasonable 
time ;  ^  and  the  burden  of  proof  is  upon  the  purchaser  who  has 
assumed  a  mortgage  and  claims  that  he  has  performed  his  obliga- 
tion, to  show  that  he  has  done  so.^ 

A  stipulation  that  the  conveyance  is  made  "  subject  to  the 
payment^^  of  an  outstanding  mortgage,  or  any  equivalent  expres- 
sion which  clearly  implies  an  obligation  intentionally  created  by 
the  one  party  and  assumed  by  the  other,  will  constitute  a  per- 
sonal obligation  for  its  payment.*  The  Supreme  Court  of  Penn- 
sjdvania  in  a  late  case  regarded  these  words  as  implying  a  con- 

1  Heid  V.  Vreeland,  30  N.  J.  Eq.  591  ;  accepted  the  laud  subject  to  the  mortgage, 

Thayer  v.  Torrey,  37  N.  J.  L.  339 ;  Tich-  and   kept   back  enough   of   the  vendor's 

enor  v.  Dodd,  3  Green  (N.  J.)  Ch.  454;  money  to  pay  it,  it  is  only  common  hon- 

Kennedy  v.  Brown,  61  Ala.  296;  Urqu-  esty  that  he  should  be  required  either  to 

hart  V.  Brayton,  12  R.  L  169.     In  the  lat-  pay  the  mortgage  or  stand  primarily  lia- 

ter  case  the  terms  of  the  mortgage  were,  ble  for  it.     His  retention  of  the  vendor's 

"  subject  to  the  payment  of  a  certain  mort-  money  for  the  payment  of  the  mortgage 

gage,  etc.,  which  said   mortgage,   or  the  imposes    upon   him    the   duty  of  protect- 

amount  thereof,  is  computed  as  so  much  ing  the  vendor  against  tlie  mortgage  debt, 

of  the  consideration  to  be  paid."  This  must  be  so   even   according  to  the 

In  Heid  i\  Vreeland,  siipi-a,  the  Vice-  lowest   notions   of  justice;  for   it  would 

Chancellor  says  :  "  There  can  be  no  doubt  seem    to  be  almost  intolerably   unjust  to 

at  this  day  that  where  the  purchaser  of  permit   him   to   keep   back   the   vendor's 

land   incumbered   by  a  mortgage   agrees  money  with   the   understanding   that   he 

to    pay   a    particular    sum    as    purchase  would  pay  the  vendor's  debt,  and  still  be 

money,  and  on  the  execution  of  the  con-  free  from  all  liability  for  a  failure  to  apply 

tract  of  purchase  the  amount  of  the  mort-  the  money  according  to  his  promise." 

gage  is  deducted  from  the  consideration.  See,  however,  Belmont   v.  Conian,   22 

and  the  land  conveyed  subject  to  the  mort-  N.  Y.  438. 

gage,   that    the    purchaser  is    bound    to  -  Braman  v.  Dowse,  12  Cush.  (Mass.) 

pay  the  mortgage  debt  whether  he  agreed  227  ;  Smith  v.  Truslow,  84  N.  Y.  660. 

to  do  so  by  express  words  or  not.     This  ^  Jewett  i\  Draper,  6  Allen  (Mass.),  434. 

obligation    results    necessarily   from    the  *  Stebbins   v.  Hall,  29  Barb.    (N.  Y. ) 

very  nature  of  the  transaction.     Having  524  ;  Carley  v.  Fox,  38  Mich.  387. 

654 


PERSONAL   LIABILITY    OF   PURCHASER.  [§  749. 

tract  of  indemnity  merely  between  the  vendor  and  vendee,  in  the 
absence  of  special  circumstances  from  which  a  personal  liability 
to  pay  the  incumbrance  to  the  mortgagee  could  be  implied.  In 
the  case  before  the  court,  however,  there  was  no  personal  liability 
on  the  part  of  the  vendor  to  pay  the  mortgage,  this  having  been 
given  by  his  vendor ;  and  this  fact  was  sufficient  to  exempt  the 
last  vendee  from  any  personal  liability  for  the  mortgage.^ 

But  a  promise  on  the  part  of  a  grantee  to  pay  a  mortgage 
upon  the  property  cannot  be  implied  from  a  statement  in  the  deed 
"  subject,  however,  to  a  mortgage  ...  of  $7,000,  which  is  part 
of  the  above-named  consideration."  These  words  do  not  neces- 
sarily imply  any  obligation  to  pay  the  mortgage  debt.  They  are 
rather  to  be  considered  as  additional  words  of  recital  or  descrip- 
tion.2 

Nor  can  such  a  promise  be  implied  from  a  clause  following  a 
description  of  two  mortgages  upon  the  property,  stating  that  "  the 
above  described  property  is  alone  to  be  holden  for  the  payment 
of  both  of  the  above  debts  ;  "  though  there  also  be  an  exception 
to  the  covenant  against  incumbrances  of  the  mortgages  referred 
to,  ''  which  are  a  part  consideration  of  this  deed."  The  language 
at  best  is  doubtful  and  ambiguous,  and  is  susceptible  of  a  mean- 
ing other  than  that  the  grantee  assumed  a  personal  obligation  to 
pay  the  mortgages.  The  language  is  chosen  by  the  grantor, 
and  it  is  within  his  power  to  express  an  obligation  of  the  grantee 
in  plain  and  intelligible  language,  if  any  such  obligation  lias  been 
agreed  upon.'^ 

^  Moore's  Appeal,  88  Pa.  St.  450 ;  S.  C.  ing  such  personal  liability  ;  provided,  that 
7  Reporter,  538.  Also  Samuel  v.  Peyton,  the  use  of  the  words  "under  and  subject 
88  Pa.  St.  465  ;  Davis's  A[>p.  89  Pa.  St.  to  the  payment  of  such  ground  rent,  mort- 
272 ;  Merriraan  v.  Moore,  90  Pa.  St.  78 ;  gage,  or  other  incumbrance,"  shall  not 
Taylor  r.  Mayer,  93  Pa.  St.  42 ;  12  Phila.  alone  be  so  construed  as  to  make  such 
42.  These  cases  arose  before  the  passage  grantee  personally  liable  as  aforesaid, 
of  the  present  statute  in  Pennsylvania,  The  right  to  enforce  such  personal  liabil- 
which  is  as  follows :  A  grantee  of  real  es-  ity  shall  not  enure  to  any  person  other 
tate  which  is  subject  to  ground  rent,  or  than  the  person  with  whom  such  an  agrce- 
bound  by  mortgage  or  other  incumbrance,  ment  is  made,  nor  shall  such  personal  lia- 
shall  not  be  personally  liable  for  the  i)ay-  bility  continue  after  the  said  grantee  has 
ment  of  such  ground  rent,  mortgage,  or  bonajide  parted  with  the  incumbered  prop- 
other  incumbrance,  unless  he  shall,  by  an  crty,  unless  he  shall  have  exjjressly  as- 
agreeinent  in  writing,  have  expressly  as-  Hunied  such  continuing  liability.  I'urdon's 
sunied  a  jiersonal  liability  therefor,  or  Ann.  Dig.  1877,  p.  21(10,  Jjij  5,  0. 
there  shall  be  express  words  in  the  deeds  ■^  Fiske  v.  Tolman,  121  Mass.  254. 
of  conveyance  stating  that  the  grant  is  ^  Hubbard  v.  Ensign,  4C  (^unu.  57G. 
made  on  condition  of  the  grantee  assum- 

656 


§  760.]  A  purchaser's  rights  and  liabilities. 

750.  Even  a  verbal  promise  by  a  purchaser  to  assume  and 
pay  a  mortgage  is  valid,  and  may  be  enforced  in  equity  not  only 
by  the  grantor  but  by  the  holder  of  the  mortgage.^  A  covenant 
in  the  deed  that  the  premises  are  free  from  incumbrances,  or  a 
recital  that  the  consideration  had  been  paid  in  full,  does  not  estop 
either  the  grantor  or  the  holder  of  the  mortgage  from  proving  the 
agreement  and  recovering  upon  it.^  The  contract  of  assumption 
is  independent  of  the  deed.  The  verbal  agreement  is  additional 
thereto,  and  in  no  respect  contradictory.  It  does  not  vary  the 
terms  of  the  contract,  and  is  not  merged  therein." 

The  owner  of  a  large  lot  of  land,  subject  to  a  mortgage,  con- 
veyed a  portion  of  it  with  covenants  of  warranty  against  the 
mortgage.  Subsequently  the  grantee  offered  to  purchase  the  res- 
idue at  a  stated  price,  and  to  assume  as  part  of  it  the  debt  se- 
cured by  the  mortgage,  and  to  pay  the  balance  in  money.  This 
offer  was  accepted,  and  a  deed  given  in  which  the  consideration 
named  was  simply  the  value  of  the  equity  of  redemption,  and 
which  conveyed  the  land  subject  to  the  mortgage,  and  contained 
a  general  covenant  against  incumbrances  except  this  mortgage. 
The  purchaser  thus  took  the  land  last  purchased,  subject  to  the 
mortgage.  The  deed  did  not  state  that  he  assumed  the  debt,  nor 
did  it  have  any  provision  to  that  effect,  and  therefore  the  mere 
acceptance  of  the  deed  did  not  make  him  personally  liable  to  pay 
the  debt  or  discharge  the  incumbrance.  In  the  absence  of  other 
evidence,  he  merely  purchased  the  equity  of  redemption.  But 
having  by  his  proposal  to  purchase  assumed  the  payment  of  the 
mortgage,  it  became  his  duty  to  the  grantor  to  pay  it.  Moreover, 
the  grantor  was  released  by  this  agreement  from  the  covenant  of 
his  first  deed  against  the  mortgagee.* 

1  Bolles  V.  Beach,  22  N.  j.  L.  (2  Zab.)  tion  to  it,  and  an  essential  change  in  its 

680;  Wilson  v.  King,  23  N.  J.  Eq.  150;  legal  effect.     Boozer  v.  Teague  (S.  C),  3 

Putney  v.  Farnham,  27  Wis.  187  ;  Lamb  S.  E.  Rep.  5.51. 

V.   Tucker,  42   Iowa,  118;   Merrinaan  v.  -  Wilson    v.   King,   supra;    Bowen    r. 

Moore,  90  Pa.  St.  78  ;  Wright  v.  Briggs,  Kurtz,  37  Iowa,  239.     As  to  evidence  of 

99  Ind.  563.     See  §  1715.  verbal  assumption,  see  Conover  v.  Brown, 

But  in  South  Carolina  it  is  held  that  the  29  N.  J.  Eq.  510. 

legal  effect  of  a  deed  absolute  on  its  face  a  Taintor  v.  Hemmingway,  18  Hun  (N. 

cannot  be  varied  by  evidence  of  a  parol  Y.),  458;  Murray  v.  Smith,  1   Duer  (N. 

agreement  that  it  was  given  npon  condi-  Y.),413  ;  Barker  v.  Bradley,  42  N.  Y.  316  ; 

tion  that  the  grantee  should  assume  and  Remington  v.  Palmer,  62  N.  Y.  31.     Ques- 

pay  a  note  given  by  the  grantor  for  a  part  tion  raised   but  not   decided   in  Gage  '". 

of  the  purchase  money  at  the  time  he  pur-  Jenkinson,    58    Mich.    169;    Canfield    v. 

chased  the  land.    To  add  such  a  condition  Shear,  49  Mich.  313. 

to  a  deed  would  be  a  very  material  addi-  *  Drury  v.  Tremont  Improvement  Co. 

656     '  13  Allen  (Mass.),  168. 


PERSONAL   LIABILITY   OF  PURCHASER. 


[§  751. 


The  agreement  of  a  purchaser  to  pay  a  mortgage  may  be  wholly 
outside  of  the  conveyance. ^  A  letter  of  a  second  mortgagee  to 
the  holder  of  the  prior  mortgage,  which  was  due,  saying  that  he 
was  willing  to  agree  to  see  him  paid  $oQ0  on  account  of  the  first 
mortgage  within  sixteen  months,  was  held  a  promise  to  pay  this 
sum.^ 

751.  Whenever  the  mortgage  debt  forms  a  part  of  the 
consideration  of  the  purchase,  although  the  purchaser  has  not 
entered  into  any  covenant  or  agreement  to  pay  it,  he  is  bound 
to  the  extent  of  the  property  to  indemnify  the  grantor.  The 
law  implies  a  promise  to  that  effect  from  the  nature  of  the  trans- 
action ;  ^  but  the  purchaser  is  under  no  personal  liability  to  any 
one  for  such  mortgage  debt.*  This  is  the  law  in  England,  where 
a  contract  of  indemnity  in  favor  of  the  grantor  is  implied.^  But 
the  purchaser  in  such  case  does  not  assume  any  liability  beyond 
the  value  of  the  land  conveyed  to  him.  If  the  mortgage  debt  be 
afterward  paid  by  the  mortgagor,  equity  will  compel  the  pur- 
chaser by  way  of  subrogation  to  refund  the  money  so  paid,  or  to 
give  up  tlie  property.  He  may  discharge  his  obligation  to  indem- 
nify the  mortgagor  by  releasing  the  lands  to  him.^  The  obliga- 
tion to  indemnify  the  mortgagor  in  such  case  differs  from  that 
imposed  upon  the  purchaser  by  an  agreement  to  assume  the  mort- 

J  Schmiicker  v.  Sibert,   18  Ivans.   104;     r.  Mears,  8  Biss.  211;  Comstock  v.   Ilitt, 
Wright  V.  Bri-^gs,  99  Ind.  563 ;  Luding-     37  111.  542. 


ton  V.  Low,  21  J.  &  S.  (N.  Y.)  374. 

-  Colgin  V.  Henley,  6  Leigh  (Va.),  85. 

•'  Connecticut :  Townsend  v.  Ward,  27 
Conn.  610.  New  York:  Dorr  v.  Peters,  3 
Kdw.  132  ;  Marsh  v.  Pike,  1  Sandf.  Ch.  210 ; 
Hlyer  v.  Monliolland,  2  lb.  478  ;  Ferris  v. 


*  Equitable  L.  Ass.  So.  v.  Bostwick,  100 
N.  Y.  628  ;  Lawrence  v.  Towle,  59  N.  H. 
28. 

*  Waring  v  Ward,  7  Ves.  332.  Lord 
Eldon  states  the  law  thus:  "If  he  enters 
into   no   obligation  with   the  party  from 


Crawford,  2  Den.  595;  Flagg  v.  Thurber,  whom   he  jmrchascs,  neither  by  bond  nor 

14  Barb.  19C  ;  Cornell  v.  Prescott,  2  Barb,  covenant  of  indemnity,  to  save  him  harm- 

1*3.   Louisiana:  Scott  r.  Featherston,  5  La.  less  from  the  mortgage,  yet  this  court,  if 

Ann.  300  ;  Schlatre  r.  Greaud,  19  lb.  125.  he  receives  pos.sesbion  and  has  the  profits, 

Ohio  :  Thompson  v.  Thompson,  4  Ohio  St.  would,  independent  of  contract,  raise  upon 

.■J33.     New  Jersey  :  Stevenson  r.  Black,  1  his  conscience  an  obligation  to  indemnify 

N.  J.   Eq.  338;  Klapworth  v.  Dressier,  13  the  vendor  against  the  personal  obligation 

N.  J.  Eq.  62;  Ilartshorne  v.  Ilarthhorne,  2  to  pay  the  money  due  upon  the  vendor's 

X.  J.  Eq.  349;  Crowi  11  u.  Hospital  of  St.  transaction   of  mortgage;   for,  being    be- 

Harnabas,  27  N.  J.  Eq.  (160.     Pennsylva-  come  owner  of  the  estate,  he  niubt  be  snp- 

nia:  Moore's  Appeal,  88  Pa.  St.  450  ;  -S'.  posed  to   intend  to  indemnify  the  vendor 

C.   19  Alb.   L.J.  257;  Burke  i;.  Gummy,  again.st  the  mortgage." 

49   Pa.  St.  518.     Iowa:   Wood  v.   Smith,  «  Tiiheiior  v.  Dodd,  4  N.  J.  Kij.  (:»  Or.) 

.'>1    Iowa,  156;  Iowa  Loan   &  Trust  Co.  v.  454  ;  Crowell  v.  Hospital  of  St.  Harnabiis, 

.Mowery,67  Iowa,  1 13.    Iliinois:  Twitchell  supra;  Mount  i'.  Van  Ness,  33    N.J.   E(i. 

262,  265. 

vol..  I.         42  657 


§  752.]  A  purchaser's  rights  and  liabilities. 

gage  debt,  in  that  such  agreement  makes  him  personally  liable  to 
the  mortgagor  to  indemnify  him,  whether  the  mortgaged  property 
be  sufficient  in  value  for  that  purpose  or  not.  He  incurs  a  per- 
sonal liability.  As  between  him  and  his  grantor  he  becomes  the 
principal  debtor,  and  the  vendor  a  surety.^  But  the  purchaser,  by 
his  assumption  of  the  debt,  does  not  generally  make  himself  liable 
at  law  to  any  one  other  than  his  grantor.  Legally  his  covenant 
is  considered  only  as  a  covenant  to  indemnify  his  grantor.  It 
does  not  even  create  a  debt  as  between  his  personal  represen- 
tative and  the  heir  or  devisee  ;  and  consequently  the  land  is  the 
primary  fund,  and  the  personal  estate  only  the  auxiliary  fund  for 
its  payment.^  The  case  is  in  this  respect  quite  different  from  one 
where  the  ancestor  has  purchased  an  estate  and  given  his  own 
mortgage  and  personal  obligation  to  secure  the  payment  of  pur- 
chase money,  for  then  the  debt  is  a  personal  debt  in  every  sense, 
and  his  personal  estate  is  the  primary  fund  for  the  payment  of  it, 
in  exoneration  of  the  land  and  the  interest  of  the  heirs.-^ 

752.  The  grantee  is  bound  by  accepting  the  deed.  To 
create  a  liability  on  the  part  of  the  grantee  to  pay  an  existing 
mortgage,  it  is  not  necessary  that  he  should  sign  the  deed  or  any 
obligation; 4  his  acceptance  of  a  deed  imposing  this  obligation 
upon  him  is  all  that  is  necessary.^  The  acceptance  by  an  agent 
duly  constituted  of  a  deed  imposing  such  a  liability  will  bind  the 
principal.*^  Acceptance  may  be  implied  from  circumstances." 
But  if  there  be  no  acceptance,  as,  for  instance,  when  the  deed  con- 
taining an  assumption  of  a  mortgage  is  made  to  a  married  woman 
without  her  knowledge  or  consent,  and  is  never  delivered  to  her,^ 
or  when  a  deed  is  made  to  a  person  without  his  knowledge  or 
consent,  and  he  repudiates  it  as  soon  as  he  knows  of  its  existence,'* 

1  Crowell  i;.  Hospital  of  St.  Barnabas,  r.   Sherwood,   1    Abb.   (N.  Y.)  N.  C.  KM, 

27  N.  J.  Eq.  650.  note  ;  Bishop  v.  Douglass,  25  Wis.  696 ; 

^  Mount  V.  Vau  Ness,  33  N.  J.  Eq.  262.  Taylor  v.  Wliitmore,  35  Mich.  97  ;  Unger 

3  Crowell  V.  Hospital  of  St.  Barnabas,  r.  Smith,  44  Mich.  22;  Kleiu  v.  Isaacs,  8 

supra,  653,  per  Depue,  J. ;  Cumberhiml  v.  Mo.  App.  568  ;  Dickason  v.  Williams,  129 

Codrington,  3  Johns.  Ch.  (N.  Y.)  229.  Mass.  182;  Urquliart  v.  Brajton,  12  R.  I. 

*  Atlantic  Dock  Co.  v.  Leavitt,  54  N.  169  ;  State  v.  Davis,  96  Ind.  539  ;  Thomp- 

Y.  35  ;  13  Am.  Rep.  556,  and  cases  cited  ;  son  v.  Dearborn,  107  111.  87  ;  Sparkman  /•. 

Bowen  v.  Beck,  94  N.  Y.  86;  S.  C.  46  Gove,  44  N.  J.  I>.  252. 
Am.  Rep.   124;  Ricard  v.  Sanderson,  44         ^  Fairchild  r.  Lynch,  42  N.  Y.  Superior 

N.  Y.  179  ;  Locke  v.  Homer,  131  Mass.  93,  Ct.  265  ;  S.  C.  46  lb.  1 ;  Schley  v.  Fryer, 

102.  lOON.  Y.  71. 

s  Spaulding  v.   Hallenbeck,   35  N.    Y.         "  Bundy  v.  Iron  Co.  38  Ohio  St.  300. 
204,   affirming  39  Barb.    79  ;  30  lb.  292  ;         «  Culver  i'.  Badger,  29  N.  J.  Eq.  74. 
Belmont  r.  Comau,  22  N.  Y.  438  ;  Wales         ^  Cordis  v.  Hargrave.  29  N.  J.  Eq.  446  : 
658 


PERSONAL   LIABILITY    OF   PURCHASER.  [§  752. 

no  liability  is  incurred  by  the  grantee.  The  acceptance  of  the  deed 
is  a  suflBcient  consideration  for  the  promise  to  assume  the  mort- 
gage debt.^ 

The  recording  of  a  deed  which  imposes  an  obligation  upon  the 
grantee  to  assume  and  pay  a  preexisting  mortgage  is  not  prima 
facie  evidence  of  its  delivery  and  acceptance,  though  it  may  be 
such  evidence  "when  the  deed  does  not  establish  any  contract 
against  the  grantee.^ 

By  the  acceptance  of  a  deed  which  provides  that  the  grantee 
shall  assume  and  paj'  a  specified  mortgage,  he  binds  himself  as 
effectually  as  he  would  by  executing  the  deed  himself  as  an  in- 
denture.'^ This  provision  becomes  an  express  agreement  on  his 
part,  for  the  fulfilment  of  which  he  is  personally  liable,  not  only 
to  his  grantor,^  but  the  benefit  of  it  enures  to  the  mortgagee, 
who  may  in  equity  enforce  it  directly  against  such  purchaser.'' 
When  foreclosure  is  made  by  an  equitable  suit,  the  mortgagee 
may  treat  both  the  vendor  and  purchaser  as  principal  debtors  to 
him,  and  may  have  a  personal  decree  against  either  or  both  of 
them. 

It  is  not  necessary  that  the  holder  of  the  mortgage  should  no- 
tify the  purchaser  who  has  assumed  the  mortgage  of  his  accept- 
ance of  the  promise  to  pay  the  debt.  The  bringing  of  suit  is  a 
sufficient  acceptance.'^ 

A  verbal  agreement  between  the  parties  that  the  grantor 
should  advance  the  money  for  the  payment  of  a  mortgage  ex- 
Stevens  Institute  of  Technology  f.  Sheri-  Marsh  v.  Pike,  1  Sandf.  Ch.  210;  10 
dan,  30  X.  J.  Eq.  23  :  Parker  v.  Jenks,  36     Paige,  595. 

X.  J.  Eq.  398;  Albany  City  Sav.  Inst.  v.         ^  Iloff's  Appeal,  24  Pa.  St.  200;  Len- 
Burdick,  87  N.  Y.  40.     See  §  738.  nig's  Estate,  52  Pa.  St.  135,   138  ;  Craw- 

1  Bay  V.  Williams,  112  111.  91.  ford  v.  Edwards,  supra;    Blyer  v.  Mon- 
-  Thompson  v.  Dearborn,  107  111.  87.  hoUand,  2  Sandf.  (N.  Y.)  Ch.  478;  Cor- 

2  Crawford  r.  Edwards,  33  Mich.  354;  bett  v.  Waterman,  11  Iowa,  86;  Thomp- 
Trotter  v.  Hughe.';,  12  N.  Y.  74,  78;  Fair-  son  v.  Bertram,  14  Iowa,  476;  Curtis  v. 
child  V.  Lynch,  46  N.  Y.  Superior  Ct.  1  ;  Tyler,  9  Paige  (N.  Y.),  432,  435  ;  King  v. 
Iluyler  v.  Atwood,  26  N.  J.  Eq.  504 ;  Fin-  AVhitely,  10  lb.  465 ;  Halsey  v.  Reed,  9 
ley  V.  Simpson,  22  N.  J.  L.  (2  Zab.)  311  ;  lb.  446,  451  ;  Burr  v.  Beers,  24  N.  Y.  178; 
Schmucker  v.  Sibert,  18  Kans.  104;  Pike  Converse  v.  Cook,  8  Vt.  164. 

V.  Brown,  7  Cush.   (Mass.  133 ;   Braman  "  Bissell  v.  Bugbee    (U.  S.  C.  C.  Dist. 

V.  Dowse,  12  lb.  227  ;  Locke  r.  Homer,  Ind.),  8  Cent.  L.  J.  272  ;  S.C.7  Kcportcr, 

131    Mass.   93;    P'urnas   v.    Durgin,    119  550.     Otherwise  in   Indiana:    Mansur  r. 

Mass.  500;  GufTiiey  r.   Hicks,  l.'U    Mass.  Miller  (Superior  Court  Marion  Co.  Ind. 

124.  1878),  7  Cent.  L.  J.  422  ;  Berk.shire  L.  Ins. 

<  Cubberly   r.    Yager   (N.  J.),    11    Atl.  Co.  u.  Ilutcliings,  100  Ind.  496 ;  Carnahan 

Kep.  113;  Iiick  1-.  Black,  17  N.J.  Eq.  189;  v.  Touscy,  93    Ind.    561,   5G6,  duflscntiiig 

0|iinioii  by  Elliott,  C.  J. 

659 


§§  753,  754.]     A  purchaser's  rights  and  liabilities. 

pressly  assumed  bj'^  the  grantee  cannot  be  shown,  because  this 
would  be  inconsistent  with  the  terms  of  the  deed.' 

753.  A  married  •woman  is  liable  on  her  covenant  to  as- 
sume a  mortgage  made  in  a  deed  of  real  estate  to  her  own  sep- 
arate use  or  benefit.  It  is  a  covenant  for  the  benefit  of  her  sep- 
arate estate,  or  to  pay  a  portion  of  the  purchase  money  of  real 
estate  conveyed  to  her.^  But  she  is  not  liable  on  such  a  covenant 
in  her  husband's  deed  of  his  land,  where  the  laws  enable  her  to 
contract  only  in  respect  to  her  own  property  ;  and  she  can  conse- 
quently contract  no  liability  as  surety  for  her  husband.^ 

A  deed,  containing  a  recital  that  the  land  therein  described 
was  subject  to  a  mortgage,  "  which  the  grantee  assumes  and 
agrees  to  pay,"  was  executed  to  a  woman  as  grantee,  without  her 
knowledge  or  authority,  by  the  direction  of  her  husband,  and  was 
by  him  recorded.  She  never  saw  the  deed,  and  knew  nothing  of 
its  contents  until  after  the  land  was  sold  by  the  mortgagee,  when 
she  repudiated  the  deed.  Soon  after  the  deed  was  recorded,  she 
knew  that  the  land  had  been  conveyed  to  her  and  claimed  to  be 
the  owner  of  it.  It  was  held,  however,  that  these  facts  warranted 
a  finding  that  she  had  assented  to  the  purchase,  and  a  ruling  that 
she  was  bound  by  the  recital  in  the  deed.* 

754.  What  will  avoid  the  purchaser's  liability.  —  Such 
purchaser  cannot  avoid  the  liability  to  pay  the  mortgage,  on  the 
ground  that  through  a  mistake  in  the  description  he  acquired  no 
legal  title  to  the  land  intended  to  be  conveyed,  if  he  obtained 
possession  of  it  under  his  deed,  and  the  right  by  virtue  of  it  to 
have  the  mistake  corrected.^  Neither  can  such  a  purchaser  de- 
fend upon  the  ground  that  the  title  conveyed  to  him  was  invalid, 
or  that  the  deed  was  imperfect,  if  he  has  entered  into  possession, 
and  alleges  no  eviction  and  makes  no  offer  of  surrender.^  Where, 
however,  the  purchaser  has  been  evicted,  so  that  there  is  a  total 

1  Unger  i'.  Smith,  44  Mich.  22.  &  Crawford  v.  Edwards,  33  Mich.  354; 

2  §  116;  Vrooman  v.  Turner,   8  Hun     Comstock  r.  Smith,  26  Mich.  306. 

(N.  Y.),  78  ;  S.  C.  69  N.  Y.  280 ;  examined  ^  Parkinson  r.  Sherman,  74  K  Y.  88 ; 

and  commented  upon  in  17  Alb.  L.J.  240;  Gifford  v.  Benefit   Soc.  (N.  Y.)   10  N.  E. 

Ballin  v.  Dillaye,  37  N.  Y.  35 ;  Cashman  Kep.  39,  affirming  38  Hun,  350.     It  was 

V.  Henry,  75  N.  Y.  103;  S.  C.  19  Albany  suggested  in  the  latter  case  that  if  a  fail- 

L.  J.  24;  55  How.  (N.  Y.)   Pr.  234,  re.  ure  of  the  title  should  occur  at  a  future 

versing  S.  C.  44  Superior  Ct.  93  ;  Huyler  time,  equity  would  not  be  powerless  if  the 

V.  Atwood,  26  X.  J.  Eq.  504;  S.  C.  28  lb.  purchaser  should  he  forced  to  pay  a  defi- 

275.  ciency,  to  furnish  adequate  relief,  by  a  re- 

3  Kitchell  V.  Mudgett,  37  Mich.  81.  vival  of  the  mortgage,  or  by  some  process 
*  Coolidge  V.  Smith,  129  Mass.  554.  of  subrogation. 

660 


PERSONAL   LIABILITY    OF   PURCHASER.  [§  755. 

failure  of  consideration  for  the  covenant  of  assumption,  the  pur- 
chaser may  effectually  allege  such  eviction  and  failure  in  defence 
of  his  covenant  of  assumption. ^  So,  also,  a  mistake  of  fact 
which  invalidates  the  contract  of  assumption,  is  a  good  defence 
to  an  action  upon  it.-  It  is  also  a  good  defence  that  the  pur- 
chaser's grantor  had  no  title  to  the  property ;  and  that  he 
assumed  the  payment  of  the  mortgage  through  the  false  and 
fraudulent  representations  of  his  grantor;  ^  or  that  there  was  no 
agreement  for  assumption  between  the  parties  to  the  deed,  and 
the  agreement  was  inserted  in  the  deed  in  an  unusual  place  and 
escaped  the  notice  of  the  grantee.^ 

755.  The  ground  upon  ■which  a  mortgagee  is  allo"wed  to 
take  advantage  directly  of  the  usual  clause  in  a  deed,  whereby 
the  grantee  assumes  the  payment  of  the  mortgage,  is  generally 
stated  to  be  that  as  between  the  parties  to  the  deed  the  grantee 
thereby  becomes  the  principal  debtor  for  the  mortgage  debt, 
which  has  been  allowed  to  him  out  of  the  purchase  money,  and 
the  grantor  is  thenceforward  merely  a  surety  for  the  debt  ;^  and 
then,  upon  the  familiar  principle  that  the  creditor  is  entitled  by 
way  of  equitable  subrogation  to  all  securities  held  by  a  surety  of  > 
the  principal  debtor,  the  mortgagee  is  entitled  to  the  benefit  of 
this  agreement  made  by  the  purchaser,  although  he  did  not  know 
of  its  existence  till  long  afterwards.  A  court  of  equity  having 
the  mortgagor,  the  mortgagee,  and  the  grantee  before  it,  may 
adjust  in  one  suit  the  rights  of  all  the  parties.  In  different  forms 
this  is  in  substance  the  doctrine  of  the  cases.''     The  right  of  the 

1  Dunning  v.  Leavitt,  85  N.  Y.  30.  ground  on  which  the  rule  now  established 

-  Crowe  V.  Lewin,  95  N.  Y.  423.  in  our  own  state  is  made  to  rest,  whether 

•■'  Benedict  v.  Hunt,  32  Iowa,  27.  on  the  ground  that  the  assuming  of  the 

*  Bull  f.  Titsworth,  29  N.  J.  Eq.  73.  mortgage  debt  by    the  grantee  creates  a 

^  Crawford  v.  Edwards,  .33  Mich.  354,  privity  of  contract  between  him  and   the 

per  Marston,  J.  mortgagee,  or  makes  the  latter  privy  to 

"  Ilalsey  v.  lieed,  9  Paige  (N.  Y.),  446;  the  consideration  of  the  promise,  or  that 

Curtis  V.  Tyler,  9  lb.  432 ;  King  v.  White-  the    right    of    action    in    the   mortgagee 

ly,  10  lb.  465 ;  Marsh  v.  Pike,  10  lb.  595,  springs   simply  from  the   ])romise  of  the 

597 ;  Cornell  v.  I'rescott,  2  Barb.  (N.  Y.)  grantee  made  to  the  grantor  for  tiie  mort- 

16;  Russell  r.  Pistor,  7  N.  Y.  171  ;  Trot-  gagee's   benefit.      Whatever  may  be   the 

ter  V.  Hughes,  12  N.  Y.  74;  Osborne  v.  ground  of  the  ruling,  it  is  now  firmly  and 

Cabell,  77  Va.  462  ;  Bassett  v.   Bradley,  definitely  settled  in  the  courts  of  this  state 

48  Conn.  224  ;  not  followed,  however,  in  that  the  promise  of  the  grantee,  in  a  case 

Meech  v.  Ensign,  49  Conn.  191  ;  Willard  like    this    under    consideration,    may   be 

V.  Worsham,  76  Va.  392.  adopted  and  enforced   by  tlio  mortgagee 

In  Douglass  v.  Wells,  18  IIuii  (N.  Y.),  as  a  personiil  obligation  of  the  former  to 

88,  95,  Hockcs,  J.,  says:  "It  is  somewhat  the  latter." 


perplexing    to     determine    precisely    the 


OGl 


§  755.]  A  purchaser's  rights  and  liabilities. 

mortgagee  to  this  remedy  does  not  result  from  any  fixed  or  vested 
right  in  him,  arising  either  from  the  acceptance  by  the  subse- 
quent purchaser  of  the  conveyance  of  the  mortgaged  premises,  or 
from  the  obhgation  of  the  grantee  to  pay  the  mortgage  debt  as 
between  himself  and  his  grantor.  The  mortgagee's  relief  depends 
upon  no  original  equity  residing  in  himself,  but  upon  the  right  of 
the  mortgagor  against  his  grantee,  to  which  the  mortgagee  suc- 
ceeds. Then  he  is  allowed  in  equity  to  recover  a  deficiency  of  the 
grantee  by  a  mere  rule  of  procedure,  going  directly  as  a  creditor 
against  the  grantee,  in  order  to  avoid  circuity  of  action,  and  save 
the  mortgagor,  as  an  intermediate  party,  from  being  harassed  for 
the  payment  of  the  debt,  and  then  driven  to  seek  relief  over 
against  his  grantee,  upon  whom  the  liability  would  ultimately 
fall.i 

To  support  an  action  upon  this  ground,  therefore,  it  is  neces- 
sary in  the  first  place  that  the  grantor,  in  whose  favor  the  stipu- 
lation is  made,  should  himself  be  personally  liable  for  the  debt 
assumed  by  the  grantee ;  and  in  the  second  place,  that  there  be 
a  debt  or  some  obligation,  on  the  part  of  the  person  assuming  the 
payment  of  the  mortgage,  to  support  his  undertaking.  If  the 
grantor  be  not  the  mortgagor  himself,  or  one  who  has  bound  him- 
self personally  for  the  payment  of  the  mortgage  debt,  the  grantee, 
in  assuming  the  payment  of  the  mortgage,  does  not  become  per- 
sonally liable  through  the  grantor  to  the  holder  of  the  mortgage 
to  p^y  the  debt  to  him.^  There  is  in  such  case  no  chance  for  any 
equitable  subrogation,  and  the  agreement  is  considered  as  a  mere 
declaration  that  the  property  was  conveyed  to  the  purchaser  sub- 
ject to  the  lien  of  the  mortgage.'^ 

Under  this  view  a  mortgagee's  right  under  a  purchaser's  agree- 
ment to  assume  the  mortgage  is  an  equitable  right,  and  can  be 
enforced  only  by  equitable  suit.*-  Where  foreclosure  is  effected 
by  suit  in  equity,  this  right  is  usually  enforced  by  making  the 
purchaser  a  party  to  the  bill,  and  asking  for  a  personal  decree  for 

1  Crowell  V.  Hospital  of  St.  Barnabas,  30  N.  J  Eq.  412;  Osborne  v.  Cabell,  77 
27  N.  J,  Eq.  650,  — substantially  the  Ian-     Va.  462. 

guage  of  Depue,  J.  3  §  76O;  King  v.  Whitely,  10  Paige  (N. 

2  Wise  V.  Fuller,  29  N.  J.  Eq.  257,-  Y.),  465;  Trotter  r.  Hughes,  12  N.  Y.  74; 
Crowell  V.  Currier,  27  N.  J.  Eq.  152 ;  Carter  v.  Holahan,  92  N.  Y.  498.  See 
Crowell  V.  Hospital  of  St.  Barnabas,  su-  Thorp  v.  Keokuk  Coal  Co.  48  N.  Y.  253 ; 
pra;  Moore's  Appeal,  88  Pa.  St.  450;  S.  §  579. 

C.  7  Reporter,  538;  Mount  v.  Van  Ness,  *  §  762;  Willard  v.  Worsham,  76  Va. 
33  N.  J.  Eq.  262 ;  Norwood  v.  De  Hart,     392. 

662 


PERSONAL   LIABILITY    OF   PURCHASER.  [§  756. 

deficiency  against  liim.^  The  mortgagee  generally  enforces  this 
liability  of  the  purchaser  by  making  him  a  party  to  the  foreclosure 
suit  as  provided  by  statute.^ 

In  Connecticut  it  is  said  that  in  the  ordinary  case  of  a  purchase 
of  an  equity  of  redemption  from  a  mortgagor,  with  a  provision  in 
the  deed  that  the  grantee  shall  assume  and  pay  the  mortgage  debt, 
no^right  of  action  on  the  promise  accrues  to  the  mortgagee.  To 
give  the  mortgagee  such  right  of  action,  the  promise  must  have 
been  intended  for  his  benefit ;  it  is  not  enough  that  a  benefit  may 
accrue  to  him.-^ 

756.  Accordingly,  when  such  an  agreement  to  assume  the 
payment  of  a  mortgage  is  contained  in  a  mortgage,  it  does 
not  as  a  general  rule  impose  any  personal  liability  upon  the  mort- 
gagee for  the  payment  of  the  prior  mortgage  debt,  which  can  be 
enforced  against  him  by  the  prior  mortgagee.*  The  subsequent 
mortgagee  owes  no  money  for  the  land  which  he  can  promise  to 
pay  to  the  prior  mortgagee,  for  he  does  not  acquire  title  to  the 
land.  Where  one  "■  buys  the  land  absolutely  for  a  stipulated 
price,  and  instead  of  paying  the  whole  of  it  to  his  grantor  he  is 
allowed  to  retain  a  part,  which  he  agrees  to  pay  to  a  creditor  of 
a  grantor  having  a  lien  upon  the  land,  the  amount  which  he  thus 
agrees  to  pay  is  his  own  debt,  which,  by  arrangement  with  his 
grantor,  he  has  agreed  to  pay  to  the  creditor  of  the  latter,  and, 
although  this  arrangement,  not  being  assented  to  by  the  creditor, 
does  not  discharge  the  grantee  from  liabilit}^  yet,  as  between  him 
and  the  party  who  has  assumed  it,  the  grantor  is  a  mere  surety. 
If  the  grantee  pays  it,  he  pays  only  what  he  agreed  to  i)ay  for 
the  land,  and  pays  it  in  the  numner  agreed  upon.  And  there  is 
no  hardship  in  allowing  either  the  grantor  or  the  mortgagee  to 
enforce  its  payment.  But  in  the  case  of  a  party  having  the  land 
merely  as  security,  such  an  undertaking  is  simply  a  promise  to 
advance  money  to  pay  the  debt  of  his  grantor  or  mortgagor,  which 
money,  when  advanced,  the  junior  mortgagee  can  collect  under 
his  mortgage."  ^ 

1  Bull  V.  Titsworth,  29  N.  J.  Eq.  73;  Kniis.  494 ;  Miller  i\  Tlioini)soii,  34  Mich. 

Crowell  V.  Hospital  of  St.   Barnabas,  27  10;  Haydeu  f.  Driiry,  3  Fed.  Kep.  782. 

N.  J.  Eq.  G50;  Koj,'er3  v.  Ilcrron,  92  111.  •*  Meech  v.  Kiisi;;ii,  49  Conu.  191. 

.'iS3.  ••  Garnscy  v.  Holers,  47  N.  Y.  233;  Par- 

-  Jolinson    V.    Harder,    45    Iowa,    G77  ;  dee  r.  Treat,  82  N.  Y.  38.5  ;  Bassctt  i'.  Brad- 

Heam  v.  Jack,  44  Iowa,  32.')  ;  lioas  v.  Ken-  ley,  48  Conn.  224. 

nison,  38  Iowa,  39G  ;  Sihinueker  r.  Sibert,  ''  Mr.  .Justice   Rapallo,  iu  Garnsoy   v. 

18   Kans.    104;  Anthony  v.   Ilcnnun,    14  Uogcrs,  sH/jra. 

663 


§  757.]  A  purchaser's  rights  and  liabilities. 

In  like  manner  a  prior  mortgagee,  who  has  received  from  the 
mortgagor  a  release  of  the  equity  of  redemption  subject  to  a  sec- 
ond mortgage,  not  in  payment  of  his  mortgage  but  as  additional 
security,  is  not  liable  to  pay  the  second  mortgage  debt,  although 
his  deed  recites  that  it  is  made  in  consideration  of  his  mortgage 
and  the  balance  due  on  the  second  mortgage.  He  may  show  by 
parol  what  was  the  real  consideration.^ 

757.  The  fact,  that  the  assumption  of  the  prior  mortgage 
is  made  in  an  absolute  deed  intended  as  a  mortgage,  does  not 
change  this  rule.2  The  title  of  the  grantee  is  defeasible.  The 
grantor  reserves  the  right  to  annul  it  by  paying  the  debt,  and 
when  he  does  so,  he  discharges  the  agreement  to  pay  the  prior 
mortgage.  "The  reservation  of  this  right  is  inconsistent  with  the 
idea  that  the  assumption  by  the  grantee  was  for  the  benefit  of  the 
prior  mortgagee  ;  for,  if  it  were,  the  grantor  would  have  no  con- 
trol over  the  rights  thus  acquired  by  a  third  party.  The  reserva- 
tion of  this  control  by  the  grantor  shows  that  the  agreement  was 
for  his  benefit  only,  and  prevents  its  enuring  to  the  benefit  of  any 
third  party."  3 

Moreover,  in  such  case  the  grantee  receives  no  money  with 
which  to  pay  a  prior  mortgage  debt,  nor  any  conveyance  of  the 
entire  estate  upon  a  consideration  of  which  the  amount  of  the 
prior  mortgage  debt  formed  a  part.  He  receives  merely  a  mort- 
gage title,  defeasible  upon  the  payment  of  a  debt,  or  the  per- 
formance of  some  other  obligation.  Upon  the  performance  of 
the  condition  he  is  obliged  to  release  or  reconvey  the  property  to 
the  grantor.  He  is  to  reconvey  merely  the  title  or  interest  con- 
ve3^ed  to  him.  He  received  nothing  from  his  grantor  which  is 
a  consideration  for  undertaking  to  pay  a  prior  mortgage  debt ; 
and,  therefore,  he  is  under  no  obligation  either  to  his  grantor  or 
to  the  prior  mortgagee  to  pay  such  debt.* 

1  Huebsch  v.  Scheel,  81  IlL  281.  supra.     The  terms  of  the  defeasance  ena- 

2  Garnsey  y.  Rogers,  47  N.  Y.  233  ;  Cole  bled  the  grantor  to  annul  the  convey- 
r.  Cole  (N.Y.),  17  N.E.  Rep.  682,  affirming  ance  on  paying  simply  the  debt  whicli 
44  Hun,  624  ;  Arnaud  v.  Grigg,  29  N.  J.  he  owed  to  the  grantee.  On  this  ground  . 
Eq.  482  ;  Giiffney  v.  Hicks,  131  Mass.  124.  the  case  is  distinguished  from  the  ordinary 
The  case  of  Ricard  v.  Sanderson,  41  N.  Y.  case  in  Pardee  v.  Treat,  18  Hun  (N.  Y.), 
179,  may  perhaps  be  distinguished  in  some  298. 

particulars  ;  but  if  not,  must  yield  to  the  *  Gaffney  v.  Hicks,  supra. 

later  decision   of  Garnsey  v.  Rogers,  s«-  "  Taking  the  two  instruments  together 

pra.     See  Bassett  v.  Bradley,  48   Conn,  as  constituting  one  contract,  the  terms  of 

^-'*-  the   agreement    to   reconvey   control  the 

^  Per  Rapallo,  J.,  in  Garnsey  v.  Rogers,  terms  of  the  deed  ;  not  only  so  far  as  the 
664 


PERSONAL   LIABILITY    OF   PURCHASER.  [§  758. 

But  a  grantee  was  held  liable  to  the  mortgagee  on  his  covenants 
to  assume  and  pay  the  mortgage,  where  he  had  taken  an  absolute 
conveyance  at  the  request  of  another  and  for  his  benefit,  except  so 
far  as  the  profits  of  the  land  were  to  be  security  for  a  debt  owed 
him  by  the  person  for  whom  he  took  the  conveyance.  The  deed 
in  this  case  was  executed  with  the  name  of  the  grantee  left  blank. 
The  purchaser,  by  agreement  with  one  to  whom  he  was  indebted, 
inserted  his  debtor's  name  as  grantee  in  the  deed,  with  the  under- 
standing that  the  profits  should  be  applied  on  account  of  the  debt. 
In  a  suit  against  the  grantee  for  a  deficiency  after  a  foreclosure 
of  the  mortgage,  it  was  held  the  grantee  was  the  absolute  owner 
in  fee  of  the  premises  ;  that  the  rights  of  the  parties  were  to  be 
determined  by  the  facts  existing  when  he  consented  to  take  the 
deed  with  a  covenant  to  pay  the  mortgage,  and  that  he  was  liable 
upon  the  covenants.^ 

Even  if  the  words  "  under  and  subject"  to  a  mortgage  could 
import  a  promise  of  payment  in  any  case,  they  will  not  create  any 
personal  liability  on  the  part  of  the  grantee  when  he  merely  took 
the  conveyance  to  oblige  the  real  purchaser,  and  is  merely  a  dry 
trustee  for  him.  The  criterion  of  personal  liability  for  an  incum- 
brance upon  property  purchased  is  to  be  found  in  the  contract  or 
consent  of  the  purchaser  to  become  bound  for  the  debt  where  it 
forms  a  part  of  the  price  he  is  to  pay  for  the  incumbered  property. 
But  where  the  property  is  cast  upon  a  person  by  act  of  law,  or  by 
the  agency  of  others,  who  are  the  beneficiaries,  there  is  no  reason 
for  assuming  that  he  intended  to  bind  himself  and  thereby  to  add 
a  new  security  for  the  payment.^ 

758.  The  broad  doctrine,  that  when  one  person  makes  a 
promise  for  the  benefit  of  a  third  person,  the  latter  may  main- 
tain an  action  upon  it,  has  been  adopted  in  several  states.^     It 

deed  purports  to  be  Jin  absolute  convey-  the  grantor  pay  a  sum  of  money,  wliicli 

ance,  but  also  so  far  as  it  purports  to  im-  the  grantee  would  have  to  pay  buck  when 

pose  on  the  grantee  the  duty  of   paying  he  seeks  to  redeem."     Per  Endicott,  J. 

off  the  prior  mortgage.    When  the  grantor  '  Campbell  v.  Smith,  8  Huu  (N.  Y.),  6  ; 

redeems  this  mortgage  he  must  do  so  ac-  71  N.  Y.  26,  following  Lawrence  v.  Fo.\, 

cording  to  its  terms,  and  one  of  them  is,  20  N.  Y.  268.     See  Gaftiiey  v.  Hicks,  124 

that  the  defendant  shall  recouvcy  subject  Mass.  301. 

to  the  prior  mortgage  It  wouhi  be  an  '^  Giiard  Life  Ins.  &  Trust  Co.  v.  Stew- 
extraordinary  and  incquitalile  construe-  art,  80  Pa.  St.  89.  See  Lcnnig's  Estate, 
tion  of  the  agreement  to  rcconvey,  not  to  52  Pa.  St.  13.5. 

require  of  the  grantor  upon  reconveyiince  ^  Lawrence    v.    Fo.\,    su/ira ;    Burr    c. 

the  same  a.-sumjiiioii  of   the   prior  mort-  Beers,    24    N.     Y.    178.      The    latter  was 

gage;  and   the   ri.«u]t  would  be    to    make  an  action  at   law  upon   the  griiutee's  un- 

GG5 


§  758.] 


A  purchaser's  rights  and  liabilities. 


is  not  needful  that  any  consideration  should  pass  from  such  third 
person,  or  that  he  should  know  of  it  at  the  time.  It  is  sufficient 
that  the  promise  be  made  upon  a  valuable  consideration  passing 
to  the  grantee,  who  assumes  the  mortgage  from  his  grantor,  and 
the  mortgagee,  in  adopting  the  act  of  the  latter  for  his  benefit, 
is  brought  into  privity  with  the  promisor,  and  may  enforce  the 
promise,  as  if  it  were  made  directly  to  him.^ 

There  is  a  sufficient  consideration  for  such  an  agreement  of  a 
grantee  where  his  grantor  has  purchased  the  property  in  his  own 
name,  and  after  making  a  mortgage  for  a  portion  of  the  purchase 
money  has  conveyed  an  undivided  portion  to  the  grantee  by  a 
deed  which  recited  that  the  grantee  was  jointly  interested  in  the 
premises,  the  title  having  for  convenience  been  taken  in  the  name 
of  the  grantor,  and  that  the  grantee  assumed  and  agreed  to  pay 
his  proportion  of  the  mortgage.  The  grantee  could  not  have  ob- 
tained a  conveyance  of  his  interest  in  the  property  without  either 
paying  or  agreeing  to  pay  his  portion  of  the  mortgage.  There- 
fore the  mortgagee  can  enforce  the  mortgage  against  him  to  the 
amount  of  the  portion  so  assumed.^ 

dertaking,  without  a  foreclosure   of   the  Bramblett,    78    Ind.    213 ;    Carnahan    v. 

mortgage,  and  without  making  the  mort-  Tousey,  93  Ind.  561 ;  Ayrcs  v.  Randall, 

gagor  a  party.     Mr.  Justice  Denio  agrees  108  Ind.  .59.5;  9  N.  E.  llep.  464;  Bay  v. 

that  the  previous  cases  proceed  upon  the  Williams,   112  111.  91  ;  Flagg  v.  Geltma- 


principle  that  the  undertaking  of  the 
grantee  to  pay  off  the  incumbrance  is  a 
collateral  security  acquired  by  the  mort- 
gagor, which  enures  by  an  equitable  sub- 
rogation to  the  benefit  of  the  mortgagee ; 
but  since  the  case  before  the  court  was  a 
suit  at  law,  and  the  doctrine  of  equitable 
subrogation  could  be  invoked  only  in 
equity,  it  became  necessary  to  determine 
whether  the  action  could  be  maintained 
directly  upon  the  grantee's  promise  in 
law ;  and  it  was  decided  that  it  could  be. 

Also,  Miller  v.  Winchell,  70  N.  Y.  437 ; 
Hand  v.  Kennedy,  83  N.  Y.  149  ;  S.  C. 
45  Superior  Ct.  385;  Pike  v.  Setter,  15 
Hun  (N.  Y.),  402 ;  Smith  v.  Truslow,  84 
N.  Y.  660 ;  Slauson  v.  Watkins,  86  N.  Y. 
597  ;  Bennett  v.  Bates,  94  N.  Y.  354 ; 
Todd  V.  Weber,  95  N.  Y.  181  ;  Ludington 
V.  Low,  21  J.  &  S.  (N.  Y.)  374 ;  Ross  v. 
Kennison,  38  Iowa,  396  ;  Scott  v.  Gill,  19 
Iowa,  187;  Thompson  i'.  Bertram,  14 
Iowa,  476  ;  Mansur  v.  Bartholomew  (Ind. 
1878),   19  Alb.  L.  J.  52;  Rodenbarger  v. 

666 


clier,  98  111.  293  ;  Thompson  v.  Dearborn, 
107  IlL  87  ;  Dean  v.  Walker,  107  111.  540; 
47  Am.  Rep.  467  ;  Daub  v.  Englebach,  109 
111.  267  ;  Corbett  v.  Waterman,  1 1  Iowa,  86, 
87  ;  Moses  z;.  Dallas  Dist.  Ct.  12  Iowa,  139  ; 
Lamb  v.  Tucker,  42  Iowa,  118;  Center  v. 
McQuesten,  24  Kaus.  480;  Comstock  v. 
Hitt,  37  111  542  ;  Twichell  v.  Mears,  8  Biss. 
211 ;  S.C.6  Rep.  40;  Hay  den  v.  Snow,  9 
Biss.  511;  Fitzgerald  v.  Barker,  70  Mo. 
685  ;  S.  C.  13  Mo.  App.  192;  85  lb.  13; 
Heim  v.  Vogel,  69  Mo.  529  ;  Cooper  v.  Foss, 
15  Neb.  515;  McDowell  v.  Laer,  35  Wis. 
171;  Bassett  v.  Hughes,  43  Wis.  319; 
FoUansbee  i>.  Johnson,  28  Minn.  311. 

1  Thorp  V.  Keokuk  Coal  Co.  48  N.  Y. 
253 ;  Lawrence  v.  Fox,  20  N.  Y.  268,  fol- 
lowed by  Campbell  v.  Smith,  8  Hun  (N. 
Y.),  6. 

-  Hand  v.  Kennedy,  83  N.  Y.  149,  150; 
S.  C.  45  Superior  Ct.  385;  Dean  v. 
Walker,  107  111.  540;  47  Am.  Rep.  467 ; 
Brewer  v.  Dyer,  7  Cush.  (Mass.)  337. 


PERSONAL   LIABILITY    OF    PURCHASER.  [§  759. 

In  order  to  recover  upon  this  theory,  it  is  essential  that  the 
plaintiff  shall  have  some  relation  to  or  interest  in  the  lands  at 
the  time  the  promise  was  made.  One  who  acquires  an  interest 
in  the  lands  after  the  making  of  such  promise  cannot  claim  that 
it  was  made  for  his  benefit.^  A  mere  stranger  cannot  intervene, 
and  claim  by  action  the  benefit  of  a  contract  between  the  parties 
to  the  deed.  To  entitle  a  third  person  to  claim  the  benefit  of  the 
agreement  of  the  parties,  there  must  be  either  a  new  considera- 
tion or  some  prior  right  or  claim  against  one  of  the  contracting 
parties,  by  which  he  has  a  legal  interest  in  the  performance  of  the 
agreement.^ 

The  agreement  of  the  purchaser  enures  in  equity  to  the  mort- 
gagee's benefit,  and  in  a  court  of  equity  the  purchaser  is  liable 
directly  to  him.  The  grantor  becomes  the  surety  of  the  pur- 
chaser, and  may  file  a  bill  against  him  and  the  mortgagee  to 
compel  the  purchaser  to  pay  the  debt  directly  to  the  mortgagee, 
or  at  least  so  much  of  it  as  might  be  left  after  exhausting  the 
mortgaged  premises.  The  purchaser  owes  the  money,  and  com- 
mon honesty  requires  that  he  should  pay  it  directly  to  the  cred- 
itor. When  the  parties  are  all  before  a  court  of  equity,  instead 
of  sending  the  money  from  the  purchaser  who  owes  it  to  his 
grantor,  and  perhaps  through  several  successive  grantors  back  to 
the  mortgagor  and  from  him  to  the  mortgagee,  the  last  purchaser 
who  has  assumed  the  mortgage  will  be  required  to  pay  it  directly 
to  the  person  ultimately  entitled  to  receive  it.^ 

But  if  the  second  or  other  subsequent  purchaser,  instead  of  di- 
rectly assuming  and  agreeing  to  pay  the  mortgage,  merely  agrees 
with  his  grantor  to  save  him  harmless  therefrom,  the  mortgagee 
lias  no  right  of  action  against  such  subsequent  purchaser.'* 

A  subsequent  assignee  of  the  mortgage  has  the  same  right  of 
action  against  purchasers  who  have  assumed  the  mortgage  that  the 
mortgagee  himself  had.^ 

759.  Under  this  rule  the  mortgagee  need  not  resort  to  a 

»  Miller  v.  Winchell,  70  N.  Y.  437.  3  Bissell  /•.  Bu|-bee  (U.  S.  C.  C.  Dist.  of 

-  Vrooman   v.  Turner,   69  N.  Y.  280;  Ind.  March,  1879),  8  Cent.  L.  J.  272;  First 

Cashman  v.  Henry,  75  N.  Y.  103  ;  S.  C.  Nat.  Hauk  v.  Schussler   (Ky.),  2   S.   W. 

19  Alb.   L.  J.  29;    55  How.  (N.  Y.)  I'r.  Rep.  14.5. 

234.  ■•  First  Nat.  Bank  i>.  Sehussler,  supra. 

The  courts  are  not  inclined  to  extend        '•  Smith   v.  Ostermeyer,  68   Ind.  432  ; 

the  doctrine  of  Lawrence  v.  Fox  to  cases  Ilayden   v.  Snow,  9    Hiss.   511;  14  Fed. 

not  clearly  within  the  principle  of  that  Kep.   70 ;  Fitzgerald   v.  Barker,  85    Mo. 

decision.     I'er  Allen,  J.,  in  Vrooman  v,  13. 

Turner,  supra. 

667 


§  760.]  A  purchaser's  rights  and  liabilities. 

foreclosure  suit  in  the  first  instance,  but  may  sne  the  grantee 
personally  on  his  undertaking  to  pay  the  debt ;  and  he  may  do 
this  even  when  the  mortgage  bond  provides  that  recourse  shall 
first  be  had  to  the  land,  and  then  only  to  the  obligor  for  the 
deficiency.^ 

In  the  case  of  Thorp  v.  Keokuk  Coal  Co.^  the  bonds  accompa- 
nying the  mortgage  contained  a  condition  that,  in  case  of  de- 
fault, recourse  must  first  be  had  to  the  kinds  mortgaged,  and  that 
the  obligors  would  only  be  3,nswerable  for  the  deficiency .^  The 
mortgage  had  not  been  foreclosed,  and  of  course  the  obligors  were 
not  liable  before  foreclosure ;  but  it  was  decided  that  the  grantee, 
having  made  the  agreement  for  a  sufficient  consideration  passing 
from  his  grantor,  was  liable  upon  that  to  the  mortgagee  abso- 
lutely, and  not  upon  the  condition  contained  in  the  bonds  that 
resort  should  first  be  had  to  the  land  by  foreclosure  of  the  mort- 
gage. "It  matters  not,"  said  Mr.  Commissioner  Earl,  "that  the 
mortgagor  was  not  liable  to  pay  personally  until  after  foreclosure, 
and  that  he  was  then  liable  only  for  the  deficiency.  It  would 
have  made  no  difference  if  he  had  not  been  liable  at  all,  the  de- 
fendant having  promised,  upon  a  sufficient  consideration,  to  pay 
the  debt.  This  suit  is  not  primarily  upon  the  bond  and  mortgage, 
but  upon  the  promise  of  the  defendant  to  pay  it ;  and  this  promise 
binds  the  defendant  to  pay  the  mortgage  debt  as  it  falls  due, 
according  to  the  terms  of  the  bond  and  mortgage.  It  was  not  a 
conditional  or  contingent  promise,  and  could  not  be  discharged  by' 
payment  only  of  a  portion  of  the  debt." 

760.  Under  this  rule  it  is  still  necessary,  according  to  the 
New  York  cases,  that  the  grantor  should  be  personally  liable 
upon  the  mortgage  which  his  grantee  has  assumed  the  payment 
of,  in  order  to  render  the  grantee  liable  upon  his  covenant  to  the 
holder  of  the  mortgage  assumed  ;  thus  such  a  covenant  made  by 
one  to  whom  the  premises  are  conveyed,  after  several  conveyances 
have  intervened  since  the  conveyance  by  the  mortgagor,  cannot 
be  enforced  by  the  holder  of  the  mortgage,  unless  the  grantor  in 
whose  deed  the  payment  was  assumed  had  himself  assumed  the 
payment  of  the  mortgage  debt,  or  made  himself  personally  liable 

1  Thorp  V.  Keokuk  Coal  Co.  48  N.  Y.  ject  to  a  certain  mortgage,  etc.,  the  pay- 
253 ;  S.  C.  Al  Barb.  439.  See  King  v.  ment  of  which  said  mortgage,  etc.,  is  here- 
Whitely,  10  Paige,  465;  S.  C.  Hoff.  477.  by  assumed  by  the   party  of  the  secomi 

2  48  N.  Y.  253.     The  clause  in  the  deed  part  hereto." 
was :  "  This  conveyance  being  made  sub- 

668 


PERSONAL   LIABILITY    OF   PURCHASER. 


[§  760. 


for  it  in  some  way.^  Therefore  a  grantee  who  has  assumed  to  pay 
a  mortgage  as  part  of  the  consideration  of  his  purchase  is  not  lia- 
ble for  a  deficiency  arising  upon  a  foreclosure  and  sale,  in  case  his 
grantor  was  not  personally  liable,  legally  or  equitably,  for  the 
payment  of  it.- 

But  in  Pennsylvania  and  Illinois  it  is  held  that  the  purchaser  is 
liable  upon  his  assumption  of  a  mortgage,  although  the  agreement 
to  assume  be  in  a  deed  from  a  grantor  who  was  under  no  personal 
liability  to  pay  the  mortgage.  The  purchaser's  agreement  cannot 
be  said  to  be  without  consideration,  inasmuch  as  the  price  of  the 
land  is  the  consideration.  "  A  vendor  may  direct  how  the  pur- 
chase money  shall  be  paid.  He  may  reserve  it  to  himself,  donate 
it  to  a  public  charity,  or  may  make  such  other  disposition  of  it  as 
may  best  meet  his  views;  and  if  his  vendee  agrees  to  pay  it  ac- 
cording to  such  directions,  he  cannot  set  up  as  a  defence  that  his 
vendor  was  under  no  duty  to  apply  it  in  such  manner."  ^ 


1  Vrooman  v.  Turner,  69  N.  Y.  280, 
reversing  S.  C.  8  Hun  (N.  Y.),  78.  The 
decision  in  Real  Estate  Trust  Co.  v.  Balch, 
45  N.  Y.  Superior  Ct.  528,  was  made  upon 
the  authority  of  the  decision  of  Vrooman 
V.  Turner,  in  the  Supreme  Court,  and  is 
therefore  erroneous.  And  see  Johnson  v. 
Harder,  45  Iowa,  677. 

-  Vrooman  v.  Turner,  69  N.  Y.  280, 
285,  per  Allen,  J.  :  "Judges  have  differed 
as  to  the  principle  upon  which  Lawrence 
V.  Fox  and  kindred  cases  rest;  but  in  every 
case  in  which  an  action  has  been  sustained 
there  has  been  a  debt  or  duty  owing  by 
the  promisee  to  the  party  claiming  to  sue 
upon  the  jiromise.  Whetiier  the  decisions 
rest  upon  the  doctrine  of  agency,  the  prom- 
isee being  regarded  as  the  agent  for  the 
third  party,  who,  by  bringing  his  action, 
adopts  his  acts,  or  upon  tlie  doctrine  of  a 
trust,  the  promisor  being  regarded  as  hav- 
ing received  money  or  other  thing  for  the 
third  party,  is  not  material.  In  either  case 
there  must  be  a  legal  right  founded  upon 
some  obligation  of  the  promisee,  in  the 
third  jjurty,  to  adopt  and  claim  the  prom- 
i.HC  as  made  for  his  benefit." 

Collating  and  comparing  other  similar 
cases  supporting  the  doctrine  of  Lawrence 
y.  Fox,  the  learned  judiiesHyH  :  "In  Hurry, 
liecrs,  and  Thorp  c.  Keokuk  Coal  Co.,  the 


grantor  of  the  defendant  was  personally 
liable  to  pay  the  mortgage  to  the  plaintiff, 
and  the  cases  were  therefore  clearly  within 
the  principle  of  Lawrence  v.  Fox,  Halscy  v. 
Reed,  and  Curtis  v.  Tyler,  supra.  See, 
also,  per  Bos  worth,  J.,  Doolittle  v.  Nay- 
lor,  2  Bosw.  206,  225,  and  Ford  v.  David, 
1  Bosw.  569.  It  is  claimed  that  King  v. 
Whitely  aud  the  cases  following  it  were 
overruled  by  Lawrence  v.  Fox.  But  it  is 
very  clear  that  it  was  not  the  intention  to 
overrule  them,  and  that  the  cases  are  not 
inconsistent.  The  doctrine  of  Lawrence 
V.  Fox,  although  not  questioned  and  criti- 
cised, was  not  first  adopted  in  this  state  by 
the  decision  of  that  case.  It  was  expressly 
adjudged  as  early  as  1825,  iu  Farley  v. 
Cleveland,  4  Cow.  432,  affirmed  in  the 
court  for  the  correction  of  errors  in  1827, 
per  lotam  curiam,  and  reported  in  9  Cow. 
6.39.  The  Chancellor  was  not  ignorant  of 
these  decisions  when  he  decided  King  v 
Whitely,  nor  was  Judge  Denio  and  his 
associates  unaware  of  them  when  Trotter 
V.  Hughes  was  decided;  and  Judge  Cray, 
in  Lawrence  v.  Fox,  says  the  case  of  Far- 
ley V.  Cleveland  had  never  been  doubted." 
■1  Merriman  v.  Moore,  90  Pa.  St.  78,  81  ; 
Dean  v.  Walker,  107  111.  541;  47  Am. 
Ucp.  467. 

669 


§§  761,  T61  a.]     A  purchaser's  rights  and  liabilities. 

761.  The  promise  must  be  express.  —  The  doctrine  that  a 
promise  by  one  peison  made  to  another  for  the  benefit  of  a  third 
may  be  enforced  by  the  latter,  although  he  was  not  privy  to  the 
transaction,  must  be  limited,  it  would  seem,  to  cases  in  which  the 
promise  is  exprcsdy  stated  to  be  for  his  benefit,  or  in  which  he 
has  received  money  or  property  out  of  which  to  pay  the  obliga- 
tion assumed  ;  ^  for  it  has  been  held  that  an  agreement  by  one 
partner  with  another  to  pay  the  debts  of  the  firm  cannot  be  en- 
forced by  a  firm  creditor ;  because  the  agreement  was  not  for 
their  benefit,  but  to  exonerate  the  partner  from  his  liability .^ 

761  a.  That  the  mortgagee  may  directly  enforce  a  pur- 
chaser's agreement  to  pay  the  mortgage  is  really  a  doctrine 
in  equity  and  not  at  law.  In  several  states,  including  those  in 
which  the  broad  doctrine  above  stated  is  declared,  under  their 
codes  of  procedure,  the  plaintiff  in  any  action  is  entitled  to  what- 
ever relief  either  law  or  equity  would  have  afforded  him  on  the 
case  presented,  before  the  distinction  between  them  in  practice 
was  abolished.^  The  two  systems  are  blended  together ;  and 
either  legal  or  equitable  rights  are  enforced  as  occasion  may  de- 
mand. In  such  states,  when  the  holder  of  the  mortgage  is  allowed 
to  enforce  a  purchaser's  agreement  of  assumption,  the  remedy  is 
really  given  upon  the  equity  side  of  the  court.* 

While  it  is  true  that  there  are  some  decisions  to  the  effect  that 
a  mortgagee  may  at  law  directly  enforce  a  purchaser's  agreement 
with  the  mortgagor  to  pay  the  mortgage  debt,''  yet  the  general  rule 
remains  unchanged  that  at  law  a  promise  by  a  third  person  to  pay 
the  debt  of  another  cannot  be  enforced  directly  by  the  creditor. 
The  promise  is  primarily  for  the  benefit  of  the  original  debtor,  and 
to  relieve  him  from  liability  for  it ;  there  being  no  novation,  he 
has  a  right  of  action  against  the  promisor  for  his  own  indemnity ; 
and  he  alone  has  such  right  of  action.  If  the  original  creditor 
can  sue  also,  the  promisor  would  be  liable  to  two  separate  actions, 
and  therefore  the  rule  is  that  the  orig-inal  creditor  cannot  sue. 
This  rule  was  affirmed  in  a  late  case  before  the  Supreme  Court  of 
the  United  States.*^     There  are  other  exceptions  to  the  rule  that 

1  Patton  ?;.  Adkins,  42  Ark.  197.  98    U.    S.    123;  S.  C.  8  Cent.  L.  J.  71. 

-  Merrill  v.  Green,  55  N.  Y.  270.  Mr.  Justice  Strong,  delivering  the  opinion 

^  §  1318.  of  the  court,  said :  "  We  do  not   propose 

*  Miller  v.  Billingsly,  41  Ind.  489.  to  enter  at  large  upon  a  consideration  of 

^  §762;  Burr  t\  Beers,  24  N.  Y.  178;  the  inquiry  how  far  privity  of  contract  be- 

Thompson  i-.  Thompson,  4  Ohio  St.  333.  tvveen  a  plaintiff  and  defendant   is  neces- 

^  Second  Nat.  Bank  v.  Grand  Lodge,  sary  to  the  maintenance  of  an   action  of 

670 


PERSONAL   LIABILITY   OF   PURCHASER. 


[§  761  a. 


privity  of  contract  is  necessary  ;  but  such  a  case  as  that  here  con- 
sidered does  not  come  within  any  of  them.  The  original  creditor 
cannot  sue  at  law  upon  an  undertaking  of  a  third  person  to  pay 
an  existinof  debt.^ 


assumpsit.  The  subject  has  beau  much 
debated,  and  the  decisions  are  not  all 
reconcilable.  No  doubt  the  general  rule  is 
that  such  privity  must  exist.  But  there 
are  confessedly  many  exceptions  to  it. 
One  of  them,  and  by  far  the  most  frequent 
one,  is  the  case  where,  under  a  contract 
between  two  persons,  assets  have  come  to 
the  promisor's  hands  or  under  his  control 
which  in  equity  belong  to  a  third  person. 
In  such  a  case  it  is  held  that  the  third  per- 
son may  sue  in  his  own  name.  But  then 
the  suit  is  founded  rather  on  the  implied 
undertaking  the  law  raises  from  the  pos- 
session of  the  assets  than  on  the  express 
promise.  Another  exception  is  where  the 
plaintiff  is  the  beneficiary  solely  interested 
in  the  promise,  as  where  one  person  con- 
tracts with  another  to  pay  money  or  de- 
liver some  valuable  thing  to  a  third." 
Also,  to  like  eftt;ct,  Bissell  v.  Bugbee  (U. 
S.  C.  C.  Dist.  Ind.),  8  Cent.  L.  J.  272,  per 
Gresham,  J. ;  United  States  Mortgage  Co. 
V.  Hill  (C.  C.  D.  Mass.  1879)  ;  Mellen  v. 
Whipple,  1  Gray  (Mass.),  317  ;  Exchange 
Bank  r.  Rice,  107  Mass.  37;  Prentice  r. 
Brimhall,  123  Mass.  291  ;  Locke  v.  Ho- 
mer, 131  Mass.  93;  Coffin  v.  Adams,  131 
Mass.  133  ;  Gautzert  v.  Hoge,  73  111.  30. 

*  The  same  question  was  before  the  Su- 
preme Court  in  Massachusetts,  in  Mel- 
len V.  Whipple,  supra,  where  it  was  held 
that  no  action  at  law  by  the  mortgagee 
lies  upon  the  promise  of  a  purchaser  to 
assume  and  pay  the  mortgage.  Mr.  Jus- 
tice Metcalf  said  :  "  The  counsel  for  the 
jjlaintiff,  in  his  brief,  puts  the  case  upon 
this  ground:  'On  a  promise  not  under 
seal,  made  by  A.  to  B.,  for  a  good  consid- 
eration, to  pay  B.'s  debt  to  C,  C.  may  sue 
A.'  Lord  Holt,  in  Yard  v.  Kland,  I  Ld. 
Kaym.  .'50H,  and  Buller,  J.,  in  Marcliington 
V.  Vernon,  1  Bos.  &  Pul.  101,  note,  used 
nearly  the  same  language  ;  and  it  lias  been 
transferred  into  variou.s  text-books,  ns  if 
it  were  a  general  rule  of  law.  But  it  is 
DO  more  true,  as  a  general  rule,  than  an- 
other maxim,  often  found    in    the  books, 


to  wit,  that  a  moral  obligation  is  a  suffi- 
cient consideration  to  support  an  express 
promise.  Both  maxims  require  great  mod- 
ification ;  because  each  expresses  rather 
an  exception  to  a  general  rule  than  the 
rule  itself.  .  .  .  That  general  rule  is  and 
always  has  been,  that  a  plaintiff  in  an  ac- 
tion on  a  simple  contract  must  be  the 
person  from  whom  the  consideration  of 
the  contract  actually  moved,  and  that  a 
stranger  to  the  consideration  cannot  sue 
on  the  contract.  The  rule  is  sometimes 
thus  expressed  :  There  must  be  a  privity 
of  contract  between  the  plaintiff  and  de- 
fendant, in  order  to  render  the  defendant 
liable  to  an  action  by  the  plaintiff  on  the 
contract."  Tlie  learned  judge  then  exam- 
ines three  classes  of  cases  which  are  excep- 
tions to  this  rule ;  but  the  case  under  con- 
sideration did  not  come  in  either  class. 

The  same  rule  is  recognized  in  the  re- 
cent Massachusetts  cases  of  Pettee  v.  Pep- 
pard,  120  Mass.  522;  Exchange  Bank  v. 
nice,  supra ;  Prentice  v.  Brimhall,  sujva. 
In  New  Jersey :  Crowell  v.  Hospital  of  St. 
Barnabas,  27  N.  J.  Eq.  650.  In  Califor- 
nia: Biddel  v.  Brizzolara,  64  Cal.  354; 
McLaren  v.  Hutchinson,  18  Cal.  80. 

It  is  a  general  principle  that  when  one 
person,  for  a  valuable  consideration,  en- 
gages with  another  by  simple  contract  to 
do  some  act  for  the  benefit  of  a  third,  the 
latter,  who  would  enjoy  the  benefit  of  the 
act,  may  maintain  an  action  for  tiie  breach 
of  such  engagement.  It  does  not  rest 
upon  the  ground  of  any  actual  or  supposed 
relationship  between  the  parties,  or  upon 
any  implied  agency,  but  upon  the  broad 
basis  that  the  law,  operating  upon  the  act 
of  the  parties,  creates  the  duty,  establishes 
the  privity,  and  implies  tiie  j)romiso  and 
obligation,  on  which  the  action  is  founded. 
Per  Bigelow,  J.,  in  Brewer  v.  Dyer,  7 
Gush.  (.Mass.)  337;  and  sec  Carnegie  r. 
Morrison,  2  Met.  (Mass.)  381,  per  Shaw, 
C.  J. ;  Bohanan  v.  Pope,  42  Me.  93  ;  Mot- 
ley V.  Manuf.  Ins.  Co.  29  Met.  337. 

671 


761  a.]         A  purchaser's  rights  and  liabilities. 


In  a  recent  case  in  New  Jersey^  the  ordinary  chancery  doc- 
trine, that  the  covenant  of  a  purchaser  who  assumes  the  payment 
of  an  existing  mortgage  is  a  collateral  security  obtained  by  the 
mortgagor,  whicli  enures  by  way  of  equitable  subrogation  to  the 
benefit  of  the  mortgagee,  is  asserted.  It  is  declared  that  the 
mortgagee's  right  does  not  rest  on  the  theory  of  a  contract  be- 
tween him  and  the  purchaser;  that  no  action  at  law  can  be  main- 
tained to  assert  this  right :  but  that  the  remedy  is  purely  equi- 
table.2     This  is  the  doctrine  also  adopted  in  Calif ornia.^ 


1  Crowell  V.  Currier,  27  N.  J.  Eq.  152  ; 
Crovvell  v.  Hospital  of  St.  Barnabas,  27 
N.  J.  Eq.  650. 

2  Klapworth  v.  Dressier,  13  N.  J.  Eq. 
62. 

lleferring-  to  the  case  of  Burr  v.  Beers, 
24  N.  Y.  178,  where  it  was  held  that  a 
mortgagee  may  maintain  an  action  at 
law,  before  foreclosure,  on  such  covenant, 
upon  the  broad  principle  that  a  promise 
by  one  person  to  another,  for  the  benefit 
of  a  third,  may  be  enforced  directly  by  the 
latter,  Vice-Chaucellor  Van  Fleet  said: 
"  This  jjrinciple,  in  its  application  to  sim- 
ple contracts,  has  given  rise  to  a  great 
contrariety  of  judicial  opinion.  So  far 
as  it  applies  to  simple  contracts,  it  must 
be  regarded  as  settled  in  this  state  for 
the  present.  Joslin  v.  N.  J.  Car  Spring 
Co.  36  N.  J.  L.  146.  But  it  has  never 
been  understood  to  apply  to  contracts 
under  seaL  And  Burr  v.  Beers  is,  so 
far  as  I  know,  the  first  attempt  in  that 
direction.  The  rule  that  an  action  at  law 
for  breach  of  a  contract  under  seal  can 
only  be  brought  in  the  name  of  a  party 
to  the  instrument,  and  that  a  third  per- 
son, who  is  not  a  party  to  it,  cannot  sue 
on  it,  though  it  appears  to  have  been 
made  expres.sly  for  his  advantage,  is  so 
ancient,  and  has  been  so  generally  ad- 
hered to,  that  it  must  be  regarded  as  ax- 
iomatic, and  beyond  the  power  of  the 
courts  to  alter  or  destroy.  1  Chitty  on 
Contr.  (11th  Am.  ed.j  77  ;  Johnson  v. 
Foster,  12  Met.  (Mass.)  167;  Mellen  v. 
Whipple,  1  Gray  (Mass.),  317;  Millard 
V.    Baldwin,    3    Gray    (Mass.),    484,    486. 


The  legal  nature  of  contracts  of  assump- 
tion,   when    expressed    in    deeds,    is   no 
longer  open  to  dispute  in  this  state.    They 
have  been  declared  to  be  valid  covenants, 
for  breach  of  which  an  action  of  covenant 
may  be  maintained.     Finley  v.  Simpson, 
22  N.  J.  L.  311.     So  completely  is  the  as- 
sumption of  the  purchaser  regarded  as  a 
contract  with  the  grantor  alone,  that  un- 
less   the  grantor   is    personally  liable  for 
the  mortgage  debt,  the  promise  of  the  pur- 
chaser is  held  to  be  a  nudum  pactum,  and  of 
course  without  efficacy  in  favor  of  either 
grantor  or  mortgagee.     King  v.  Whitely, 
10   Paige,   465;    Trotter    v.   Hughes,    12 
N.  Y.    74.     It  would   seem   to   be  clear, 
then,   that   in   ordinary   cases   the   mort- 
gagee does  not,  by  force  of  the  contract, 
acquire  a  right  of  action  against  the  pur- 
chaser,  but   the   benefit    flowing  to   him 
from  the  contract  is  limited  to  a  right  to 
be  subrogated  to  the  rights  of  his  debtor. 
He  stands  in  his  debtor's  rights,  and  may 
appropriate    to    the    satisfaction    of    his 
mortgage     any     security     held     by    his 
debtor,  for    its    payment;  he   can,   there- 
fore,   only    have    a     personal    judginent 
against  the  purchaser  for  his  debt,  when 
the  mortgagor  holds  an  obligation  which 
will  support  such  judgment.     His  right  is 
simply  the  right  of  substitution,  permit- 
ting a  new  creditor  to  take  the  place  of 
an  old  one,  and  allowing  the  new  to  suc- 
ceed to  the  rights  of  the  old  one.     The 
adoption  of  the  other  view  would  lead  to 
the  establishment   of  this  anomalous  and 
unjust  principle,  that  a  person  shall  have 
a  right  of  action  on  a  contract  to  which 


672 


8  Biddel  r.  Brizzolara,  64  Cal.  3.54. 


PERSONAL   LIABILITY    OF   PURCHASER.  [§  761  h. 

In  Michigan  also  it  is  held  that  the  mortgagee  cannot  enforce 
a  promise  to  pay  the  mortgage  made  to  the  mortgagor  by  the 
latter's  grantee,  because  the  promise  is  not  made  to  the  mort- 
gagee, but  to  a  third  person  ;  but  nevertheless  the  purchaser  who 
has  promised  to  pay  the  mortgage  may  be  joined  as  a  party  de- 
fendant in  an  equitable  suit  to  foreclose  the  mortgage,  and  a 
decree  may  be  obtained  against  him  for  any  deficiency  that  may 
exist  after  the  land  is  sold.  But  this  is  only  by  way  of  enforcing 
an  equity  by  subrogation.^ 

761  h.  The  mortgagee  has  no  right,  without  the  consent  of 
the  mortgagor,  to  maintain  an  action  in  his  name  upon  the 
agreement  of  a  grantee  of  the  mortgagor  in  a  deed  poll  to  assume 
and  pay  the  mortgage  debt.^  It  has  already  been  noticed  that 
an  action  at  law  upon  such  an  agreement  can  be  brought  only 
in  the  name  of  the  mortgagor.  The  agreement  is  with  him,  and 
a  third  person  can  obtain  the  exclusive  right  to  the  control  of 
an  action  at  law  only  where  he  has  acquired  the  whole  interest 
of  the  nominal  plaintiff,  either  by  his  voluntary  act  or  by  opera- 
tion of  law.  But  in  the  case  of  a  transaction  such  as  is  now 
under  consideration  the  "  mortgagee  has  not  acquired  the  entire 
interest  of  the  grantor  in  the  promise  of  the  grantee  to  the 
grantor,  or  in  the  right  of  action  under  that  promise.  The  grantor 
has  a  direct  interest  in  that  promise,  because,  if  it  is  broken  by 
the  neglect  of  the  grantee  to  pay  the  mortgage  debt  at  maturity, 
the  grantor  has  an  immediate  right,  without  any  notice  to  or  in- 
terposition of  the  mortgagee,  to  sue  the  grantee  at  law  upon  his 
promise,  and  to  recover  the  amount  of  the  mortgage  debt  remain- 
ing unpaid.  He  has  a  direct  interest  in  the  action,  in  the  amount 
to  be  recovered,  and  in  the  control  of  the  litigation,  because  he  is 
himself  liable  to  pay  the  mortgage  debt  to  the  mortgagee  ;  and 
if  the  amount  recovered  by  judgment,  and  collected  on  execu- 
tion, in  this  action  shall  be  less  than  the  amount  of  the  mortgage 
debt,  and  the  amount  so  collected  shall  be  paid  to  the  mortgagee, 
he  will  still  remain  liable  to  the  latter  for  the  rest  of  the  mort- 
gage debt."''     It  was  accordingly  held  that  a  mortgagor  who  has 

he  is  not  a  party,  but  a  stranger;  which  ^  Booth  v.  Conn.  Mut.  Life  Ins.  Co.  43 

wa.s  not  made  for  liis  benefit,  for  wiiich  he  Mich.  290  ;  IIi{,Mnan  v.  Stewnrt,  38  Mich. 

>,'ave   no  consideration,  and   wiiich  never  513;  IIicl<s   v.   Mc(Jarry,   38   Midi.    C67 ; 

influenced  hi.s  conduct  in  tlic  nliglitest  do-  Ungcr  v.  Sinitii,  44  Mich.   22  ;  Stuart  v. 

gree."     See   §   760;  Wri^^ht  v.   Storrs,  6  Wordcn,  42  Mich.  l.'J4. 

IJosw.   (X.  V.)   600,  611;  Mount  v.  Van  -  Coflin  i-.  Adams,  131  Mass.  133. 

.Ness,  33  N.  J.  Eq.  202,  26.').  •'  Coffin  v.  Adam."*,  .si(/)r</,  |.«r(;ra_v,  C.  .1. 

vol..  I.                         43  673 


§  762.] 


A  purchaser's  rights  and  liabilities. 


without  consideration  consented  that  the  mortgagee  might  bring 
an  action  at  law  in  his  name  against  one  who  had  assumed  in  a 
deed  poll  to  pay  the  mortgage,  might  withdraw  his  consent,  and 
have  the  action  dismissed  on  payment  of  costs  to  the  mortgagee 
to  the  time  of  such  withdrawal. 

762.  Contrary  to  the  general  rule,  a  mortgagee  has  been 
allowed  to  recover  in  a  suit  at  law  against  the  purchaser, 
upon  the  ground  that  the  transaction  amounts  to  a  novation.^ 
Thus,  in  a  recent  case  in  Rhode  Island,  it  was  held  that  the  pur- 
chaser by  assuming  the  mortgage  was  substituted  as  the  debtor 
to  the  mortgagee,  in  lieu  of  the  mortgagor,  and  that  the  mort- 
gagee completed  the  novation  when  he  assented  to  it  by  bringing 
suit  upon  the  undertaking;  and  consequently  that  he  could  re- 
cover of  the  purchaser  in  an  action  of  assumpsit.  The  promise  of 
the  purchaser  was  regarded  as  made  to  the  mortgagee  through 
the  medium  of  the  mortgagor  or  grantor,  acting  as  the  mort- 
gagee's agent,  so  that,  when  he  was  informed  of  it,  he  could  rat- 
ify and  adopt  it ;  and  he  was  regarded  as  having  ratified  it  by 
bringing  suit  as  effectually  as  if  he  had  stood  by  at  the  time  of 
the  transaction  and  assented  to  it.^ 


In  regard  to  the  remedy  by  suit  in  equity 
Chief  Justice  Gray,  in  this  case,  remarked  : 
"There  are  indeed  authorities  which  sus- 
tain the  right  of  the  mortgagee,  upon  a 
bill  in  equity  for  foreclosure  to  which  the 
mortgagor  and  his  grantee  are  both  made 
parties  defendant,  to  obtain  the  benefit  of 
the  liability  of  the  latter  on  his  promise  to 
the  grantor.  But  the  ground  upon  which 
those  cases  proceed  is  that  in  equity  the 
mortgagee,  as  against  his  mortgagor,  has 
the  right  to  the  benefit  of  any  collateral 
security  held  by  the  latter  for  the  pay- 
ment of  his  debt  to  the  mortgagee ;  and 
that  a  court  of  equity,  having  the  mort- 
gagee, the  mortgagor,  and  the  grantee  be- 
fore it,  can  adjust  in  one  suit  all  the 
rights  of  the  parties.  However  that  may 
be,  they  give  no  countenance  to  the  theory 
that  the  mortgagee  has  the  exclusive  right, 
in  law  or  equity,  without  bringing  a  suit 
for  foreclosure,  to  maintain  an  action  at 
law  against  the  grantee  in  the  name  of 
the  mortgagor  without  his  consent,  or  that 
a  court  of  law,  when  both  the  mortgagor 
and  the  mortgagee  are  interested  in  the 

674 


cause  of  action,  can,  upon  summary  mo- 
tion and  without  regular  issues,  determine 
the  equities  between  them,  and  take  the 
control  of  the  action  out  of  the  hands  of 
the  plaintiff  of  record." 

1  See  §§  758-761. 

2  Urquhart  v.  Brayton,  12  R.  I.  169. 
Chief  Justice  Durfee,  delivering  the  opin- 
ion of  the  court,  said  :  "  This  is  equivalent 
to  regarding  the  transaction  as  a  novation, 
or,  if  not,  we  think  it  may  be  so  regarded. 
The  case  stands  thus:  B.  is  indebted  to 
A. ;  B.  sells  land  to  C,  who  agrees,  instead 
of  paying  the  price  in  full,  to  assume  the 
debt,  or  to  become  A.'s  debtor  in  lieu  of 

B.  If  A.  were  present,  assenting,  the 
novation  would  be  consummated  on  the 
instant  ;  but  A.,  being  absent,  learns  of 
the  agreement  afterward,  and  assents  to 
it  by  bringing  his  action.  "Why  may  we 
not  hold  the  novation  consummated  by 
the  assent  so  given  as  effectually  as  if 
given  on  the  instant?  If  it  be  said  that 
in  order  to  create  a  priority  between  A.  and 

C.  the  assent  must  be  mutual,  the  answer 
is  that  C.  had  already  assented,  and  there 


PERSONAL   LIABILITY   OF   PURCHASER.  [§  763. 

By  a  recent  statute  in  Connecticut  it  is  provided  that  whenever 
any  real  estate  incumbered  by  mortgage  or  lien  shall  be  hereafter 
conveyed,  subject  to  such  mortgage  or  lien,  and  in  such  convey- 
ance there  shall  be  a  provision  that  the  grantee  shall  assume  and 
pay  such  incumbrance,  the  holder  of  such  mortgage  or  lien  may, 
upon  the  non-payment  of  the  same,  maintain  an  action  in  his  own 
name  upon  such  promise  without  obtaining  an  assignment  thereof 
from  the  grantor  of  said  premises.^ 

In  Pennsylvania,  also,  a  mortgagee  may  recover  in  assumpsit 
againt  a  purchaser  who  has  assumed  the  payment  of  the  mort- 
gage.2  His  right  to  recover  does  not  depend  upon  privity  of  con- 
tract, but  upon  the  rudimental  principle  that  one  may  sue  on  a 
promise  made  on  sufficient  consideration  for  his  use  and  benefit, 
though  it  be  made  to  another  and  not  to  himself.^ 

763.  Whether  the  grantor  can  deprive  the  mortgagee  of 
the  benefit  of  a  covenant  made  by  the  grantee  who  has  as- 
sumed the  payment  of  the  mortgage  will  in  large  measure  depend 
upon  the  ground  upon  which  the  mortgagee  is  allowed  to  take 
advantage  of  such  covenant.  On  the  one  hand,  if  this  covenant 
be  regarded  as  an  agreement  of  indemnity  against  the  mortgage 
debt,  which  the  mortgagee  may  avail  himself  of  by  way  of  equi- 
table subrogation,  the  grantor  and  his  purchaser  may  at  any  time 
before  the  filing  of  a  bill  to  foreclose  the  mortgage  extinguish 
the  liability,  as  between  themselves,  by  a  reconveyance  of  the 
property  ;  and  as  the  contract  of  indemnity  is  thus  put  an  end  to 
by  the  act  of  the  parties  to  it,  there  is  then  no  right  to  which  the 
mortgagee  can  be  subrogated.^ 

was  nothing  wanting  but  A.'s  assent  to  one  man's  placing  money  in  tlie  hands  of 
perfect  the  novation.  To  reach  such  a  another  for  the  use  of  a  third  person,  and 
conclusion  it  is  only  necessary  to  make  to  be  paid  to  him.  It  is  a  provision  for 
certain  presumptions,  which  arc  so  appro-  the  benefit  of  the  third  person,  and  which 
priate  to  the  nature  of  the  transaction  he  may  enforce.  And  in  tliis  case  the 
that  the  law  can  readily  allow  them.  We  deed  contains  the  condition,  and  the  pur- 
think  the  action  is  maintainable,  and  that  chaser,  by  acceptance,  promises  the  seller 
the  plaintiff  is  entitled  to  recover  of  the  that  he  will  make  the  pnynient."  Fol- 
defendant  the  amount  remaining  due  on  lowed  in  Mechanics'  Sav.  Bank  v.  Goff, 
the  mortgage  note."  13  R.  I.  510. 

Potter,  J.,  concurring,  said  :  "It  seems  >  Acts  1881,  eh.  97. 
to  roe,  while  concurring  in  the  result,  that  2  Merriman  v.  Moore,  'JO  I'a.  St.  78. 
it  is  not  nccetpary  to  resort  to  the  doc-  »  Iloffs  Appeal,  24  Pa.  St.  200;  Town- 
trine  of  novation  in  order  to  sustain  the  send  v.  Long,  77  Pa.  St.  143;  Justice  v. 
plaintiff's  suit.     The  authorities  cited  by  Tallman,  8G  Pa.  St.  147. 
the  plaintiff's  counsel   amply  sustain  his  *  Crowell  v.  Hosjiital  of  St.  HarnabaB, 
right  to  recover.     It  is  the  simple  case  of  27  N.  J.  Kfp  050,  per  Dcpuc,  J.     "  The 

675 

« 


§  763.]  A  purchaser's  rights  and  liabilities. 

A  grantee  who  has  assumed  the  payment  of  a  mortgage  termi- 
nates his  liabiHty  to  the  holder  of  the  mortgage  by  a  reconvey- 
ance of  the  premises  made  in  good  faith  to  his  .grantor,  who  in 
turn  assumes  the  mortgage.^ 

Eveji  a  voluntary  release  made  by  the  grantor  without  consid- 
eration, in  anticipation  of  the  filing  of  a  bill  for  foreclosure,  and 
for  the  express  purpose  of  releasing  the  grantee  from  liability  for 
a  deficiency,  will  not  for  that  reason  be  invalid  ;  though  it  would 
be  otherwise  if  the  grantor  has  become  insolvent,  and  the  effect 
of  the  release  would  be  to  hinder  or  defraud  creditors  by  depriv- 
ing them  of  the  means  which  the  debtor  had  in  his  hands  for  the 
payment  of  debts.^  "A  party  who  has  incurred  responsibility 
for  the  payment  of  a  mortgage  debt,  either  as  a  mortgagor  or 
by  a  subsequent  assumption  of  liability,  and  has  conveyed  the 
mortgaged  premises,  taking  a  covenant  from  his  grantee  for  the 
payment  of  the  mortgage  debt,  would  have  no  more  right,  in 
case  of  his  insolvency,  to  divest  himself,  by  a  voluntary  release  of 
the  covenant  of  indemnity  against  his  liability  for  the  mortgage 
debt,  to  the  prejudice  of  the  grantor  creditor,  than  he  would 
have  to  surrender,  without  consideration,  a  covenant  against  in- 
cumbrances or  a  promissory  note,  or  to  give  up  property  or  rights 
of  any  other  description  which  might  be  made  available  in  satis- 
faction of  debts.  But  this  disability  of  one  to  do  with  his  own 
as  he   pleases  arises    only  on    the  happening  of    insolvency,  and 

mortgagee  being  the  representative  of  and  only,  it  may  be  released  and  discharged 

standing  in  the  place  of  the  mortgagor,  by  him  as  the  only  person  interested  in 

to  enforce  the  rights  of  the  latter  against  it,  and  his  release,  as  a  general  rule,  will 

the  purchaser,  and  having  no  greater  or  operate   as    a    complete    extinguishment, 

other  equity  in  himself,  is  entitled  to  such  unless,  in  the  mean  time,  some  equitable 

remedy  only    as   the   mortgagor   himself  right  in  it  has  arisen  in  favor  of  a  third 

had  against  the  purchaser  when  the  bill  person."     Also  the  rule  in  Indiana :  Davis 

is  filed.     In  other  words,  being  a  stranger  v.    Calloway,    30    Ind.    112;     Durham    v. 

to   the  contract    of    the   purchaser   with  Bischof,  47   Ind.  211  ;  Carnahan  v.  Tou- 

the  mortgagor,  and  to   the  consideration  sey,  93   Ind.  561  ;  Berkshire  L.  Ins.  Co. 

whereon  it  was  founded,  it  will   be  com-  v.  Hutcbings,   100   Ind.   496  ;   Talburt  v. 

petent  for  those  who  were  parties  to  it  to  Berkshire  L.  Ins.  Co.  80  Ind.  434.     Qnare 

rescind  and  extinguish  it  at  their  jdeas-  raised  as  to  this  rule  in  Virginia,  76  Va. 

ure;  and  after  such  rescission  and  extin-  392. 

guishment  the   contract   becomes   utterly  i  Laing  r.  Byrne,  34  N.  J.  Eq.  52  ;  Cole 

incapable  of  enforcement."     Followed  in  v.  Cole  (N.  Y.),  17  N.  E.  Rep.  682,  aff'g 

Youngs   V.  Public  Schools,  31  N.  J.  Eq.  44  Hun,  624. 

290,  Depue,  J.,  saying  :  "  Where  a  collat-  -  Youngs   v.    Public    Schools,    supra  ; 

eral  obligation  is  given,  or  a  trust  is  ere-  Public  Schools  v.  Anderson,  30  N.  J.  Eq. 

ated,    merely   for   the    indemnity  of   the  366. 
surety,  and  for  his  protection  and  benefit 

676 


PERSONAL   LIABJLTTY    OF   PURCHASER. 


[§  763. 


wlien  creditors  are  thereby  hindered  or  deprived  of  the  means  of 
collecting  their  demands."  ^ 

But  in  states  where  the  covenant  of  the  purchaser  to  assume  an 
existing  mortgage  is  regarded  as  a  promise  for  the  benefit  of  the 
mortgagee,  the  promise  has  been  regarded  as  irrevocable.^  There 
is  a  dictum  to  this  effect  in  Giarnsey  v.  Rogers,^  in  which  case 
the  Court  of  Appeals  of  New  York  distinguished  between  a  cove- 
nant by  a  grantee  in  an  absolute  deed  to  assume  a  mortgage,  and 
one  made  by  a  subsequent  mortgagee  to  assume  a  prior  mortgage, 
holding  that  the  latter  does  not  thereby  make  himself  personally 
liable  for  such  debt  to  the  prior  mortgagee. 

It  has  been  suggested  in  some  cases  that  this  statement  is  sub- 
ject to  the  qualification,  that  the  assumption  of  the  mortgage  be- 
comes irrevocable  as  to  the  mortgagee  only  after  he  has  knowl- 
edge of  the  agreement,  and  has  by  his  acquiescence  and  acceptance 
made  himself  a  party  to  it.* 

This  doctrine  is  supported  by  the  decision  in  Simson  v.  Brown,^ 
in  the  Supreme  Court  of  New  York.     That  was  an  action  upon  a 

1  Per  Depiie,  J.,  in  Youugs  v.  Public  shows  that  the  agreement  was  for  liis 
Schools,  31  N.  J.  Eq.  290.  benefit  only,  and  prevents  its  enuring  to 

2  Douglass  V.  Wells,  18  Hun   (N.  Y),     the  benefit  of  any  third  party." 


88,  where  the  subject  is  fully  examined ; 
Hartley  v.  Harrison,  24  N.  Y.  170;  Camp- 
bell V.  Smith,  71  N.  Y.  26;  Hayden  v. 
Snow,  14  Fed.  Rep.  70 ;  Bassett  v.  Brad- 
ley, 48  Conn.  224;  Willard  v.  Worsham, 
76  Va.  392. 


See,  also,  a  dictum  to  the  same  effect  in 
Hartley  v.  Harrison,  supra. 

*  Whiting  V.  Gearty,  14  Hun  (N.  Y.), 
498  ;  Kelly  v.  Roberts,  40  N.  Y.  432  ;  Dur- 
ham V.  Bischof,  47  Ind.  211;  Jones  v. 
Higgins,  80  Ky.  409  ;  Carnahan  v.  Tousey, 


3  47  N.  Y.  233,  242.     Mr.  Justice  Ra-  93  Ind.  .561,  .566,  per  Elliott,  C.  J.;  Gil- 

pallo,  in  stating  the  grounds  of  thi.s  dis-  bert  v.  Sanderson,  56  Iowa,  349;  9  N.  W. 

tinction,    said:    "It    must   be   considered  Rep.  293 ;  41  Am.  Rep.  103. 
that,  where  such  an  assumption  is  made         "  6  Hun  (N.  Y.),  251.     It  may  be  re- 

on  an  absolute  conveyance  of  land,  it  is  un-  marked  of  this  case,  that  the  bond  was  in 

conditional  and  irrevocable.     The  grantor  form  an  obligation  to  pay  tiie  debt  to  the 

cannot    retract    his    conveyance,    or   the  holder  of  the  mortgage,  and  to  indemnify 

grantee  his  promise  or  undertaking;  but,  the   mortgagor  as  well.     The  mortgagor 

where  contained  in  a  mortgage,  the  con-  not  being  liable  for  the  debt,  his  release 

veyance   is   defeasible.     The   grantor   re-  did  not  harm  him,  and  was  a  satisfaction 

serves  the  right  to  annul  it  by  paying  his  of  his  interest  in  the  obligation;  but  the 

debt,  and  when   he  does  so  he  discharges  principal  obligor  was  directly  responsible 

the  agreement  to  pay  the  prior  mortgage,  to  the  holder  of  the  mortgage  aside  from 

The  reservation  of  this  right  is  inconsis-  the  bond,  and  the    bond  was  to  pay  the 

tent  with  the  idea  that  the  a.ssumj)tion  by  debt.      The  holder  of  tlie  mortgage  was 

the  grantee  was  for  tlie  benefit  of  the  prior  interested  in  compelling  ])ayment  of  the 

mortgagee  ;   for   if  it   were,   the  grantor  bond,  and,  not  having  liimHclf  released  the 

would    have    no   control    over   the   rights  parties  bound  by  it,  he  bad  a  right  to  main- 

tlius  acquired  by  a  third  party.     The  re-  tain   his  action  unimpaired  by  the  act  of 

servalion  of  this  control    by  the  grantor  the  mortgagor. 

G77 


§  764.]  A  purchaser's  rights,  and  liabilities. 

bond  given  to  a  mortgagor  conditioned  to  pay  to  the  holder  of  a 
mortgage  the  full  amount  of  it,  and  to  save  the  mortgagor  harm- 
less therefrom,  and  the  payment  was  guaranteed  by  another  per- 
son. The  mortgagor  was  not  personally  liable  for  the  payment 
of  the  mortgage  debt,  although  the  principal  in  the  bond  was  so 
liable  to  the  holder  of  the  mortgage.  The  mortgagor  wlio  took 
the  bond  afterwards  executed  and  delivered  to  the  principal  obli- 
gor in  the  bond  a  satisfaction  of  the  bond,  which,  however,  he  did 
not  deliver  up  or  cancel,  but  afterwards  assigned  to  the  holder  of 
the  mortgage.  In  a  suit  by  the  latter  against  the  guarantor  of 
the  bond,  it  was  held  that  he  was  entitled  to  recover;  that  the 
mortgagor  did  not  by  his  release  discharge  the  bond  as  against 
the  holder  of  the  mortgage. 

764.  The  result  of  the  latest  cases  upon  this  subject  is,  that 
where  the  conveyance  is  absolute  to  the  grantee  his  assumption  of 
an  existing  mortgage  creates  against  him  an  absolute  obligation 
for  its  payment,  and  that  a  release  of  this  obligation  cannot  be 
made  by  the  grantor  without  the  assent  of  the  mortgagee.  The 
acceptance  on  the  part  of  the  mortgagee  of  the  benefit  of  the  as- 
sumption is  a  legal  presumption,  in  the  absence  of  proof,  of  his 
actual  dissent.^ 

The  personal  liability  of  the  grantee  to  the  holder  of  the  mort- 
gage depends,  of  course,  upon  the  nature  of  the  dealing  in  which 
the  assumption  is  made,  and  is  subject  to  any  condition  or  de- 
feasance attached  to  such  assumption.^  It  may  be  qualified  or 
conti'oUed  not  only  as  between  the  parties,  but  also  as  to  the 
mortgagee,  by  a  contemporaneous  agreement  of  the  parties  exe- 
cuted on  a  separate  paper. ^  Moreover,  if  the  consideration  for 
the  assumption  wholly  or  in  part  fails,  or  there  is  a  good  defence 
to  it  as  between  the  parties,  it  would  seem  that  the  mortgagee 
could  have  no  fixed  right  to  enforce  the  grantee's  liability  ;  and 
that  a  release  of  the  grantee  by  the  grantor,  in  accordance  with  or 
to  the  extent  of  the  equities  between  them,  would  be  binding  upon 
the  mortgagee.* 

But  after  the  mortgagee  has  adopted  or  accepted  the  agreement 
of  the  purchaser  for  his  benefit,  he  is  brought  into  privity  with 

1  Bay  v.  Williams,  112  111.  91  ;  54  Am.  -  Garnsey  v.  Rogers,  47  N.  Y.  233;  Jiul- 

Rep.  209 ;  Douglass  v.  Wells,  18  Hun  (N.  son  v.  Dada,  79  N.  Y.  373. 

Y.),  88,  where  the  cases  are  cited.     Ste-  ^  Flagg  v.  Munger,  9  N.  Y.  483. 

phens  V.  Casbacker,  8  Hun,  116,  is  over-  *  Judson  v.  Dada,  supra. 
ruled. 

678 


PERSONAL   LIABILITY   OF  PURCHASER.  [§§  765,  766. 

him,  becomes  a  party  to  the  agreement,  is  entitled  to  insist  upon 
the  performance  of  it,  and  cannot  afterwards  be  deprived  of  his 
right  of  action  by  any  act  of  the  mortgagor  in  releasing  or  dis- 
charging the  purchaser.!  It  is  accordingly  held  that  the  mort- 
gagor cannot  release  the  purchaser  from  his  agreement  to  assume 
the  mortgage  after  the  mortgagee  has  brought  an  action  to  fore- 
close it,  and  has  asked  for  a  judgment  against  the  purchaser  for 
a  deficiency.^  Neither  can  the  grantor  release  the  grantee  from 
his  obligation  incurred  by  assuming  a  mortgage,  as  against  a  pur- 
chaser of  the  mortgage  who  may  have  relied  upon  the  contract  of 
assumption  as  it  appears  of  record.^ 

765.  Conveyance  on  condition  that  the  grantee  pay  a  mort- 
gage.—  A  conveyance  "subject  to"  certain  mortgages,  "to  be 
assumed  and  paid  by  the  grantee,  his  heirs  and  assigns,  the  same 
making  part  of  the  consideration,"  and  "  on  condition "  that 
the  grantor  and  his  representatives  shall  be  forever  indemnified 
and  saved  harmless  from  the  payment  of  them,  is  a  grant  on 
condition,  and  forfeited  by  a  breach  thereof,  and  is  not  in  the  na- 
ture of  a  mortgage  from  the  grantee  to  the  grantor,  with  a  right 
of  redemption  for  three  years  after  such  breach.  Such  condition 
is  not  extinguished  by  the  grantor's  taking  back  a  mortgage  for  a 
part  of  the  consideration  subject  to  the  mortgages  assumed,  with 
covenants  to  save  the  grantor  harmless  against  them,  and  his 
entry  upon  the  land  for  breach  of  the  condition  of  the  deed  is 
not  affected  by  an  assignment  of  the  mortgage  before  or  after 
such  entry.4  But  any  entry  in  such  case  made  for  the  purpose  of 
foreclosure  will  not  serve  as  an  entry  for  foreclosure  under  the 
condition  in  the  deed  until  some  further  notice  be  given  or  act 
done  for  that  purpose.'^ 

In  such  case  if  the  grantee  fails  to  perform  the  condition,  the 
grantor  is  not  confined  to  a  forfeiture  as  his  only  remedy,  but  he 
may  maintain  an  action  against  the  grantee  upon  his  implied 
promise  to  pay  the  mortgage,  and  recover  any  payments  he  has 
made.  The  grantor  may  enter  for  breach  of  the  condition,  but 
he  may  have  an  action  upon  the  promise  as  well.*' 

766.  Grantor's    agreement    to    discharge    a    mortgage.  — 

1  Baasett  r.  Hughes,  4.3  Wis.  ,319.     See  Fed.  Kop.    782,  789;   and  see  Basse tt    v. 

Carnahan  v.  Tousey,  9,3  Ind.  5C1.  Bradluy,  48  Conn.  'J24. 

■^  Whiting  f.  fiearty,  14   Hun   (X.  Y.),  ••   Maneociv  r.  Carlton,  0   (iray   {l\1a.ss.), 

498;  and  see  Durham  v.   Hischof,  47  Ind.  :i'J. 

211.  "^  Stone  v.  Kiiis,  9  Cush.  (Mass.)  95. 

3  Hayden  v.  Drury  (C.  C.  111.  1880),  .3  «  Tike  i;.  Brown,  7  Cu»h.  (Mass.)  133. 

679 


§  767.]  A  purchaser's  rights  and  liabilities. 

Where  a  grantor  of  land,  subject  to  a  second  mortgage,  gives 
the  purchaser  a  bond  conditioned  to  save  him  harmlesss  from  it, 
and  to  cause  it  to  be  assigned  to  him  within  six  months,  a  failure 
to  do  this  entitles  the  purchaser,  even  after  the  foreclosure  of  the 
first  mortgage,  to  recover  damages  to  the  amount  of  the  difference 
between  the  value  of  the  estate  and  the  amount  due  on  the  first 
mortgage,  if  the  value  of  the  property  is  less  than  the  amount  of 
the  two  mortgages.^  But  if  a  grantor,  upon  the  sale  of  a  small 
portion  of  premises  covered  by  a  mortgage,  covenants  to  pay  the 
mortgage  when  due,  and  the  rest  of  the  land  is  worth  more  than 
the  amount  of  the  debt,  and  is  in  equity  first  liable  for  it,  the 
grantee,  upon  a  failure  to  pay  the  mortgage  when  due,  and  before 
the  mortgage  is  foreclosed,  can  recover  upon  such  covenant  only 
nominal  damages.^  If  the  grantor  has  covenanted  to  pay  off  a 
mortgage,  he  cannot,  by  allowing  the  mortgage  to  be  foreclosed 
and  then  redeeming  it,  take  and  hold  title  in  himself  as  against 
his  grantee.^ 

The  general  covenants  in  a  grantor's  deed  bind  him  to  dis- 
charge an  existing  mortgage,  unless  there  be  some  provision  to 
the  contrary.  In  equity  this  covenant  may  be  released  without 
a  technical  release,  by  matters  m  pais  ;  as,  for  instance,  by  a  sub- 
sequent transaction  between  the  parties  in  which  the  purchaser 
agrees  to  assume  and  pay  this  mortgage.* 

767.  When  a  purchaser  is  entitled  to  a  release.  —  A  pur- 
chaser of  a  portion  of  the  premises  covered  by  a  mortgage  duly 
recorded  is  not  entitled  to  a  release  of  that  portion  by  reason  that 
he  has  given  to  the  mortgagor  his  promissory  note  for  the  whole 
value  of  that  portion,  and  the  mortgagor  has  transferred  the  note 
to  the  mortgage  creditor  to  be  applied  in  reduction  of  the  mort- 
gage debt.  Neither  does  the  payment  of  such  note  give  him  this 
right,  unless  the  holder  of  the  mortgage  has  agreed  to  release.^ 
The  mortgage  covers  the  whole  property,  and  secures  the  whole 
debt ;  and  the  holder  of  it,  aside  from  any  agreement,  is  under 
no  obligation  to  release  any  part  of  the  property  upon  payment 
of  a  part  of  the  debt. 

An  agreement  to  make  releases  of  portions  of  the  mortgaged 
premises  is  personal  to  the  mortgagor,  unless  his  grantees  or  others 

1  Coombs  V.  Jenkins,  16  Gray  (Mass.),  *  Drury  v.  Treraont  Improvement  Co. 
153.  13  Allen  (Mass.),  168. 

2  Wilcox  V.  Musche,  39  Mich.  101.  ^  Colby  v.  Cato,  47  Ala.  247. 
*  Huxley  v.  Rice,  40  Mich.  73. 

680 


PERSONAL   LIABILITY   OF   PURCHASER.  [§  768. 

are  included  expressly  or  impliedly  in  the  benefit  of  the  agree- 
ment.^ 

768.  The  remedy  of  the  grantor.  —  If  a  purchaser  who  has 
assumed  a  mortgage  debt  omits  to  pay  it  when  due,  the  grantor 
may  take  an  assignment  of  the  mortgage  to  himself,  foreclose  the 
same,  and  sue  for  the  deficiency,  or  sue  on  the  agreement  and  re- 
cover the  amount  paid  by  him  in  obtaining  the  mortgage,  not 
exceeding  the  amount  unpaid  on  such  mortgage.^  In  such  an 
action,  written  receipts  indorsed  on  the  mortgage  by  the  mort- 
gagee are  competent  evidence  to  show  payments  thereon.  The 
plaintiff  in  such  action  can  only  recover  the  amount  paid  by  hira.^ 
The  mortgagor  may  himself  purchase  the  mortgage  and  fore- 
close it.'* 

And  so  a  mortgagor,  who  has  sold  subject  to  the  mortgage 
debt,  upon  being  compelled  to  pay  it,  is  subrogated  to  the  benefit 
of  the  security,  without  any  formal  assignment  of  it  to  him.  He 
thereby  becomes  an  equitable  assignee  of  it,  and  may  enforce  it 
against  the  property.^ 

If  the  grantor  die  before  any  right  of  action  accrues  upon  the 
grantee's  covenant  to  assume  the  mortgage,  the  land  descends  to 
the  heirs,  who  are  the  parties  injured  by  a  breach  of  the  cove- 
nant, and  are  the  proper  parties  to  sue  for  a  breach  of  it.  The 
executor  or  administrator  cannot,  in  such  case,  maintain  the 
action.^ 

The  purchaser,  by  assuming  the  payment  of  the  mortgage, 
makes  himself  personally  liable  both  to  the  mortgagee  and  to  the 
mortgagor."  The  mortgagor  upon  paying  the  mortgage  debt  may 
recover  the  amount  paid  from  such  purchaser^  in  an  action  at 
law,  as  for  money  paid  for  the  grantee's  use.^  Moreover,  on  a 
default  the  mortgagor  may  immediately,  before  paying  the  mort- 

'  Sijuier  v.  Shepard,  38  N.  J.  Eq.  331.  i-.  Terrell,  8  Miiiu.  195  ;  Aycrs  r.  Dixon, 

■^  Furnas    v.    Durgin,    119    Muss.    500;  78  N.  Y.  318;   Ki.sk  v.   Iloffiiian,  09   Ind. 

Braman  v.  Dowse,  12  Cu.sh.  (Mass.)  227;  137. 

Jewett  V.  Draper,  6  Allen   (Mass.),  434;  ''  Ay ers  v.  Dixon,  supra. 

Strohauer  v.  Voltz,  42  Mich.  444  ;  Uolica  '  Jones  v.  Parks,  78  Ind.  537. 

V.   Beach,   22   N.  J.  L.  080;    Crowell   v.  •*  Wood  v.  Smith,  51  Iowa,  150. 

Hospital  of   St.  Barnabas,  27   N.  J.  Krj.  ^  Lappen  v.  Gill,  129  Mass.  349.      lu 

650,  655;  Sparkman  v.  Gove,  44  N.  J.  L.  such  action,  evideuco  is  inudnii.ssible  that, 

252.  at  the  time  the  niort};agc  was  made,  the 

■'  Mills  i;.   Watson,    1   Sweeny  (N.  Y.),  grantor   held    tiic   land   in    trust  for  the 

374.  giantuc  and  others,  and  the  mortgage  was 

*  Mills  V.  Watson,  supra.  t;iveii  to  take  np  the  defendant's  share  of 

■  Kinnear  v.  Lowell,  34  Me.  299;   IJaker  a  previous  mortgage. 

t)81 


§  769.]  A  purchaser's  rights  and  liabilities. 

gage,  proceed  against  him  upon  his  covenant.^  He  cannot  com- 
pel the  mortgagee  to  foreclose  his  mortgage  so  as  to  subject  the 
land  to  the  payment  of  the  debt,  and  the  purchaser  to  a  judg- 
ment for  the  deficiency ;  but  he  may  himself  proceed  in  equity 
to  compel  the  purchaser  to  pay  off  the  mortgage  according  to  his 
undertaking.2  Under  codes  of  practice  allowing  an  equitable  suit 
in  such  case,  the  grantor  may  maintain  a  bill  to  have  the  mort- 
gage satisfied  out  of  the  land.^ 

When  land  is  conveyed  to  several  grantees  in  different  propor- 
tions definitely  specified,  subject  to  a  mortgage  which  they  agree 
to  assume  and  pay,  they  are  jointly  liable  for  a  breach  of  this 
agreement.* 

If  the  deed  in  which  a  grantee  assumes  the  payment  of  a  mort- 
gage be  executed  by  a  husband  and  wife  as  grantors,  the  prom- 
ise implied  by  law  from  the  acceptance  of  the  deed  is  to  both, 
and  an  action  for  breach  of  the  promise  should  be  brought  in  the 
name  of  both,  although  the  wife  alone  signed  the  mortgage  note, 
and  the  husband  joined  "  to  give  validity  "  thereto.  But  if  in  an 
action  by  the  wife  alone  the  merits  of  the  case  have  been  fully 
tried,  she  will  be  allowed  to  amend  after  verdict  in  her  favor,  by 
joining  her  husband,  taking  no  costs  since  the  trial.^ 

769.  A  contract  to  pay  a  mortgage  may  be  enforced  be- 
fore the  promisee  has  paid  it.  A  provision  whereby  a  grantee 
"  assumes  and  agrees  to  pay  "  a  mortgage  is  a  contract  not  merely 
to  indemnify  the  grantor,  but  to  pay  the  debt,  provided  it  be  the 
debt  of  the  grantor.  It  is  not  necessary,  therefore,  as  it  is  in  case 
of  an  agreement  purely  to  indemnify  the  grantor  against  any  loss 
or  damage  by  reason  of  the  mortgage,*^  that  the  grantor  should 
show  that  he  has  been  in  some  measure  damnified  before  he  can 
recover  on  such  promise.'^     "  There  is  no  reason,"  says  Mr.  Jus- 

1  Rubens  v.  Prindle,  44  Barb.  (N.  Y.)  ^  Furnas  v.  Durgin,  119  Mass.  500; 
336  ;  Bowen  v.  Kurtz,  37  Iowa,  239.  Brewer  v.  Worthiugton,  10  Allen  (Mass.), 

2  Marsh  v.  Pike,  1  Sandf.  (N.  Y.)  Ch.  329.  See  Gaffney  v.  Hicks,  124  Mass. 
210;  >S'.  C.  10  Paige,  .595  ;  Cornel U\  Pres-  301  ;  Cilley  v.  Feuton,  130  Mass.  323; 
cott,  2  Barb.  (N.  Y.)  16  ;  Marshall  v.  Da-  Gregory  v.  Hartley,  6  Neb.  356  ;  Wilson  v. 
vies,  78  N.  Y.  414;  Lick  v.  Black,  17  N.  Stilwell,  9  Ohio  St.  4G7 ;  Stout  v.  Folger, 
J.  Eq.  189;  Cubberly  v.  Yager,  42  N.  J.  34  Iowa,  71  ;  Snyder  v.  Summers,  1  Lea 
Eq.  289.  See,  however,  Slauson  y.  Wat-  (Tenn.),  534,540;  Foster  v.  Atwater,  42 
kins,  25  Alb.  L.  J.  72.  Conn.  244;  Locke  v.    Homer,  131  Mass. 

3  Abell  V.  Coons,  7  Cal.  105.  93  ;  41  Am.  Rep.  199,  where  the  whole 
*  Fenton  v.  Lord,  128  Mass.  466.  subject  and  the  cases  are  elaborately  exam- 
5  Fenton  v.  Lord,  supra.  ined  by  Gray,  C.  J.,  who,  upon  the  point 
«  Little  V.  Little,  13  Pick.  (Mass.)  426.  under  consideration,  said :  "  The  only  dif- 

682 


PERSONAL   LIABILITY    OF   PURCHASER. 


[§  769. 


tice  Devens,  in  a  recent  case  before  the  Supreme  Coui-t  of  Massa- 
chusetts, "  why  an  agreement  may  not  be  made  which  shall  bind 
the  party  so  contracting  to  pay  the  debt  which  another  owes,  and 
thus  relieve  him  or  his  estate  from  it,  and,  if  the  promise  thus 
made  is  not  kept,  why  the  promisee  should  not  recover  a  sum 
sufficient  to  enable  him  so  to  do.  Such  is  the  construction  to  be 
given  to  the  agreement  in  the  case  before  us.  As  a  considera- 
tion for  the  property  conveyed  to  him,  the  plaintiff  conveyed  the 
Hyde  Park  estate  to  the  defendant,  who  contracted  not  to  indem- 
nify the  plaintiff  against,  but  to  pay  the  mortgages  upon  it,  and, 
if  he  has  failed  to  do  this,  the  plaintiff  should  be  entitled  to  re- 
cover the  amount  which  the  defendant  thus  agreed  to  pay.  It  is 
a  portion  of  the  consideration  money  due  the  plaintiff,  which  he 
was  to  receive  by  payment  of  a  debt  for  which  he  was  liable, 
which  he  thus  recovers,  when  the  defendant  fails  to  perform  his 
promise.  That  the  plaintiff  should  be  kept  subject  to  a  debt 
from  which  the  defendant  agreed  to  relieve  him  is  a  continuing 
injury,  for  which  a  sum  of  money,  which  will  enable  him  to  dis- 
charge it,  is  an  appropriate  remedy  in  damages."  ^ 


ferences  between  Furnas  ik  Durgin,  supra, 
and  the  case  at  bar  are  that  in  the  present 
case  it  is  not  in  terms  stipulated  that  the  de- 
fendant shall '  pay '  as  well  as '  assume '  the 
mortgage  ;  and  that  it  is  stipulated  that 
he  shall  '  hold  tlie  grantors  harmless  from ' 
the  same.  These  differences  do  not  affect 
the  result.  Under  such  circumstances,  in 
common  understanding  and  in  legal  effect, 
to  '  assume  '  a  debt  is  an  undertaking  to 
pay  it  as  tiie  proper  debt  of  the  party  who 
enters  into  the  undertaking.  Braman 
V.  Dowse,  12  Cush.  (Mass.)  227  ;  Drury 
V.  Tremont  Improvement  Co.  13  Allen 
(Mass.),  168,  171  ;  United  States  Mort- 
gage Co.  V.  Hill  (C.  C.  D.  Mass.  1879)  ; 
Stout  V.  Folger,  34  Iowa,  71.  And  it  is 
well  settled,  as  appears  by  the  cases  al- 
ready referred  to,  that  when  the  defend- 
ant promises  to  pay  a  certain  debt  due 
from  the  plaintiff  to  a  third  pers-on,  the 
effect  of  this  promise  is  not  restricted, 
either  as  to  the  form  of  jdeading,  tlie 
rules  of  evidence,  or  the  measure  of  dam 
ages,  by  the  fact  that  tiie  ilefetidant  by 
his  agreeiricni  further  promises  to  indem- 
nify the  pliiiiiliir  mid  have  hiui   hanule.ss." 


Citing  Hodgson  v.  Bell,  7  T.  R.  93  ; 
Holmes  v.  Rhodes,  1  B.  &  P.  638  ;  Penny 
V.  Foy,  8  B.  &  C.  11  ;  5".  C.  2  Man.  & 
R.  181  ;  Robinson  v,  Robinson,  24  Law 
Times  Reports,  112  ;  Lathrop  v.  Atwood, 
21  Conn.  117  ;  Gage  v.  Lewis,  68  111.  604  ; 
Carr  v.  Roberts,  2  Nev.  &  M.  42  ;  S.  C. 

5  B.  &  Ad.  78  ;  Hodgson  v.  Wood,  2  H. 

6  C.  649  ;  Thomas  v.  Alien,  1  Hill  (N. 
Y.),  145  ;  Churchill  v.  Hunt,  3  Denio  (N. 
Y.),  321  ;  Belloni  v.  Freeborn,  63  N.  Y. 
383;  Stout  v.  Folger,  34  Iowa,  71.  See, 
also,  to  same  effect.  Wicker  v.  Hoppock,  6 
Wall.  94  ;  Loosemorc  v.  Radford,  9  M.  & 
W.  6.'J7  ;  Smith  i'.  Pond,  11  Gray  (Mass.), 
234  ;  Farnsworth  v.  Boardman,  131  Mass. 
115;  Reed  v.  Paul,  131  Mass.  129. 

Contra,  see  Burbank  v.  Gould,  15  Me. 
118. 

'  Furnas  w.  Durgin,  si//(rrj.  Sec  author 
ities  there  cited  in  support  of  the  jiroposi- 
tion  that  a  promi.so  to  j)ay  a  debt  due  from 
the  prcnnisee,  even  where  it  has  not  been 
paid  by  iiim,  is  oiu;  upon  wliicii  an  action 
may  lie  iiiMintained,  and  damages  recov- 
ered to  tiie  amount  of  sucli  deijt. 

683 


§  769.]  A  purchaser's  rights  and  liabilities. 

Such  a  promise,  when  no  time  is  specified  for  the  payment  of 
the  mortgage,  is  a  promise  to  pay  it  when  it  becomes  due,  or,  if  it 
be  already  due,  to  pay  it  forthwith.^ 

Payment  of  the  debt  by  the  grantee  to  the  mortgagee  would 
discharge  the  debt  and  the  mortgage  given  to  secure  it.  If  he 
make  such  payment  at  the  day  fixed,  there  is  no  breach  of  his 
promise  to  the  grantor.  If  he  make  it  afterwards  at  any  time 
before  final  judgment  against  him  in  an  action  by  his  grantor 
upon  that  promise,  only  nominal  damages  could  be  recovered  of 
him.2 

Moreover,  if  the  grantee  does  not  pay  ad  diem^  and  so  breaks 
his  agreement,  the  fact  that  he  may  also  be  in  danger  of  having 
the  mortgage  enforced  against  his  land  affords  no  defence  to  the 
action  at  law  by  the  grantor  against  him  upon  his  agreement. 
If  he  has  equities,  by  I'eason  of  his  failure  to  pay  having  been 
caused  by  accident,  mistake,  or  fraud,  or  any  other  matter  against 
which  a  court  of  equity  will  grant  relief,  his  remedy  must  be 
sought  in  equity ;  as,  for  instance,  by  bill  against  the  mortgagee 
and  the  grantor,  on  which  the  mortgagee  may  be  ordered  to  ac- 
cept pa3niient  of  the  mortgage  debt,  with  proper  interest,  ex- 
penses, and  costs,  and  the  grantor,  upon  such  payment  being 
made  by  the  grantee,  may  be  restrained  from  prosecuting  his 
action  at  law  against  the  latter,  except  for  nominal  damages.^ 

But  when  the  suit  by  the  grantor  to  enforce  his  grantee's  agree- 
ment to  assume  and  pay  a  mortgage  is  in  equity  and  not  at  law, 
pajanent  of  the  amount  of  the  mortgage  debt  will  not  be  en- 
forced against  the  purchaser  until  the  grantor  has  paid  the  mort- 
gage, or,  if  a  decree  is  made  without  such  payment,  it  will  be 
that  so  much  as  is  necessary  to  pay  the  mortgage  be  retained  and 
paid  directly  to  the  mortgagee.* 

The  decision  in  Furnas  v.  Durgin,  119  ^  Locke   v.   Homer,    supra,  per    Gray, 

Mass.  500,   has  been  recognized   in    Val-  C.  J. 

entine   u.  Wheeler,   122   Mass.  566,  568;  *  Waters  i>.  Bassel,  58  Miss.  602  ;  citing, 

Fiske    V.  Tolman,    124    Mass.   254,    256;  but  not  following.  Furnas  r.   Durgin,  s((- 

Gaffney  v.  Hicks,  124  Mass.  301,304;  and  pra,  for  reasons  stated.     See,  also,  Ayers 

expressly  followed  and  reaffirmed,  after  a  v.  Dixon,  78  N.  Y.  318. 

careful  reexamination  of  the  whole  sub-  This    distinction    is,    moreover,   recog- 

ject,  in  Locke  v.  Homer,  131  Mass.  93.  nized  in  Furnas  v.  Durgin,  for  it  is  there 

1  Furnas  i'.  Durgin,  supra.  said :  — 

2  Locke  V.  Homer,  supra,  per  Gray,  C.  "  There  is  no  mode  at  law  by  which 
J. ;  Furnas  v.  Durgin,  supra,  per  Devens,  this  difficulty  can  be  avoided-,  and  the 
J.;  Hood  y.  Adams,  124  Mass.  481  ;  Muh-  plaintiff  enabled  to  receive  the  benefit  of 
llg  V.  Fiske,  131  Mass.  110.  his  contract.     Perhaps  in  equity,  where  a 

proper  case  for  its  interference  was  shown, 

684 


PERSONAL   LIABILITY   OF   PURCHASER.  [§  770. 

A  mortgage  conditioned  to  pay  the  mortgagor's  earlier  mort- 
gage upon  lands  conveyed  by  liim  to  the  mortgagee,  and  save 
him  harmless  therefrom,  cannot  be  foreclosed  until  the  mortgagee 
has  paid  the  earlier  mortgage,  at  least  if  the  mortgagee  in  the 
earlier  mortgage  is  not  made  a  party  to  the  suit.^ 

770.  The  measure  of  damages  in  an  action  by  the  grantor 
against  his  grantee  upon  his  promise  to  pay  a  mortgage  debt  is 
the  amount  of  the  debt  and  interest  remaining  due.^  If  the 
grantor  has  paid  the  mortgage  debt  before  bringing  suit  against 
the  grantee  upon  his  promise,  the  measure  of  damages  is  the 
amount  so  paid."^  If  the  defendant  should  pay  the  debt  after  suit 
at  any  time  before  final  judgment,  the  damages  to  be  recovered 
would  be  nominal  onl}'.'^  Such  payment  would  obviate  the  risk 
that  otherwise  may  be  incurred,  that  the  plaintiff  may  not  devote 
the  sum  recovered  by  him  to  the  payment  of  the  mortgage  debt, 
and  that  the  defendant,  in  order  to  relieve  his  property,  may  be 
compelled  to  pay  the  amount  a  second  time.^ 

In  a  suit  by  a  grantor  against  his  grantee,  who  had  assumed 
the  payment  of  a  mortgage  upon  the  premises,  it  appeared  that 
the  grantor,  at  an  attempted  sale  under  the  mortgage,  bid  a  cer- 
tain sum,  much  less  than  the  amount  of  the  mortgage,  at  which 
the  land  was  struck  off  to  him,  though  he  failed  to  complete  the 
purchase,  and  thereupon  a  verdict  was  entered  for  the  difference 
between  the  amount  of  the  mortgage  and  the  amount  bid  at  the 
sale,  but  no  judgment  was  entered.  Subsequently  the  land  was 
sold  and  conveyed  by  the  mortgagee  to  another  person  for  a  less 
sum  than  that  bid  by  the  grantor.  The  grantee  thereupon 
brought  a  bill  in  equity  to  restrain  the  grantor  from  obtaining 
and  enforcing  judgment,  and  to  have  the  amount  paid  for  the 
property  upon  the  final   sale  of  it  under   the  mortgage  credited 

a  remedy  would  be  afforded   that  would  subject  to  the   buidcu  of  the  debt^  whicii 

secure  the  party  paying  under  such  cir-  tlie  defendant  has  agreed  to  cxtinguisli." 

cumstances    from    having    the     payment  ^  Learned  i-.  Bishop,  42  Wis.  470;  Wa- 

made  by  liim  devoted  to  any  otlicr  object  tcrs  v.  liassel,  58  Miss.  602. 

than  tliat  which  would  relieve  him  or  iiis  -  Locke  v.  Homer,   I.'M    Mass.   03;    41 

estate  from  furtiicr  responsibility.     How-  Am.  Kcp.  199. 

ever  this  may  be,  the  want  of  elasticity  in  •'  'J'own  v.  Wood,  .37  111.  512. 

the  forms  of  the  common  law,  which  does  ■•   Klmcr  !■.  Welch,  47  Conn.  5G,  59,  per 

not  enable  us  to  make  (■uch  a  decree  hero  Pardee,  J.;  Hull   t'.   Way,   47  Conn.  407, 

as  would  guard  the  rights  of  all  parties,  473,  jier  Curijcnter,  J. 

should  not  jircvent  us  fr<jm  giving  to  (lie  ''  Furnas   v.    Durgin,    119    Mass.    500, 

jilaintiff  the  iiencdt  of  the  contract  which  508. 

he   has   made,    or  compel   liiiti   t<i  remain 

685 


§  770.]  A  purchaser's  rights  and  liabilities. 

upon  the  verdict.  The  bill  was  dismissed,  upon  the  ground  that 
the  grantee  had  once  received  the  benefit  of  the  value  of  the  land 
in  part  payment  of  the  debt  which  he  had  assumed,  and  had  no 
interest  in  the  proceeds  of  the  sale.^ 

1  Cillev  V.  Fen  ton,  130  Mass.  323. 

686 


CHAPTER   XVIIl. 

A   lessee's    rights   and   liabilities,    771-785. 

771.  The  mortgagor,  while  allowed  to  remain  in  possession 
without  an  entry  by  the  mortgagee,  although  there  has  been  a 
breach  of  the  condition  of  the  mortgage,  is  entitled  to  receive 
the  rents  and  profits  to  his  own  use,  and  is  not  liable  to  account 
for  them  to  the  mortgagee.^  If  the  premises  are  under  lease,  the 
right  of  the  mortgagor  in  possession  to  the  rents  is  the  same, 
whether  the  lease  was  made  before  or  after  the  mortgage  ;  he 
may  lawfully  receive  the  rents  until  the  mortgagee  interferes  ; 
and  may  receive  them  to  his  own  use,  and  not  to  the  use  of  the 
mortgagee.'"^ 

In  those  states  in  which  the  mortgagee  is  prohibited  from  tak- 
ing possession  previous  to  foreclosure,  the  mortgagor  may  make 
a  valid  and  binding  assignment  of  the  rents  and  profits  until  fore- 
closure and  sale.  Such  an  assignment  does  not  operate  as  a  fraud 
upon  the  mortgagee,  because  he  is  not  in  any  event  entitled  to 
the  rents  and  profits  before  such  time.  The  assignee  of  the  rents 
and  profits  may  enforce  his  right  to  them  by  an  action  in  the  na- 
ture of  a  foreclosure  suit.''^  In  the  absence  of  a  specific  pledge  of 
the  rents  and  profits  to  the  mortgagee  as  part  of  his  security,  the 
mortgagor,  though  insolvent,  may,  until  the  foreclosure  sale,  or 
until  the  appointment  of  a  receiver  pending  the  foreclosure  suit, 
receive  them  to  his  own  use,  or  assign  them  to  another.^  The 
foreclosure  sale  alone  does  not  divest  the  mortgagor  of  his  right 
of  possession  ;  he  may  occupy  the  premises  or  receive  the  rents  of 
them   until  the  delivery  of  the  deed  to  the  purchaser.     A  lessee 

'  Teal  V.  Walker,  111  U.  S.  242  ;  Fitch-  Noyes  v.  Rich,  52  Me.  1 1 5  ;  Long  v.  Wndc, 

burg  Cotton  Manuf.  Corp.  v.  Melven,  15  70  Me.  358;  Keyser  v.  llitz,  4   Mackey 

Mass.  268;    Gibson   i;.   Farley,   16   Mass.  (1).  C),  179. 

280  ;    BoHton    Bank    v.    Heed,    8    Pick.  '^  Trent  v.   Hunt,  9  Exih.   14,  22,  per 

(Mass.)  4.'i9  ;  Wilder  t;.   Ilougliton,  1    lb.  Alderson,  B.     See  §  670. 

87,   89;    Mayo   v.    Fletcher,    14    lb.   525;  3  Dp^ey  y.  Latson,  6  Cal.  609. 

M'Kircher  i;.  Hawley,  16  .Johns.  (N.  Y.)  *  Syracuse  City  Bunk  v.   Tallnian,  :n 

289  ;  Clarke  v.  Curtis,  1  Gratt.  ( Va.)  289  ;  Marb.  (N.  Y.)  201.     See  §  669. 

687 


§§  772,  773.]       A  lessee's  rights  and  liabilities. 

having  purchased  at  the  foreclosure  sale,  and  a  delay  of  several 
weeks  having  occurred  in  the  delivery  of  the  deed  to  him,  during 
which  a  quarter's  rent  became  due  under  the  lease,  he  was  held 
liable  in  an  action  by  the  mortgagor  for  such  rent.  Although  he 
made  a  tender  of  the  purchase  money  soon  after  the  sale,  it  was 
held  that  his  tender  did  not  operate  to  vest  in  him  the  legal  title ; 
nor  did  the  subsequent  delivery  of  the  deed  to  him  operate  by 
relation  to  vest  the  title  in  him  at  the  time  of  the  purchase,  or 
of  the  tender  of  the  purchase  money.  He  should  have  followed 
up  his  tender  by  a  motion  to  pay  the  money  into  court,  or  to  com- 
pel the  completion  of  the  sale,  whereupon  the  court  could  have 
adjusted  the  equities  of  all  the  parties,  and  made  the  loss  arising 
from  the  delay  fall  upon  the  party  whose  negligence  caused  it. 
The  court  might  have  ordered  the  tenant  to  attorn  to  the  pur- 
chaser, and  the  interest  on  the  mortgage  to  cease  from  the  day  of 
tender.^ 

772.  A  mortgagee  has  no  specific  lien  upon  the  rents  and 
profits  of  the  mortgaged  land  unless  he  has  in  the  mortgage  stip- 
ulated for  a  specific  pledge  of  them  as  part  of  his  securit3\  He 
has  no  claim  upon  them  until  he  has  the  right  to  take  possession 
of  the  premises  under  his  mortgage.^  Until  the  mortgage  debt  is 
due  he  is  not  entitled  to  have  a  receiver  of  such  rents  appointed.^ 
The  tenant  may  safel}^  continue  to  pay  rent  to  the  mortgagor, 
until  he  receives  notice  from  the  mortgagee  of  his  requirement 
that  the  rents  be  paid  to  him. 

Where  a  mortgagee  has  taken  a  lease  of  the  mortgaged  prem- 
ises from  the  mortgagor,  upon  a  subsequent  sale  of  the  equity  of 
redemption,  he  cannot  apply  the  rents  as  against  the  purchaser  in 
set-off  upon  the  mortgage  debt.* 

773.  A  lease  already  existing  at  the  date  of  the  mortgage 
is  in  no  way  invalidated  by  the  giving  of  the  mortgage.  It  is 
then  a  paramount  interest,  and  the  mortgage  is  subject  to  it.^ 
The  mortgagee  has  only  the  rights  of  the  mortgagor  as  against 
the  lessee.^ 

The  mortgagor  may  of  course,  at  the  time  of  making  a  mort- 
gage of  the  reversion,  release  the  tenant  from  the  payment  of  the 

1  Clason   V.   Corley,   5    Sandf.  (N.  Y.)  *  Scott  i-.  Fritz,  51  Pa.  St.  418;  Talia- 
447.  ferro  v.  Gay,  78  Ky.  496. 

2  Reeder  v.  Dargan,  15  S.  C.  175.  5  Edos  v.  Cook,  65  Cal.  175. 

3  Bank  of    Ogdensburg    v.   Arnold,   5  «  Hemphill  r.  Giles,  66  N,  C.  .512. 
Paige    (N.   Y.),   38;    Keyser   v.   Hitz,   4 

Mackey  (D.  €.),  179. 

688 


A  lessee's  rights  and  liabilities.  [§  774. 

rents  accrued  at  that  time  ;  but  otherwise  the  rent  then  accruing 
goes  with  the  reversion,  and  the  mortgagee  is  entitled  to  it  if  he 
gives  the  tenant  notice  before  the  rent  day.^ 

But  a  payment  of  rents  in  advance  is  not  binding  upon  a  mort- 
gagee of  the  reversion.  "  The  question  is,"  says  Mr.  Justice 
Willes,^  "  whether,  where  there  has  been  an  assignment  of  a  re- 
version, payment  of  rent  to  the  assignor  before  rent  day  takes 
away  the  rights  of  the  assignee  to  the  rent  so  completely  that,  if 
he  should  give  notice  before  rent  day  of  the  assignment,  the  pay- 
ment would  still  be  good.  There  would  be  an  obvious  injustice 
in  that,  even  if  the  payment  were  made  before  the  assignment, 
because  a  person  who  bought  the  reversion,  on  the  faith  that  the 
rent  was  becoming  due,  would  be  defeated  by  a  transaction  be- 
tween the  landlord  and  tenant,  of  which  he  had  no  notice." 

774.  A  mortgage  of  premises  already  leased  is  an  assign- 
m.ent  of  the  reversion.  It  is  an  established  rule  that  a  mort- 
gagee, upon  giving  notice  to  a  tenant  of  the  mortgaged  premises, 
under  a  lease  for  years  given  prior  to  the  mortgage,  is  entitled  to 
all  rent  accruing  and  becoming  due  subsequent  to  the  execution 
of  tlie  mortgage,  as  well  that  in  arrear  at  the  time  of  giving  no- 
tice as  that  which  accrues  afterwards.  This  was  decided  in  the 
time  of  Lord  Mansfield,  and  has  been  a  recognized  principle  ever 
since. "^  The  mortgagee  becomes  entitled  to  the  rent  without  any 
attornment  by  the  tenant.  The  mere  execution  of  the  mortgage 
subsequent  to  the  lease  operates  as  an  assignment  of  the  rever- 
sion, and  carries  the  rent  as  incident  to  it,  and  the  mortgagee 
is  entitled,  upon  notice  to  the  tenant,  to  receive  the  rents  when- 
ever he  is  entitled  to  possession.  No  actual  entry  by  him  is  nec- 
essary. 

Rent  accrued  prior  to  the  mortgage  does  not  pass  as  incident 
to  the  reversion,  but  is  a  mere  chose  in  action  belonging  to  the 
mortgagor.*     But  rent  accruing  and  becoming  due  after  the  exe- 

1  De  Nicholls  v.  Saunders,  L.  Iv.  5  C.  1'.  Fitchburg  Cotton  Manuf.  Corp.  v.  Melvcu, 
589.  1.5  Mass.  2G8  ;  Burden  y.  Thayer,  3  Met. 

2  De  Nicliolls  i'.  Saunders,  .<!«/jra ;  and  (Mass.)  76,  79;  Russell  v.  Allen,  2  Allen 
see  Cook  v.  Guerra,  7  lb.  132.  (Mass.),  42;  Mirick  v.  Hopjjin,  118  Mass. 

3  Moss  v.  Galiiinore,  Doug.  279;  Rogers     582;  Kimball  v.  Lockwood,  G  R.I.  138; 
Humphreys,  4  Ad.  &  E.  299  ;  Rawson     King  v.  Ilousatoiiic  R.  R.  Co.  45  Conn 

Eieke,  7  Ad.  &  El.  451  ;  Trent  v.  Hunt,  226  ;  English  v.  Key,  39  Ala.  113;  Tubb 

9  Exch.  14  ;  4  Kent  Com.  165  ;  1  Smiths  v.  Fort,  58  Ala.  277 ;  Coffey  v.  Hunt,  75 

Lead.  Cas.  310;  Teal  v.  Walker,  111  U.  Ala.  230;  Kimball  v.  I'ike,  18  N.  H.  419. 

S.  242;  Newnll  v.  Wright,  3   Ma'^s.  138;  ■•  King  v.  Housiitonic  1{.  It.  Co.  sii/ira. 

VOL.  I.             44  (J80 


§  775.]  A  lessee's  rights  and  liabilities. 

cution  of  the  mortgage  does  pass  as  incident  to  the  reversion,  and 
may  be  recovered  of  the  lessee  after  notice  of  the  mortgage,  and 
without  an  actual  entry  by  the  mortgagee  upon  the  premises. 
His  right  does  not  extend  to  rents  already  due  when  the  mort- 
gage was  executed,  or  to  rents  which  have  been  paid  to  the  mort- 
gagor before  notice  to  the  lessee  of  the  mortgage.^ 

The  mortgagee  as  assignee  of  the  reversion  has  the  same  rights 
against  the  lessee  and  those  claiming  under  him  that  the  mort- 
gagor had,  and  no  other  than  he  had,  so  long  as  the  term  contin- 
ues, and  the  tenant  acknowledges  his  title. ^ 

775.  To  entitle  the  mortgagee  to  the  rents  as  against  the 
mortgagor,  it  is  not  necessary  that  his  entry  should  be  effectual 
for  the  purpose  of  foreclosure,  but  any  possession  taken  by  him 
with  notice  to  the  tenants  to  pay  the  rent  to  him  is  sufficient.^ 
The  mortgagor  cannot  recover  for  rents  that  accrue  afterwards. 
To  an  action  by  him  on  the  covenants  of  the  lease,  the  entry  of 
the  mortgagee  and  the  promise  of  the  lessee  to  pay  him  are  a  good 
defence.  Where  the  mortgagor  has  appointed  an  agent  to  receive 
the  rents  of  the  mortgaged  estate,  a  notice  to  him  by  the  mort- 
gagee to  pay  the  rents  when  collected  to  himself  is  a  termination 
of  the  mortgagor'^  tenancy  at  will,  and  the  agent  will  hold  the 
rents  subsequently  accruing  as  trustee  of  the  mortgagee.^  If  the 
tenant,  after  receiving  notice  from  a  mortgagee  entitled  to  posses- 
sion that  he  claims  the  rents,  pays  them  to  the  mortgagor,  he  is 
not  absolved  from  the. legal  obligation  to  pay  the  same  to  the 
mortgagee.^ 

Unless  there  is  an  attornment  by  the  lessee  to  the  mortgagee, 
the  latter  cannot,  either  before  or  after  default,  demand  the  bene- 
fits of  the  lease  without  the  lessee's  consent.  He  cannot  distrain, 
or  bring  an  action  either  at  law  or  in  equity,  for  the  rents  paya- 
ble by  the  lessee,  nor  is  he  entitled  to  enforce  the  covenants  of  the 
lease.  His  remedy  is  to  foreclose  upon  default  of  the  mortgagor, 
or  to  take  possession  of  the  premises  ;  and  either  course  operates 
as  an  eviction  of  the  tenant  by  title  paramount,  and  leaves  him  at 
liberty  to  terminate  the  lease.^ 

1  Russell  V.  Allen,  2  Allen  (Mass.),  42;  *  Crosby  i-.  Harlow,  21  Me.  499. 
Mirick  v.  Hoppin,  118  Mass.  582.  ^  Watford  v.  Gates,  57  Ala.  290. 

2  Rogers  r.  Humphreys,  4  Ad.  &  El.  ^  Moran  v.  Pittsburgh,  &c.  Ry.  Co.  32 
299,  313,  per  Lord  Denman,  C.  J. ;  Globe  Fed.  Rep.  878;  Teal  v.  Walker,  111  U. 
Marble  Mills  Co.  v.  Qiiinn,  76  N.  Y.  23.  S.  242  ;  4  Sup.  Ct.  Rep.  420. 

3  Stone  V.  Patterson,  19  Pick.  (Mass.) 
476 ;  Welch  v.  Adams,  1  Met.  (Mass.)  494, 

690 


A  lessee's  rights  and  liabilities,     [§§  776,  777. 

776.  A  mortgagor  cannot  make  a  1  ease  of  the  mortgaged 
premises  which  will  be  binding  upon  the  mortgagee.^  Upon 
a  breach  of  the  condition  the  mortgagee  may  enter,  and  treat  the 
lessee  as  a  trespasser,  and  without  notice  bring  ejectment.^  If  the 
mortgagee  after  entry  accepts  rent  from  such  lessee,  the  relation 
of  landlord  and  tenant  is  thereby  created,  but  this  tenancy  will  be 
deemed  one  from  year  to  year,  and  not  for  the  term  of  the  orig- 
inal lease.3  The  mortgagee  can  no  longer  treat  the  lessee  as  a 
trespasser.* 

Whether  the  tenant  has  actual  notice  of  the  mortgage  or  not 
makes  no  difference  if  the  mortgage  be  recorded ;  it  is  then  con- 
structive notice,  and  affects  one  who  becomes  the  tenant  of  the 
mortgagor  as  much  as  it  affects  a  purchaser.  The  mortgagor  has 
no  implied  power  to  bind  the  mortgagee  by  lease.^ 

A  mortgagor's  lease  is,  however,  good  as  between  the  parties, 
by  virtue  of  the  contract,  and  upon  a  subsequent  discharge  of  the 
mortgage  the  defect  in  the  lessee's  title  is  removed.  But  the  ten- 
ant cannot  compel  the  mortgagor  to  pay  off  the  mortgage  in  order 
that  his  lease  may  be  perfected ;  but  he  is  left  to  his  remedy  at 
law  for  damages.^  It  is  avoided  only  upon  the  interference  of  the 
mortgagee,  and  until  that  time  the  mortgagor  is  entitled  to  receive 
the  rent  to  his  own  use,  and  to  enforce  the  payment  of  it  by  action 
in  his  own  name.*^ 

777.  Lease  made  after  the  mortgage.  —  The  rights  and  lia- 
bilities of  the  parties  are  very  different  when  a  mortgagor  in  pos- 
session makes  a  lease  for  years  subsequent  to  the  execution  of  the 
mortgage.  There  is  then  no  privity  of  contract  bet\v(?en  the  mort- 
gagee and  lessee,  and  until  actual  entry  by  the  mortgagee,  or  the 
lessee  expressly  promises  to  pay  rent  to  him,  he  can  maintain  no 
action  against  the  lessee  to  recover  it.^  He  cannot  by  mere  notice 
compel  the  tenant  to  pay  rent  to  him,  and  his  title  to  rent  does 
not  accrue  until  he  has  obtained  possession  of   the  mortgaged  es- 

1  McDermott   v.  Burke,   IC   Cal.  580;  See  Howe  i-.  Hunt, 31  lU-nv.  420;  Carj)cn- 
Russuin  V.  Wauser,  5.i  Md.  92;  Moran  v.  ter  v.  linker,  3  C.  H.  N.  S.  20t5. 
Piltsburgh.  &c.  Ry.  Co.  32  Fed.  liep.  878.  ''  Trent  r.    Hunt.  0    Kxcli.   14,  22,  per 

2  Thunder  f.  Belclier,  3  Kabt,  449  ;  Ho;;-  Aldcrsoii,  B. 

era  v.  Humplirev-s  4  A<1.   &  EI.  L'99,  per  "  Teal  v.  Walk.r.  1 1 1  U.  S.  242  ;  Morse 

Lord  Denman.  v.  God.iard,  13  Mit.  (Ma.ss.)  177  ;  Field  i;. 

■•'  Hughes  .;.  Bucknell,  8  Car.  &  1'.  5GC.  Swan,   10  11).   112;   MaHS.    Ho-i-ilal    Life 

*  Bireli  V.  Wright,  1  T.  U.  378.  Ins.  Co.  v.  Wil.son,   10   11..   12C  ;   White  v. 

6  HeiLshaw  v.  Wells,  9  Hunipli.  (Tenn.)  Wear,  4  Mo.  App.  341  ;  No.ves  v.  Kiel),  52 

55g  Me.  1 1 J  ;   Long  v.  Wiide,  70  Me.  358. 


«  Costigan  v.  Haulier,  2  .^cli.  &.  Lef.  100. 


GUI 


§  777.]  A  lessee's  rights  and  liabilities. 

tate  ;  but  if  the  tenants  of  the  mortgagor  pay  rent  to  the  mort- 
gagee, they  thereby  by  attornment  become  his  tenants,  and  entitle 
him  from  that  time  to  receive  the  rents. ^ 

The  mortgagee  may  treat  a  lessee  holding  under  a  lease  from 
the  mortgagor  as  a  trespasser,  and  eject  him  ;  but  unless  the  ten- 
ant has  attorned  to  him,  he  cannot  distrain  or  bring  an  action  for 
rent,  as  there  is  no  relation  of  landlord  and  tenant  between  them.^ 
A  mere  notice  by  the  mortgagee  to  the  tenant  to  pay  the  rent  to 
him,  to  which  the  tenant  does  not  consent,  or  upon  which  he  does 
not  act,  does  not  make  the  tenant  liable  to  him  in  an  action  for 
rent,  nor  does  a  request  by  the  mortgagor  that  he  will  pay  to  the 
mortgagee  have  this  effect.^ 

If  the  tenants  under  such  a  lease  attorn  to  the  mortgagee  after 
a  breach  of  the  condition  which  gives  him  the  right  of  entry,  they 
thei-eby  become  his  tenants  and  debar  the  mortgagor  from  recov- 
ering from  them.^  The  mortgagee,  as  between  him  and  the  mort- 
gagor, has  then  the  right  to  enter  and  take  possession  of  the  prem- 
ises ;  and  if  the  tenant  yields  up  possession  to  the  mortgagee,  he 
does  voluntarily  what  the  law  will  compel  him  to  do.  By  attorn- 
ment he  does  not  injure  the  mortgagor,  and  he  saves  himself  the 
costs  of  an  eviction  by  the  mortgagee.  His  attornment  is  a  good 
defence  to  an  action  by  the  mortgagor  for  the  rent,^  or  to  an  ac- 

1  Kimball  v.  Lockwood,  6  K.  I.  138.  Cook  v.  Johnson,  121  Mass.  326;  Kuowles 

2  Rogers  v.    Humphreys,  4  Ad.  &  EI.     v.  Maynard,  13  Met.  (Mass.)  352  ;  Smith 
299,  313,  per  Lord  Denman,  C.  J.  v.  Shepard,  15  Pick.  (Mass.)  147  ;  Magill 

3  Evans  v.  Elliot,  9  Ad.  &  EL  342.  v.  Hinsdale,  6  Conn.  464  ;  Jones  v.  Clark, 
In  Alabama  it  is  provided  that   every     20  Johns.  (N.  Y.)  51  ;  Jackson  v.  De  Lan- 

conveyance  of  an  estate  is  good  and  effec-  cey,  1 1  lb.  363.     See  Souders  v.  Vansickle, 

tualwithoutattornmentof  the  tenant;  but  8  N.  J.  L.  (3  Halst.)  313,  315;  Blain  v. 

that  no  tenant  is  liable  who  has  paid  his  Rivard,  19  111.  App.  477. 

rent  without  notice  of  such   conveyance.  In  Iowa  it  is  provided  by  statute  that 

Code  1867,  §  1568.  the  attornment  of  a  tenant  to  a  stranger 

The  mortgagee  is  entitled  to  the  rents  is  void,  unless  made  to  a  mortgagee  after 

upon  giving  notice  to  the  tenant.     Marx  the  mortgage   has    been  forfeited.     It  is 

V.  Marx,  51  Ala.  222  ;   Kno.-c  v.  Easton,  also  provided  the  mortgagor  may  redeem 

38  Ala.  345  ;  Hutchinson  v.  Dearing,  20  within  one  year  after  a  foreclosure  sale, 

Ala.  798 ;  Mansony  v.  U.  S.  Bank,  4  Ala.  and  that  he  is  in  the  mean  time  entitled 

735  ;    Coker    v.    Pearsall,    6    Ala.   542  ;  to  possession.    Under  these  provisions  the 

Branch  Bank  at  Mobile  v.  Fry,  23  Ala.  construction  is  that  there  can  be  no  valid 

770.  attornment  of   a  tenant  to  a  mortgagee 

*  Kimball  v.  Lockwood,  6  R.  I.  138  ;  until  the  expiration  of   the   mortgagor's 

Hemphill  v.  Giles,  66  N.  C.  512  ;  and  see  right  of  redemption.     Mills  v.  Heatou,  52 

Higginbotham  v.  Barton,  11  Ad.   &  El.  Iowa,  215;  Mills  i'.  Hamilton,  49  Iowa, 

307,315,  105. 

°  Adams   v.  Bigclow,   128  Mass.  365  ; 

692 


A  lessee's  rights  and  liabilities,       [§§  778,  779. 

tion  to  recover  possession  of  the  property  by  a  summary  proceed- 
ing.^ The  tenant  in  such  case  does  not  dispute  the  title  of  his 
landlord,  but  justifies  his  possession  under  it. 

It  is  no  answer  to  a  claim  for  rent  by  a  second  mortgagee  who 
has  entered  that  there  is  a  prior  mortgage,  under  which  no  entry 
has  been  made.^ 

Until  the  tenant  has  attorned  to  the  mortgagee,  he  is  liable  to 
the  lessor  for  rent,  though  the  latter  be  insolvent,  and  the  mort- 
gagee threatens  foreclosure.^ 

778.  But  in  a  state  where  a  mortgage  is  regarded  as 
conveying  no  title  to  the  mortgagee,  and  the  right  of  posses- 
sion until  foreclosure  and  sale  is  assured  to  the  mortgagor  by 
statute,  it  has  been  held  that  there  is  nothing  to  rest  an  attorn- 
ment upon,  and  that  this  doctrine  has  no  application.  The  ver- 
bal agreement  of  the  tenant  to  pay  rent  to  the  mortgagee  does 
not  continue  the  existing  tenancj'^,  simply  putting  the  mortgagee 
in  place  of  the  mortgagor  as  landlord  ;  but  it  is  a  new  undertak- 
ing, and  must  be  valid  as  a  new  agreement  if  valid  at  all.^ 

779.  Tenants  cannot  be  allo^wed  compensation  for  im- 
provements, although  they  have  taken  leases  for  a  term  of  years, 
with  a  certain  rent,  and  have  made  advancements  of  money  to 
the  mortgagor  under  an  agreement  that  he  should  expend  it  in 
buildings  and  improvements,  and  he  so  spends  it.^ 

If  the  mortgagor,  or  his  tenants,  or  others  claiming  under  him, 
make  improvements,  they  can  avail  themselves  of  their  improve- 
ments by  paying  the  mortgage  debt. 

If,  during  the  pendency  of  an  action  to  foreclose  a  mortgage, 
the  mortgagor  makes  leases  under  which  the  lessees  enter  and 
retain  actual  possession  under  claim  of  right,  the  mortgagee,  after 
recovering  judgment  for  possession  against  them,  is  entitled  to 
recover  damages  for  rents  and    profits  from   the  time  when  the 

1  Breitenbucher    v.    McElroy     (N.    J.  may  any  other  person  not  lioliiinij  a  mort- 

1879),  2  N.  .J.  Law  J.  157.  gago  acquire  in  the  Siuno  way  the  right  to 

■^  Cavis  r.  McClary,  5  N.  II.  529.  possession  and  tiie   right  to  rent,  by  any 

"  McDowell  V.  llendrix,  G7  Ind.  513.  valid  agreement  to  that  cHect.     But,  in 

*  IIogHctt  V.  Ellis,  17  Micii.  .351.     Mr.  both  cases  alike,  I  think,  it  would  depend 

.Justice  Christiancy  said:   "If  it  be  said  upon  tlie  contract,  as  s«c/i,  which  might  be 

thai,  though  the  mortgage  does  not  give  made   between    them,  and  not   upon  the 

the    mortgagee    the    right    to    possession  doctrine  of  attornment."     See,  also,  Teal 

against  the  will  of  the  mortgagor,  yet,  by  v.  Walker,  111  U.  S.  242. 

the  consent  of  the  mortgagor  and  the  ten-  ^  Haven  i-.  Boston  &  Worcester  U.  11. 

ant,  he  m.ay  be  let  into  posiseasion,  and  Co.  8  Alien  (Mass.),  369. 
thus  acquire  the  right  to  rent ;  so,  I  reply, 

693 


§§  780-782.]     A  lessee's  rights  and  liabilities. 

formal  possession  was  delivered  to  him  ;  and  not  merely  for  the 
rents  and  profits  of  the  land,  but  also  for  the  rents  and  profits  of 
buildings  erected  and  improvements  made  on  the  premises  by 
the  tenants,  although  they  had  reason  to  believe  that  their  title 
under  the  lease  was  valid. ^ 

780.  Emblements.  —  A  mortgagor  is  subject  to  ejectment 
without  notice  whenever  the  mortgagee  has  the  right  to  enter, 
and  is  not  entitled  to  the  growing  crops.^  His  tenant  has  no 
greater  rights.  The  mortgagee  may  treat  him  as  a  trespasser; 
he  may  enter  immediately  and  take  the  emblements. 

By  foreclosure  and  sale,  the  purchaser  of  the  premises  becomes 
entitled  to  the  possession  of  them,  and  to  all  the  crops  then  grow- 
ing on  them  ;  and  a  lessee  holding  the  property  under  a  lease 
from  the  mortgagor  made  subsequently  to  tlie  mortgage,  without 
the  concurrence  of  the  mortgagee,  has  no  greater  right  than  the 
mortgagor  to  the  emblements.'^  Under  such  a  lease  the  lessee 
holds  subject  to  all  the  rights  of  the  mortgagee,  unimpaired  and 
unaffected;  and  is  liable  to  trespass  for  taking  and  carrying  away 
the  crops  growing  at  the  time  of  the  sale. 

781.  No  one  but  the  mortgagee  can  take  advantage  of  the 
invalidity  of  a  lease  as  to  him.  Although  a  lease  made  by  a 
mortgagor  after  the  execution  of  the  mortgage  is  not  binding 
upon  the  mortgagee,  and  the  lessee  holds  subject  to  the  rights  of 
the  mortgagee,  yet  if  the  mortgagee  does  not  object  to  the  lease 
as  interfering  with  his  rights,  or  as  impairing  the  security  the 
mortgage  was  intended  to  give,  or  that  there  has  been  any  for- 
feiture of  the  conditions,  a  stranger  should  not  be  permitted  to 
volunteer  such  objections,  which  are  strictly  technical,  in  order 
to  avoid  liability  for  an  unauthorized  trespass.  This  was  the  de- 
termination of  the  Supreme  Court  of  Missouri  in  a  case  where 
the  lessee  under  such  a  lease  brought  suit  for  trespass  upon  the 
leased  premises  for  the  carrying  away  of  a  large  amount  of  lead 
ore.  The  defendant  was  not  allowed  to  set  up  the  invalidity  of 
the  lease  as  asfainst  the  mortgaeree.'* 

782.  Doubtless  a  provision  may  be  made  in  a  mortgage, 
which  would  enable  the  mortgagor,  while  remaining  in  pos- 
session, to  give  leases  of  the  premises  which  would  be  binding 

1  Haven  v.  Adams,  4  Allen  (Mass.),  80.     (>f.  Y.)  584 ;  Downard  v.  Groff,  40  Iowa, 

2  See  §§  697,  776;  Rankin  v.  Kinsey,  7     597;  Anderson  v.  Strauss,  98  111.  485. 
Bradw.  (111.)  215.  »  Kennett  v.  Plummer,  28  Mo.  142. 

^  See  §  697  ;  Lane  v.  King,  8  Wend. 

694 


A  lessee's  rights  and  liabilities.  [§  782. 

upon  the  mortgagee  or  any  one  claiming  under  him  after  a  breach 
of  the  condition  of  the  mortgage,  and  possession  taken  by  liim 
under  it.  But  when  the  circumstances  are  such  that  the  power 
reserved  bj^  the  mortgagor  to  make  leases  is  repugnant  to  the 
purposes  of  the  mortgage,  the  exercise  of  it  will  not  avail  to  make 
the  leases  valid  beyond  the  time  of  a  breach  of  the  condition. 
Such  was  held  to  be  the  case  where  a  railroad  company  executed 
a  mortgage  to  trustees,  to  secure  bonds  of  the  form  annexed 
thereto,  which  contained  a  certificate  that  it  was  secured  by  a 
mortgage  of  real  estate,  and  the  mortgage  contained  a  provision 
authorizing  the  trustees,  upon  a  breach  of  the  condition,  at  the 
request  of  the  bondholder,  to  take  possession  of  the  premises,  or 
under  certain  circumstances  to  sell  them  at  public  auction  ;  and 
the  mortgage  further  provided,  that  until  breach  of  the  condition 
the  mortgagor  should  remain  in  undisturbed  possession  and  occu- 
pation, "and  that  nothing  herein  contained  shall  be  so  construed 
as  to  prevent  said  corporation  from  improving  said  real  estate,  or 
making  leases  of  such  parts  thereof  as  they  may  desire  and  have 
opportunity  to  make."  ^  Leases  were  made  by  the  corporation 
for  a  long  term  of  years,  and  the  rent  was  partly  paid  in  advance, 
and  the  mortgagees  having  subsequently  foreclosed  the  mortgage, 
the  tenants  claimed  that  the  leases  were  valid  by  virtue  of  this 
clause.  In  construing  this  provision  in  its  application  to  the 
leases,  and  in  determining  whether  they  were  within  the  right 
reserved,  the  court  advert  to  the  purpose  for  which  the  mortgage 
was  made,  saying  that  it  was  not  made  to  secure  the  mortgagees 
their  private  claims,  but  debts  due  to  bondholders;  that  the  bonds 
were  made  to  be  sold  in  the  market,  and  were  transferable  by  de- 
livery. Tile  leases  provided  for  the  application  of  tlie  rents  to 
the  payment  for  improvements,  and  to  the  payment  of  interest 
on  bonds  of  the  corporation  held  by  the  lessees  in  a  way  to  cre- 
ate a  preference  over  the  bondholders  generally.  "  If  the  right 
to  create  such  a  preference,"  say  the  court,  "  had  been  so  clearly 
expressed  in  the  mortgage,  and  stated  in  the  certificate  on  the 
bonds,  as  that  all  parties  understood  it,  the  bonds  must  have  been 
regarded  as  unsound,  and  would  liave  had  little  or  no  market 
value.  And  if  the  parties  to  the  mortgage  intended  that  such  a 
right  should  be  reserved,  the  certificate  must  1)6  regarded  as 
fraudulent,  and  as  designed  to  give  the  bonds  a  fictitious  credit. 
It  is  impossible  to  state  a  stronger  case  of  repugnance  to  the  ob- 

'   Iluvcn  V.  Ailains,  4  Allen  (Mass.),  HO. 

G05 


§§  783,  784.]     A  lessee's  rights  and  liabilities. 

ject  of  a  grant."  It  was  therefore  decided  that  the  validity  of 
the  leases  terminated  upon  breach  of  the  condition  of  the  mort- 
gage, and  that  the  trustees  could  not,  by  an  oral  assent,  confirm 
them  so  as  to  give  them  validity  for  a  longer  time. 

783.  A  lease  made  by  the  mortgagee  in  possession  is 
necessarily  terminated  by  a  redemption  of  the  mortgage,  unless 
there  has  been  some  express  or  implied  authority  from  the  mort- 
gagor to  lease  for  a  given  time.^  But  it  has  been  held  that  if  all 
the  parties  are  before  a  court  of  chancery,  the  court  will  not  di- 
rect the  delivery  of  possession  at  a  time  that  would  work  great 
hardship  to  the  lessee.^  Ordinarily,  however,  the  mortgagor  may 
upon  redemption  treat  the  mortgagee's  tenant  as  a  trespasser,  and 
recover  possession  without  notice,  just  as  a  mortgagee  may  upon 
entry  treat  the  mortgagor's  lessee.  The  only  safety  for  a  lessee 
in  taking  a  lease  of  premises  subject  to  a  mortgage  is  to  obtain 
the  concurrent  action  of  the  mortgagor  and  mortgagee  in  the  exe- 
cution of  the  lease. 

A  mortgagee  having  neither  the  possession  nor  the  right  of 
possession  cannot  confer  either  upon  another  by  a  lease ;  and  in 
fact  he  can  convey  no  interest  by  such  lease,  save  his  bare  legal 
title,  in  states  where  the  mortgagee  has  such  title  ;  though  such  a 
lease  may  be  effectual  against  him  by  way  of  estoppel. ^ 

784.  An  assignment  by  a  mortgagee  in  possession  does  not 
transfer  any  rent  due  at  the  time  of  the  assignment  without  ex- 
press words  to  that  effect ;  nor  does  it  pass  any  right  of  action  the 
mortgagee  had  for  any  appropriation  of  the  products  of  the  land 
by  the  mortgagor  or  any  other  person.^  In  Salmon  v.  Dean^  Lord 
Chancellor  Truro,  upon  this  question,  said :  "  One  would  think 
that  this  was  a  very  ordinary  matter :  men  are  in  the  daily  habit 
of  conveying  estates,  and  if  the  by-gone  rents  in  arrear  do  not 
pass  by  a  conveyance  of  the  fee,  what  is  the  rule  of  law  that 
makes  a  difference  in  the  case  of  a  mortgage  ?  "  In  conclusion,  he 
added :  "  I  am  unable  to  understand,  having  listened  attentively 
to  the  argument,  upon  what  principle  of  law  or  equity  the  assignee 
of  a  mortgage  can  claim  the  rent  due  before  the  assignment  to 
him,  he  not  pretending  that  the  assignment  contains  any  words  of 

1  Hungerford  v.  Clay,  9  Mod.  1  ;  Wil-         *  Salmon   v.  Dean,  3  Mac.  &  G.  344 ; 
lard  V.  Harvey,  5  N.  H.  252.  Kimball  v.  Lewiston  Steam  Mill  Co.  55 

•^  Holt  V.  Rees,  46   111.  181;    S.  C.  44     Me.  494. 
111.  30.  5  Supra. 

^  Union  Mut.  Life  Ins.  Co.  v.  Lovitt,  10 
Neb.  301. 

696 


A  lessee's  rights  and  liabilities.  [§  785. 

transfer  beyond  those  incidental  to  the  transfer  of  the  mere  mort- 
gage." 

785.  A  mortgage  of  a  leasehold  estate,  being  in  law  an  as- 
signment of  the  lease,  makes  the  mortgagee  liable  upon  the 
covenants  of  the  lease  for  the  payment  of  rent,  from  the  time  of 
the  mortgage,  as  this  covenant  in  the  lease  runs  with  the  land, 
and  binds  the  party  holding  the  legal  estate.  It  makes  no  differ- 
ence whether  the  mortgagee  be  in  possession  or  not ;  if  he  is 
assignee  of  the  entire  term,  he  is  liable  on  the  real  covenants  of 
the  lease. ^  But  where,  as  in  New  York,  a  mortgage  is  considered 
as  a  mere  lien,  a  mortgagee  not  in  possession  is  not  considered  as 
an  assignee  of  the  entire  term,  and  therefore  it  is  held  that  he  is 
not  liable  for  rent  until  he  takes  possession.^  Where  the  registry 
laws  of  a  state  require  the  recording  of  a  mortgage  or  the  assign- 
ment of  it  to  make  it  valid,  if  not  recorded  it  is  ineffectual  to  pass 
the  legal  estate,  and  liability  upon  these  covenants  is  not  incurred 
by  the  person  taking  such  unrecorded  instrument.^ 

In  making  a  mortgage  of  a  leasehold  estate  it  is  often  prefer- 
able for  the  mortgagee  to  take  an  assignment  of  the  lease  for  a 
period  short  of  the  whole  term,  rather  than  a  formal  mortgage  of 
the  leasehold  estate  which  amounts  to  an  assignment  of  the  whole 
term,  and  makes  the  mortgagee  liable  upon  the  covenants  of  the 
lease,  although  he  does  not  enter  into  possession  of  the  property. 
A  lease  or  an  assignment  of  the  rents  for  a  period  short  of  the 
whole  term  subjects  him  to  no  such  liability  ;  but  on  the  other 
hand,  it  is  not  so  complete  a  security,  especially  as  it  leaves  the 
mortgagor  in  a  position  to  forfeit  and  defeat  the  estate.  There- 
fore, in  taking  security  upon  a  leasehold  estate,  the  mode  of  effect- 
ing it  is  a  matter  to  be  determined  according  to  the  circumstances 
of  the  case. 

If  a  lessee  assign  his  estate  by  way  of  mortgage,  the  assignee 
is  liable  on  the  covenants  of  the  lease  to  pay  rent,  although  he 
does  not  actually  enter  and  take  possession  under  the  mortgage  ; 
but  he  is  only  liable  for  the  rent  which  accrues  after  the  taking  of 
the  mortgage.     The  covenants  of  the  lease  running  with  the  land, 

1  ■VVilliiinis  y.  Bosanquet,   1   Brod.  &  B.  kins,  l.";  Vt.  479 ;  Kiirmi-rs'  ]5iuik  r.  Miit. 

238,  overruling  Kutori  v.  Jjkiuch,  2  Duuj;.  Assurance  Soc.  4  Leigli  (Va.),  r.'J. 
45.'),    wiierc   Lonl    Man.sfiold   held   tliat  a         -  Walton   r.  Cronly,   14  Wend.  (N.  Y.) 

mortgagee  out  of  poHseH^ion  was  not  lia-  G3  ;  Aslor  r.  Miller,  2  I'aige  (N.  Y.),  68; 

ble.     SecCalverti;.  Bradley,  10  How.  580;  Aslor   v.    lloyt,   5    Wend.    (N.  Y.)  603; 

Lester  v.  Ilardesty,  2'J  Md.  50;  Mayliew  CliildH  v.  Clark,  3  Barb.  (N.  Y.)  Cli.  52. 
I'.  Hardebty,  8  Md.  47'.);   I'ingrey  v.  Wat-         •'  Lester  v.  Ilardesty,  supra. 

697 


§  785.]  A  lessee's  rights  and  liabilities. 

it  is  regarded  as  a  necessary  consequence  that  the  mortgagee,  by 
becoming  vested  of  the  whole  legal  estate,  is  liable  for  the  per- 
formance of  the  covenants,^ 

The  making  of  a  mortgage  of  a  leasehold  estate  is  a  breach  of 
a  covenant  not  to  assign,  except,  perhaps,  where  a  mortgage  is 
regarded  as  a  mere  lien,  and  not  a  transfer  of  title.^ 

The  mortgagee  of  a  leasehold  estate  is  entitled,  iu  the  absence 
of  any  stipulation  to  the  contrary,  to  all  rents  that  subsequently 
become  due,  and  may  maintain  an  action  against  the  tenants  to 
recover  them  ;  but  he  has  no  right  to  the  rents  that  were  due  at 
the  time  of  the  grant  to  him  of  the  reversion.^ 

The  mortgagee  is  entitled  to  the  benefit  of  any  covenants  con- 
tained in  the  lease  for  a  renewal  of  it,  and  his  lien  attaches  to  the 
renewed  lease.* 

1  M'Murphy  v.  Minot,  4  N.  H.  251.  *  Slee  i;.  Manhattan  Co.  1  Paige  (N.  Y.), 

2  RigKs  V.  Pnrsell,  66  N.  Y.  193.  48. 

3  Burden  v.  Thayer,  3  Met.  (Mass.)  76. 

698 


CHAPTER   XIX. 


ASSIGNMENT    OF    MORTGAGES. 


T.  A  formal  assignment,  786-791. 
II.  Wliether    an    assijrnment    may    be 
compelled,  792,  793. 

III.  Who    may    make    an    assignment, 

794-803. 

IV.  What    constitutes    an    assignment, 

804-812. 


V.  Equitable  assignments,  813-822. 
VI.  Construction  and   effect  of  assign- 
ments, 823-833. 
VII.  Whether  an  assignee  takes  subject 
to  equities,  834-847. 


I.  A  Formal  Assignment. 

786.  Form  of  assignment.  —  An  assignment  of  a  mortgage 
is  usually  effected  by  a  brief  form  in  which  the  mortgage  is  iden- 
tified by  a  recital  of  the  names  of  the  parties  to  it,  of  its  date, 
and  of  the  book  and  page  in  the  registry  where  it  is  recorded, 
without  any  other  description  of  the  property.  If  the  refei-ence 
to  the  mortgage  is  so  deficient  that  the  register  cannot  tell  by  the 
description  what  mortgage  is  intended,  and  therefore  omits  to 
make  the  usual  reference  to  the  assignment  on  the  margin  of  tlie 
record  of  the  mortgage,  the  assignee  may  lose  all  benefit  of  the 
record.^  It  is  usual  to  deliver  with  the  assignment  the  original 
mortgage ;  but  this  is  not  essential.^  It  is,  however,  essential  to 
a  formal  and  complete  assignment  that  the  note  or  bond  secured 
by  the  mortgage  should  be  indorsed  or  otherwise  assigned,  and 
delivered  with  the  assignment;  or,  at  any  rate,  that  an  intention 
should  be  manifest  to  assign  the  mortgage  debt,  to  which  the 
mortgage  is  only  an  incident ;  otherwise  the  assignment  will  only 
pass  a  naked  legal  title  to  the  land. 

The  deed  of  assignment  sometimes  contains  a  covenant  bv  the 
a.ssignor  that  he  has  good  right  and  lawful  authority  to  sell  and 
convey  the  mortgage.  This  is  a  covenant  that  the  mortgage  is  an 
e.xisting  lien,  as  well  as  hiwfuUy  transferred,  and  it  is  broken  by 
the  existence  of  a  pnnious  releas(;  of  the  security,  or  of  any  defect 
in  it  which  inijiiiir.s  or  destroys  it  as  an  elVet^tive  mortgage.^ 


1  Moore  v.  Sionn,  50  Barb.  (N.  Y.)  442. 

2  Warden  v.  AdamH,  15  Mhh.s.  233. 


'  Hyk'8  V.  Lawrence,  35  Midi.  458. 

G9U 


§  787.] 


ASSIGNMENT    OF   MORTGAGES. 


787.  The  legal  title  to  a  mortgage  can  only  be  transferred 
by  deed,i  except  in  those  states  where  the  common  law  character 
of  the  mortgage  as  an  estate  in  land  has  given  place  to  the  doc- 
trine that  the  mortgage  is  a  mere  chattel  interest. 

An  assignment,  though  indorsed  upon  the  mortgage  and  de- 
livered with  it,  if  not  under  seal,  conveys  only  an  equitable  inter- 
est.2  It  does  not  pass  the  legal  estate,  though  it  will  authorize 
the  assignee  to  enforce  the  mortgage  in  equity.'^  It  must  also 
contain  the  words  necessai-y  in  an  ordinary  deed  of  land  to  pass 
the  legal  estate,  as,  for  instance,  words  of  grant.* 

An  assignment  by  deed  puts  the  assignee  in  the  place  of  the 
mortgagee.  It  is  2pso  facto  a  transfer  of  the  premises  covered 
by  the  mortgage.^  It  passes  the  legal  estate,  and  enables  the 
assignee  to  foreclose  in  his  own  name.  The  mortgagee  has  no 
longer  any  right  or  interest  in,  or  claim  to,  the  lands  mortgaged, 
and  an  action  in  his  name  in  respect  to  them  can  be  no  longer 
maintained.^ 

If  the  assignment  in  terms  assigns  the  mortgage  deed  and  the 


1  Massachusetts  :  Warden  v.  Adams,  15 
Mass.  233;  Adams  v.  Parker,  12  Gray, 
53.  Maine:  Douglass  v.  Durin,  51  Me. 
121 ;  Smith  v.  Kelley,  27  Me.  237  ;  Dork- 
ray  V.  Noble,  8  Me.  278  ;  Dwinel  v.  Peiley, 
32  Me.  197;  Lyford  v.  Ross,  33  Me.  197  ; 
Warren  v.  Homestead,  33  Me.  256.  In- 
diana :  Givan  v.  Doe,  7  Blackf.  210  ;  Bur- 
ton v.  Baxter,  lb.  297.  Texas  :  Henderson 
V.  Pilgrim,  22  Tex.  464,  478.  Vermont : 
Torrey  v.  Deavitt,  53  Vt.  331.     Althoujrh 


and  tliat  the  assignee  may  sue  in  his  own 
name.  The  assignment  must  be  in  writ- 
ing, but  need  not  be  under  seal.  Nixon's 
Dig.  p.  613;  Mulford  v.  Peterson,  35  N. 
J.  L.  127. 

In  Pennsylvania,  also,  it  is  provided  that 
an  assignee  may  maintain  scire  facias,  or 
other  suit,  upon  a  mortgage  and  bond  in 
his  own  name;  but  the  assignment  should 
be  a  formal  one,  under  seal,  and  attested 
by  two  witnesses.     1  Brightly's  Purdon's 


the  language  of  the  assignment  creates  a     Dig.  p.  485 ;  and  see  Twitchell  v.  McMur- 

trie,  77  Pa.  St.  383.  Although  a  formal 
assignment  passes  the  legal  estate,  and  the 
assignee  may  sue  in  his  own  name,  yet  a 
mortgage  is  not  considered  a  conveyance 
of  real  estate,  except  in  form,  while  it  is 
in  fact  only  a  security  for  money.  Mc- 
Candless  v.  Engle,  51  Pa.  St.  309. 

In  Dakota  Territory  an  assignee  cannot 
foreclose  a  mortgage  under  a  power  with- 
out a  written  assignment,  duly  executed, 
acknowledged,  and  recorded.  Civ.  Code, 
§  313  ;  Hickey  v.  Richards,  3  Dak.  345. 

6  Hills  V.  Eliot,  12  Mass.  26;  Wiley  v. 
Williamson,  68  Me.  71. 

6  Gould  V.  Newman,  6  Mass.  239.  See 
Reading  of  Judge  Trowbridge,  8  Mass. 
554;  Pryor  v.  Wood,  31  Pa.  St.  142. 


trust  in  the  assignee,  if  it  vests  in  him  the 
legal  title  he  can  foreclose  it.  Phelps  v. 
Townsley,  10  Allen  (Mass.),  554.  North 
Carolina :  Williams  v.  Teachey,  85  N.  C. 
402. 

2  Adams  v.  Parker,  supra. 

3  Kinna  v.  Smith,  3  N.  J.  Eq.  14. 

*  Cottrell  V.  Adams,  2  Biss.  351 ;  Wil- 
liams V.  Teachey,  supra.  The  proper 
technical  words  of  an  assignment  are  "  as- 
sign, transfer,  and  set  over."  But  the 
words  "  give,  grant,  bargain,  and  sell,"  or 
any  other  words  which  show  the  intent  of 
the  parlies  to  make  a  complete  transfer, 
will  amount  to  an  assignment. 

In  New  Jersey  it  is  provided  by  statute 
that  mortgages  shall  be  assignable  at  law, 

700 


A   FORMAL   ASSIGNMENT.  [§  788. 

debt  thereby  secured,  it  is  an  assignment  of  the  entire  mortgage, 
and  not  merely  of  the  mortgagee's  interest  in  it  not  previously 
conveyed,  although  it  contains  the  language,  "and  all  my  right, 
title,  and  interest  in  the  premises  therein  described."  This  lan- 
guage does  not  operate  as  it  might  in  a  common  deed  of  convey- 
ance to  give  precedence  to  prior  unrecorded  deeds  of  the  same 
property.^ 

The  second  or  third,  or  any  subsequent  assignee,  taking  the 
mortgage  and  note  before  maturity,  takes  the  same  estate  and  the 
same  risfhts  that  the  first  assignee  had.- 

788.  Consideration.  —  Whether  the  assignee  of  a  mortgage 
has  paid  value  for  it  or  not  does  not  concern  the  mortgagor,  ex- 
cept in  reference  to  his  interposing  an  equitable  defence  in  the 
way  of  payment  or  set-off."^  Although  the  assignee  has  purchased 
the  mortgage  for  less  than  the  amount  due  upon  it,  it  is  none  the 
less  a  valid  security  for  the  entire  debt.*  An  assignment  to  an 
attorney,  for  the  purpose  of  enforcing  collection  of  the  mortgage 
debt,  is  a  valid  assignment,  and  passes  the  legal  title  with  the 
right  to  exercise  the  power  of  sale  given  by  the  mortgage.^  But 
one  who  buys  a  note  and  mortgage  which  are  not  delivered  to 
him,  making  only  a  nominal  payment  prior  to  his  receiving  notice 
that  they  belong  to  another,  is  not  entitled  to  protection  as  a  lond 
fide  purchaser.^ 

Where  a  mortgagor  who  has  given  a  mortgage  to  secure  a  loan 
is  informed  by  the  mortgagee  that  he  wishes  to  assign  the  mort- 
gage to  a  creditor  of  his  own,  and  the  mortgagor  makes  no  objec- 
tion, he  is  estopped  from  denying  that  the  assignment  was  made 
to  secure  the  mortgagee's  own  debt,  and  claiming  that  it  was  to 
secure  an  indebtedness  of  his  own  to  the  assignee.*^ 

Neither  the  mortgagor  nor  a  purchaser  subject  to  the  mortgage 
can  redeem  except  by  paying  the  amount  due  on  the  mortgage. 
If  a  mortgage  be  made  without  consideration  for  the  purpose  of 
being  negotiated,  the  price  paid  by  the  assignee  becomes  the  con- 
sideration of  the  mortgage,  and    makes  it  a  valid  security.^     The 

1  Wiley  V.  Williamson,  68  Me.  71.  see  Dresser  v.  Mo.  &  Iowa  l{y.  Construc- 

2  Iloitt  V.  Webb,  36  N.  II.  158.  tion  Co.  93  U.  S.  92;  Campbell  v.  Uoacli, 
«  Adair  v.  Adair,  5  Mich.  204.  45  Alii.  667 ;  Weaver  v.  Bardcu,  49  N.  Y. 
*  Warner  i-.   Gouverneur,  1   Barb.  (N.     286,291. 

Y.)36;  Knox  v.  Galli;,'an,  21    Wis.  470;  ^  Matthews   v.    Warner,  33  Fed.  Kep. 

Pease  i;.  Benson,  28  Me.  336.  369. 

'^  KusHum  V.  Wanscr,  53  Mil.  92.  "»  Croft  v.  Btinstcr,  9  Wis.  503 ;  Sciiafer 

«  Hacscig  V.  Brown,  34  Mich.  503;  and  »-.  Heilly,  50  N.  V.  61. 


01 


§  789.]  ASSIGNMENT    OF   MORTGAGES. 

assignee  is  not,  however,  bound  to  see  that  the  money  he  pays 
for  it  is  appHed  to  the  use  of  the  mortgagor.^ 

The  rule  adopted  in  some  states,  that  a  mortgage  to  secure  a 
preexisting  debt  does  not  constitute  the  mortgagee  a  bond  fide 
purchaser  for  vahie,  is  in  those  states  applied  to  assignments  of 
mortgages  ;  and  to  the  extent  to  which  a  preexisting  debt  is  the 
consideration  of  an  assignment,  the  assignee  is  not  a  purchaser  for 
value.2 

When  any  consideration  is  necessary  to  support  an  assignment, 
the  forbearance  of  a  creditor,  and  his  extension  of  the  time  of  pay- 
ment, is  sufficient.^ 

789.  After  a  mortgagee  has  been  disseised  he  cannot  make 
a  valid  assignment.  In  this  respect  the  general  doctrine  applies 
that  a  disseisee,  without  an  entry  and  delivery  of  the  deed  on  the 
land,  cannot  convey  a  title  valid  as  against  the  disseisor.'*  Ordi- 
narily, however,  the  possession  of  the  mortgagor  is  the  possession 
of  the  mortgagee,  and  is  not  adverse  ;  and  such  possession  is  there- 
fore no  obstacle  to  an  assignment.^  Even  exclusive  possession  by 
the  mortgagor,  with  a  claim  of  exclusive  ownership,  does  not  of 
itself  amount  to  a  disseisin  of  the  mortgagee.  The  possession  of 
the  mortgagor  being  the  possession  of  the  mortgagee,  it  follows 
that  the  disseisin  of  the  mortgagor  is  the  disseisin  of  the  mort- 
gagee, and  so  long  as  the  disseisor  is  in  possession,  the  mortgagee 
cannot  pass  his  interest  in  the  land  by  a  deed  of  assignment.^ 
From  the  disseisin  of  the  mortgagor  an  intent  to  disseise  the  mort- 
gagee,  who  holds  under  him,  follows  as  a  matter  of  course,  unless 
the  disseisor  expressly  recognizes  the  mortgagee's  title." 

A  second  mortgagee  may  make  a  valid  assignment  of  his  inter- 
est, although  he  has  at  the  time  been  ousted  from  possession  by 
one  claiming  under  a  prior  mortgage  from  the  same  mortgagor.^ 

In  New  Hampshire  it  is  a  settled  rule  that  a  conveyance,  as 
distinguished  from  an  assignment,  by  a  mortgagee  not  in  posses- 

1  Westervelt  v.  Scott,  11  N.  J.  Eq.  (3  Sheridan  v.  Welch,  8  Allen,  166;  and  see 

Stockt.)  80;  McCurdy  v.  Agnew,  8  N.  J.  James  v.  Morey,  2  Cow.  (N.  Y.)  246;  Con- 

Eq.  (4  Halst.)  733.  verse  v.  Searls,  10  Vt.  578 ;  Gould  v.  New- 

^  Yates  County  Nat.  Bank  r.  Baldwin,  man,   6    Mass.   239;    Beading  of  Judge 

43  Hun  {N.  Y.),  136.  Trowbridge,  8  Mass.  554. 

3  Worcester  Nat.  Bank  v.  Cheeney,  87  ^  Poignard  v.   Smith,  8  Pick.  (Mass.) 

Bl.  602.  272;  S.  C.  6  lb.  172. 

*  Dadmun  v.  Lamson,  9  Allen  (Mass.),  ^  Dadmun  v.  Lamson,  supra ;  Lincoln 

85;  Hunt  v.  Hunt,  14  Pick.  (Mass.)  374,  v.  Emerson,  108  Mass.  87. 

385.  8  Nichols  v.  lleynolds,  1  R.  I.  30. 

6  Murray  v.  Blackledge,  71  N.  C.  492; 
702 


A    FORMAL   ASSIGNMENT.  [§§  790,  791. 

sion,  does  not  pass  the  debt  secured  by  the  mortgage,  and  does  not 
pass  any  interest  in  the  land  ;  but  a  devise  of  his  interest  in  the 
mortgaged  premises  passes  the  debt  secured.  The  intention  of  the 
testator  governs  the  construction  of  the  will.^ 

790.  Delivery  is,  of  course,  as  essential  to  the  validity  of  an 
assignment  of  a  mortgage  as  it  is  to  the  validity  of  the  mortgage 
itself ;  and  therefore  if  it  be  executed  and  acknowledged,  and 
made  complete  in  every  other  way,  if  it  be  not  delivered  to  the 
assignee  it  amounts  to  nothing.^  A  second  assignment  to  a  bond 
fide  purchaser  after  a  previous  assignment  not  delivered,  thougli 
recorded,  is  entitled  to  priority.^  To  constitute  a  delivery  of  an 
assignment,  an  intention  to  pass  the  property  in  the  debt  and 
mortgage  must  be  shown.  A  request  by  the  assignor  to  the 
assignee  to  have  the  assignment  recorded  as  soon  as  the  former 
should  die,  when  it  is  shown  that  the  assignee  did  not  have  ex- 
clusive control  of  it,  but  that  the  assignor  collected  interest  on  the 
mortgage,  and  otherwise  treated  it  as  his  own  property,  and  never 
indorsed  or  delivered  the  mortgage  note,  makes  manifest  an  inten- 
tion that  the  assignment  should  not  be  operative  until  the  death 
of  the  assignor ;  and  consequently  it  is  a  nullity  as  being  incon- 
sistent with  the  statute  of  wills.^ 

If  a  mortgagee  executes  and  acknowledges  an  assignment  in 
blank,  and  authorizes  an  agent  to  find  a  purchaser  and  fill  in  the 
purchaser's  name,  and  the  agent  delivers  it  to  the  purchaser,  who 
has  no  knowledge  of  the  agent's  filling  up  the  blank,  the  assign- 
ment is  valid.'^ 

791.  The  assignee  of  a  mortgage,  as  a  practical  matter, 
should  always  give  notice  of  the  assignment  to  the  mortgagor, 
so  as  to  surely  protect  himself  against  payments  which  may  be 
made  in  good  faith  to  the  assignor.  The  recording  of  the  assign- 
ment is  not  of  itself  notice  of  such  assignment  to  the  mortgagor, 
his  heirs  or  personal  representatives.'^     It  is  so  declared  by  statute 

1  Clark  V.  Clark,  56   N.   II.   105,   and  ren  v.  Corkins,  6  Tliomp.  &  C.  (N.  Y  ) 

cases  cited.     See  §  808.  355;  S.   C.  4  Ilun,   129;  G6  N.   Y.  77; 

-  Hose  V.  Kimball,   16  N.  J.  Eq.  185;  James  v.  Johnson,  6  Johns.  (N.  Y.)  Ch. 

Uuckmari  v.  Ruckmaii,  33  N.  J.  Kij.  354  ;  417    427  ;  James  v.  Morey,  2  Cow.  246  ; 

Kankin  v.  Major,  0  lown,  297.  N.  Y.  Life  Ins.  &  Trust  Co.  v.  Smith,  2 

3  Brown  v.  Johnston,  7  Abb.  (N.  Y.)  Barb.  (N.  Y.)  Ch.  82;  Union  College  v. 

N.  C.  IBS.  Wheeler,  61    N.  Y.  88,    111  ;  Johnson  i;. 

*  ShurtlelTi;.  Francis,  118  Mas^s.  154.  Carjjenter,  7  Minn.  176;  Iloratman  r.  Gcr- 

■'  rhelj)S  V.  Sullivan,  140  .Mass.  36  ;  54  ker,  49  Pa.   St.  282  ;  HeevcH  i;.  Haves,  95 

Am.  Hep.  442.  Ind.  521,537;  Perkins  c.  Matteson(Kans.), 

•■'  See  §§  472,  956,  961  ;  Heed  i-.  Mar  19  Pac.  Hep.  63.!. 

ble,  10  Paige  (N.  V.),  409,  416;  Van  Keu-  7U;j 


§  792.]  ASSIGNMENT   OF   MORTGAGES. 

in  several  states  ;  ^  but  the  statute  does  not  apply  to  a  purchaser 
of  the  equity  of  redemption.  He  is  chargeable  with  notice  of 
an  assignment  which  has  been  recorded  prior  to  his  purchase.^ 
If  the  mortgage  secure  a  bond  or  other  non-negotiable  instrument, 
the  fact  that  the  mortgagor,  in  paying  an  instalment  of  the  inter- 
est or  principal,  does  not  require  the  production  of  the  mortgage 
bond,  for  the  purpose  of  having  the  payment  indorsed  upon  it, 
does  not  raise  a  presumption  of  bad  faith  on  his  part ;  and  under 
some  circumstances  no  such  presumption  would  arise  from  his 
omission  to  require  a  delivery  up  of  the  securities,  upon  paying  off 
the  whole  amount  of  the  mortgage  debt ;  ^  though  under  other 
circumstances  such  omission  would  make  him  chargeable  with 
knowledge  of  a  prior  transfer,  and  would  make  the  payment  inef- 
fectual.^ If  the  assignee  of  a  mortgage  fails  to  give  notice  of  the 
assignment,  and  so  acts  as  to  authorize  the  mortgagor  to  believe 
that  the  mortgagee  is  still  the  owner  of  it,  he  is  estopped  from 
denying  the  right  of  the  mortgagor  to  deal  with  the  mortgagee 
as  the  owner.^ 

A  partner  made  a  note  and  mortgage  to  his  copartner  for  the 
benefit  of  the  firm,  and  the  latter  assigned  the  mortgage  to  his 
wife.  About  a  year  afterwards  the  affairs  of  the  partnership 
were  settled,  and  the  mortgagor  paid  his  share  of  the  mortgage 
to  the  mortgagee,  having  no  notice  of  the  assignment,  and  the 
mortgagee  promised  to  discharge  the  mortgage.  The  assignment 
was  not  recorded  till  several  years  afterwards.  It  was  held  that 
the  mortgagor  was  entitled  to  a  cancellation  and  discharge  of  the 
mortgage.^ 

II.    Whether  an  Assignment  may  be  compelled. 

792.  A  mortgagee  cannot  be  compelled  in  equity  to  assign 
his  mortgage,  on  receiving  payment,  in  order  that  subsequent 
parties  in  interest  may  adjust  their  respective  rights.  He  is  enti- 
tled to  be  paid,  or  to  proceed  to  foreclosure,  without  being  obliged 
to  investigate  titles  arising  after  his  own.  He  may  release  his 
interest  on  receiving  payment,  and  leave  after  claimants  to  the 

1  See  §  473.  7  N.  Y.  141  ;  Doubleday  v.  Kress,  50  N.  Y. 

2  See  §  472;  Brewster  v.  Carnes,  103  410;  Foster  ?;.  Beals,  21  N.  Y.  247 ;  Mitch- 
N.  Y.  556;  9  N.  E.  Kep.  323.  ell  v.  Cook,  17  How.  (N.  Y.)  Pr.  110;  S. 

3  VanKeuren  v.  Corkins,  6  Thomp.  &  C.  29  Barb.  243;  Burhans  v.  Hutcheson, 
C.  (N.  Y.)  355 ;  Hubbard  v.  Turner,  2  Mc-  25  Kans.  625. 

Lean,  519.  ^  McCabe  v  Farusworth,  27  Mich.  52. 

^  §§  956,  961  ;  Brown  v.  Blydenburgh,         «  Ingalls   v.  Bond  (Mich.),  33   N.  W. 
704  Rep.  404. 


WHETHER   AN   ASSIGNMENT   MAY   BE    COMPELLED.         [§  792. 

preferences  which  their  respective  titles  give  them  wlien  his  mort- 
gage is  discharged.^ 

A  mortgagee  is  not  bound  to  protect  other  parties  who  have 
interests  in  the  property  by  assigning  his  mortgage  to  any  one. 
His  whole  duty  is  peiformed  by  releasing  his  interest  on  receiving 
payment.  When,  therefore,  the  equity  of  redemption  of  a  bank- 
rupt had  been  sold  by  his  assignee,  but  the  bankrupt  and  his 
wife  having  a  homestead,  and  the  wife  an  inchoate  right  of  dower, 
sought  to  obtain  an  assignment  of  the  mortgage  so  that  it  might 
continue  as  security  for  the  amount  paid,  it  was  held  that  they 
were  not  entitled  to  an  assignment,  which  their  bill  prayed  for, 
but  that  the  bill  might  be  maintained  as  a  bill  to  redeem.^  Any 
one  having  a  subsequent  incumbrance  upon  the  mortgaged  estate 
can  protect  his  interest,  by  paying  the  prior  mortgage  when  it  is 
due,  and  he  thereupon  succeeds  by  subrogation,  on  settled  prin- 
ciples of  equity,  to  the  rights  and  interests  of  such  prior  mort- 
gagee in  the  lands,  as  security  for  the  amount  so  paid,  without 
any  assignment  or  transfer  by  the  prior  mortgagee.  He  is  not 
entitled  to  an  assignment.^ 

The  mere  fact  that  one  has  a  right  to  redeem  a  mortgage  does 
not  enable  him  to  compel  an  assignment  of  it  to  himself.  There 
must  be  some  equitable  reason  for  it,  as  that  the  redeeming  party 
is  in  the  position  of  a  surety  and  is  entitled  to  be  subrogated  to 
the  position  of  the  holder  of  the  mortgage  ;  or  that  the  mort- 
gagee or  the  mortgagor,  or  both  of  them,  were  about  to  do  some- 
thing to  injure  or  destroy  the  security.* 

1  Butler  r.  Taylor,  5  Gray  (Mass.), 455.  demption.  Pardee  v.  Van  Aiikcii,3  Barb. 
See  §  1086.  Othorwise  in  New  York:  Cole  (N.  Y.)  534,  536;  Jenkins  v.  Continental 
V.  Malcolm,  66  N.  Y.  363  ;  Frost  r.  Yon-  Ins.  Co.  12  IIow.  (N.  Y.)  Pr.  66.  After  a 
kers  Sav.  Bank,  70  N.  Y.  553.  review  of  the  cases  upon  this  point  in  New 

2  Lamb  v.  Monta-ue,  112  Mass.  352;  York,  Sutherland,  J.,  said,  in  Ellsworth 
Butler  V.  Taylor,  supra,-  and  see  McCabe  v.  Lockwood,  supra:  "  Ujion  the  whole,  I 
V.  Bellows,  7  Gray  (Mass.),  148,  as  to  re-  do  not  think  it  can  be  said  to  bo  the  law 
quirement  that  the  whole  mortgage  be  of  this  state,  that  the  right  to  redtem  a 
redeemed.  mortgage,  that  is,  the  right  to  compel  the 

3  Ellsworth  V.  Lockwood,  42  N.  Y.  89,  holder  of  it  to  accept  or  receive  payment 
96,  and  cases  cited;  Burnet  v.  Deuniston,  of  it,  after  it  is  due  and  payable,  cavrie-s 
5  Johns.  (N.  Y.)  Ch.  35  ;  Hubbard  i-.  As-  with  it  the  right,  upon  such  redemption,  to 
cutney  Mill  IJam  Co.  20  Vt.  402.  an  assignment  of  the  mortgage,  and  of  the 

*  Ellsworth  V.  Lockwood,  supra  ;  Van-  bond  or  other   iiiNtrnmcnt  evidencing  the 

dercook  v.  Cohoes  Sav.  Inst.  5  Ilun   (N.  mortgage  debt,  or  of  cither,  unlc>H  the  re- 

Y.),    641.     It   has    been   erroneously   as-  deeming  party  has  the  position  of  surety, 

sumed  in    some   cases    that    the  right    to  or  can  be  regarded  as  surety  (or  the  niort- 

compel  an  assi;:nment  of  a  prior  mortgage  gage  debt." 
and  the  debt  flows  from  the  right  of  re- 

voL,  I.  45  YQg 


i5§  793,  794.]  ASSIGNMENT    OF   MORTGAGES. 

793.  Sometimes  an  assignment  may  be  compelled  in  a 
court  of  equity.  This  has  often  been  done  in  New  York  for  the 
protection  of  a  surety,  or  junior  incumbrancer,  though  not  occu- 
pying the  position  of  a  surety,  when  in  other  states  he  would  be 
protected  under  the  general  principles  of  subrogation.^ 

For  instance,  when  the  mortgagor  has  conveyed  the  premises 
subject  to  the  mortgage,  and  the  holder  of  the  mortgage  after- 
wards attempts  to  enforce  it  against  him,  he  is  entitled  to  be 
subrogated  to  the  position  of  the  holder,  who  may  thereupon  be 
ordered  to  assign  the  bond  and  mortgage  to  him,  or  to  a  third  per- 
son for  his  benefit,  on  receiving  the  amount  due  upon  it.^  "  This 
cannot  prejudice  the  creditor,  and  it  is  clearly  equitable  as  be- 
tween the  debtor  and  the  owner  of  the  land.  He  clearly  has  no 
right,  or  color  of  right,  justice,  or  equity  to  claim  that  he,  not- 
withstanding the  conveyance  of  the  property  subject  to  the  mort- 
gage, and  thus  entitling  him  only  to  its  value  over  and  above  it, 
should  in  fact  enjoy  and  hold  it  discharged  of  the  incumbrance 
without  any  contribution  toward  its  discharge  and  satisfaction 
from  the  land.  "^  It  is  proper,  too,  that  the  assignment  should 
be  made  to  another  person  for  the  benefit  of  the  mortgagor. 

An  assignment  in  such  cases  furnishes  the  only  complete  pro- 
tection, for  if  the  mortgagee  should  cancel  the  mortgage  upon  the 
record,  or  release  the  mortgaged  premises  upon  receiving  pay- 
ment, the  owner  of  the  equity  of  redemption  might  sell  the  prop- 
erty to  a  bond  fide  purchaser,  or  a  creditor  of  his  might  attach  it 
or  levy  an  execution  upon  it. 

III.    Who  may  make  an  Assignment. 

794.  A  mortgage  made  to  two  persons  jointly,  to  secure  a 
note  payable  to  them  jointly,  may  be  assigned  by  one  of  them  in 
the  name  of  both  ;  but  if  it  secures  separate  debts,  both  must  join 
in  an  assignment.^  Where  a  mortgage  note  was  indorsed  to  two 
persons,  each  was  regarded  as  entitled  to  one  half  interest  in  the 
note  and  the  proceeds  of  it,  and  was  held  to  be  incapable  of  trans- 

^  §  1087.  For  other  cases  in  which  an  assignment 

2  Johnson   v.   Zink,    52   Barb.  (N.  Y.)  may  be  compelled  in  equity,  see  Lyon's 

396;  <§.  C.  51  N.  Y.  333;  Baker  v.  Ter-  Appeal,  61  Pa.  St.  15. 

rell,  8   Minn.  195.     See,  also.  Mount   v.  '^  Per  Chief  Commissioner  Lott,  on  ap- 

Suydam,  4  Sandf.  (N.  Y.)  Ch.  399.  peal,  in  Johnson  v.  Zink,  supra. 

To  be  entitled  to  an   as-ignment,  one  *  Bruce  v.   Bonney,   12    Gray  (Mass.), 

must  be  the  holder  of  the  next  lien.    Bishop  107,110.     See  §  135. 

V.  Ogden,  9  Phila.  (Pa.)  524. 

706 


WHO   MAY    MAKE   AN    ASSIGNMENT.  [§§  795,  796. 

ferring  any  other  or  greater  interest.^  Where  a  mortgage  is  made 
to  two  or  more  persons,  and  one  of  them  dies,  it  would  seera  that 
if  the  mortgage  was  given  to  secure  a  joint  debt,  the  survivor  or 
survivors  might  assign  the  mortgage;  but  if  given  to  secure  sep- 
arate debts  or  obligations,  it  is  necessary  to  join  the  representa- 
tives of  the  deceased  mortgagee.^ 

795.  One  of  several  trustees  who  hold  a  mortgage  cannot 
make  a  valid  assignment  of  it.  All  must  join.^  On  the  death 
of  one  trustee,  the  survivors  succeed  to  the  rights  to  which  all  of 
them  were  before  jointly  entitled.  But  a  mere  abandonment  or 
mismanagement  of  a  trust,  by  one  trustee,  does  not  divest  his 
legal  interest  in  the  trust  property  and  transfer  it  to  the  other 
trustees.  Such  transfer  can  be  made  only  by  deed,  or  by  some 
legal  process.^ 

A  legatee  to  whom  a  mortgage  has  been  specifically  bequeathed, 
or  bequeathed  in  general  as  a  part  of  the  testator's  personal  prop- 
erty, to  hold  for  life,  with  remainder  over  to  others  after  the  death 
of  the  first  taker,  may  make  a  valid  assignment  of  the  mortgage, 
inasmuch  as  such  a  sale  may  be  necessary  in  order  to  obtain  the 
income  and  protect  the  property  from  loss.^ 

796.  An  executor  or  administrator  can  generally  assign  a 
mortgage  without  a  license  for  that  purpose,  inasmuch  as  a 
mortgage  is  regarded  as  only  a  chattel  interest,  which  immedi- 
ately vests  in  the  personal  representative  of  the  mortgagee  upon 
his  decease.^ 

When  a  mortgage  has  been  foreclosed  in  the  hands  of  an  exec- 

1  Herring  v.  Woodhull,  29  111.  92.  «  Ladd  v.  Wiggin,  35  N.  H.  421 ;  Ex 

^  Gilson   r.   Gilson,   2    Allen    (Mass.),  ;?ar<e  Blair,  13  Met.  (Mass.)  126;  Crooker 

115,    117;    Blake   v.    Sanborn,    8    Gray  i;.  Jewell,  31  Me.  306 ;  Baldwin  v.  Hatch- 

(Mass),  155;  Burnett  v.  Pratt,  22  Pick,  ett,    56    Ala.    461;    Libby    v.   Mayberry 

(Mass.)  556.  (Me.),    13    Atl.   Rep.   577  ;    Williams    v. 

8  Austin  V.    Shaw,   10    Allen   (Mass.),  Teachcy,  85  N.  C.  402. 

552;   Webster  v.    Vandeventer,    6   Gray  In  Massachusetts,  by  statute  1788,  ch. 

(Mass.),  428;  Wilbur  v.  Almy,   12   How.  51,  §  1,  sale  of  a  mortgage  might  be  made 

180.  by  an  executor  or  administrator  witliout 

*  Webster  v.  Vandeventer,  supra.  In  licen.se  of  the  Probate  Court,  in  case  tlie 
this  ca.«e  one  of  tlie  jjersons  to  whom,  "as  mortgagee  had  died  "  before  recovery  of 
trustees  of  the  society  of  Shakers  in  En-  seisin  and  possession."  The  IJev.  Stat, 
field,"  a  mortgage  had  been  assigned,  had  1836,  ch.  65,  §§  11,  14,  rendered  such 
left  the  society  and  moved  away,  and  en-  license  necessary.  Ex  parte.  Blair,  supra. 
gaged  in  other  business.  He  had,  more-  But  by  statute  1849,  ch.  47,  Gen.  Stat, 
over,  received  a  large  sum  of  money  ch.  96,  §  12,  and  ch.  98,  §  5,  autliority 
from  the  society  in  consideration  of  his  was  given  to  ninke  the  sale  without 
claims.  license. 

*  Sutphcn  V.  Kllis,  35  Mich.  440  ;    and 

see  Proctor  v.  Robinson,  lb.  284.  '  ^7 


§  796  05-798.]  ASSIGNMENT   OF   MORTGAGES. 

utor  or  administrator,  the  chattel  interest  of  the  mortgage  has 
then  become  real  estate,  and  he  should  obtain  a  license  of  court 
before  selling  the  premises ;  yet  in  such  case  a  conveyance  by  him 
without  license  would  not  be  void,  but  only  voidable  by  the  heirs 
or  creditors  of  the  deceased.^ 

796  a.  In  general  one  of  two  or  more  executors  or  admin- 
istrators may  make  a  valid  assignment  of  a  mortgage  without 
the  others  joining  in  the  act  of  transfer  ;  ^  and  this  rule  has  been 
held  to  apply  as  well  to  a  mortgage  taken  by  executors  in  their 
own  names  as  such,  after  the  death  of  their  testator,  as  to  one 
given  to  the  testator  in  his  lifetime,  provided  the  money  when 
received  would  be  assets  of  the  testator's  estate.^ 

An  assignment  by  the  executors  of  the  mortgagee  to  a  son  of 
the  testator,  who  is  also  a  co-executor,  is  valid.* 

797.  Assignment  by  foreign  administrator.  —  Although  a 
mortgage  is  regarded  as  a  mere  chattel  interest,  yet  a  foreign  ad- 
ministrator cannot,  by  virtue  of  his  appointment  in  another  state, 
assign  the  mortgage.^  Titles  to  real  estate  are  regulated  and 
established  by  the  lex  loci  ret  sitce ;  and  whenever  the  official  act 
of  an  executor  or  administrator  is  necessary  to  make  title  to  real 
estate,  his  authority  must  appear  by  letters  testamentary,  or  let- 
ters of  administration  granted  in  the  state  where  the  land  is  situ- 
ated.^ But  where  a  mortgage  is  not  regarded  as  a  title  to  land, 
but  merely  a  lien,  a  foreign  administrator  can  make  a  valid  assign- 
ment,'^ though  such  administrator  could  not  maintain  a  suit  upon 
the  mortgage.^ 

798.  A  treasurer  or  other  officer  of  a  corporation  has  no 
authority  by  virtue  of  his  office  merely,  and  aside  from  the  au- 
thority of  a  by-law  or  a  special  power  given  by  the  company,  to 
execute  an  assignment  of  a  mortgage,  and  his  use  of  the  seal  of 
the  corporation,  of  which  he  has  charge,  does  not  serve  to  give 

1  Baldwin  v.  Timmins,  3  Gray  (Mass.),  the  Chancellor  and  Vice-Chancellor  to  the 
302.  contrary. 

2  Bac.  Ab.  Exr's  &  Admr's,  D. ;  George         *  Hitchcock  v.  Merrick,  15  Wis.  522. 

17.  Baker,  3  Allen  (Mass.),  326  n. ;  Bogert  ^  Cutter  v.  Davenport,  1  Tick.  (Mass.) 

V.  Hertell,  4  Hill   (N.  Y.),  492;  Mutual  81. 

Life  Ins.  Co.  v.  Sturges,  33  N.  J.  Eq.  328.  ^  Hutchins    v.   State    Bank,    12    Met. 

3  Bogert   V.    Hertell,    supra;   S.   C.   9  (Mass.)  421,  424. 

Paige  (N.  Y.),  52;  3  Edw.  Ch.  20.     Tiie         ^  Smith   v.  TiflFany,   16   Hun  (N.  Y.), 
Court  of  Errors  overruled  the  opinions  of     552. 

8  §  1389. 
708 


WHO   MAY   MAKE   AN   ASSIGNMENT.  [§§  799-801. 

the  assignment  so  made  by  him  any  validity.^  Of  course  a  sub- 
sequent ratification  of  the  act  by  the  corporation  will  supply  the 
original  want  of  authority,  and  make  the  act  valid. 

799.  If  a  mortgage  be  made  or  assigned  to  certain  persons 
as  trustees  of  an  association  not  incorporated,  the  legal  title 
vests  in  these  persons  jointly,  and  no  valid  assignment  can  be 
made  by  the  association,  or  by  one  of  the  mortgagees,  but  all 
must  ioin  in  the  deed  in  order  to  make  a  valid  assicmment.^  In 
the  absence  of  any  evidence  that  power  of  alienation  by  such 
trustees  is  restrained  by  the  by-laws  of  the  association,  their  as- 
signment of  a  mortgage  will  pass  the  legal  title.^ 

The  organization  of  a  voluntary  loan  fund  association  into  a 
corporation  does  not  transfer  their  property  without  a  formal 
conveyance  or  assignment.^  Neither  does  the  title  vest  in  new 
trustees  who  may  be  elected  from  time  to  time,  but  remains  in 
the  original  trustees  or  their  survivors  until  transferred  by  their 
deed.^ 

800.  A  mortgage  to  a  partnership  should  be  assigned  by  a 
deed  executed  by  all  the  partners ;  for  although  it  belongs  to 
the  partnership,  the  legal  estate  is  in  the  individual  members  of 
it,  as  tenants  in  common.  One  partner  cannot  make  a  legal  as- 
signment by  executing  an  assignment  in  the  name  of  the  firm  ;*' 
but  he  can  make  an  equitable  assignment  by  a  transfer  of  the 
debt ;  and  therefore  a  mortgage  to  a  partnership  to  secure  a  debt 
due  the  firm  will  equitably  pass  by  an  assignment  of  all  debts  due 
the  firm,  executed  in  the  name  of  the  firm  by  one  member  of  it, 
to  secure  a  debt  due  from  the  firm  to  the  assignee."  Although  it 
is  a  general  rule  that  a  partner  cannot  bind  his  copartners  by  an 
instrument  under  seal,  yet  as  he  can  make  an  equitable  assignment 
without  using  a  sealed  instrument  at  all,  the  addition  of  a  seal 
does  not  vitiate  such  an  assignment,  any  more  than  the  addition 
of  a  seal  to  a  bill  of  sale  of  goods  would  vitiate  the  sale.^ 

801.  Assignment  by  attorney.  —  A  mortgage  being  an  estate 
or  interest  in  land   can  be  assigned  only  by  deed.     An  attorney 

1  Jackson  v.  Campbell,  5  Wend.  (N.  Y.)  *  Munahan  v.  Varnum,  supra;  Holland 
572.  V.  Cruft,  .3  Gray  (Muss.),  162,  17:J. 

2  Anstin  v.  Shaw,  10  Alien  (Mass.),  ''  Pcalnxly  u.  Eastern  Methodist  Society, 
.552;    Webfitcr    v.    Vande venter,    fi    CJray  5  Allen  (Mass.),  540. 

(Mass.),  428;  Chapin  i'.  First  Universali.st  "  And  sec  Dillon  v.  Hrown,  11  (iray 
Churrli,  8  (iray  (Mass.),  580.  (Mass.),  17!).     See  §§  119-122. 

'*  Manahau  v.  Varnum,  11  Gray  (Mass.),         ^  Dubois's  App.  ."18  I'a.  St.  'i.'tl. 
405.  "  Evcrit  v.  Siron^j,  C  Hill  (N.  Y.),  1G3. 

709 


§  802.]  ASSIGNMENT   OF  MORTGAGES. 

executing  an  assignment  in  behalf  of  bis  principal  must  have  au- 
thority under  seal.  That  be  is  an  attorney  in  fact  is  not  suffi- 
cient, without  a  subsequent  ratification.  But  if  one  partner  exe- 
cute an  assignment  in  behalf  of  his  copartner,  in  the  course  of  the 
partnership  business,  under  the  authority  of  the  partnership  arti- 
cles which  are  under  seal,  and  provide  that  the  business  of  the 
partnership  shall  be  transacted  by  the  person  who  executed  the 
assignment,  the  authority  is  sufficient.  It  is  not  necessary  to  the 
validity  of  a  foreclosure  of  the  mortgage  so  assigned  that  the  au- 
thority to  execute  the  assignment  should  be  recorded.^ 

802,  Mortgage  of  indemnity.  —  The  condition  of  a  mortgage 
of  indemnity  is  saved  if  the  debt  for  which  the  indemnity  is  taken 
is  paid  by  the  principal  debtor,  according  to  its  terms.  The  mort- 
gage in  that  case  never  becomes  operative  and  available,  and  the 
mortgagee  has  then  no  interest  which  he  can  assign.  It  is  imma- 
terial in  this  respect  whether  the  original  debt  is  paid  by  the 
mortgagor  in  money  or  by  a  new  note,  with  other  sureties ;  the 
mortgagee  not  being  upon  the  renewed  note  is  exonerated  and 
discharged  from  his  liability,  and  his  interest  under  his  mortgage 
having  ceased  he  cannot  pass  any  interest  by  an  assignment  of  it, 
even  to  the  new  sureties.^ 

A  mortgage  of  indemnity  is  assignable  after  the  mortgagee  has 
paid  the  debt  against  which  he  is  indemnified  ;  but  until  that  time 
he  has  nothing  that  he  can  assign.^  If,  however,  he  procures  the 
payment  of  the  debt  by  a  third  person  for  his  benefit,  he  may 
transfer  the  mortgage  to  such  third  person  as  security  for  the  pay- 
ment, although  this  be  done  before  the  maturity  of  the  debt ;  and 
the  mortgagor  cannot  claim  that  such  payment  is  a  performance 
of  the  condition  of  the  mortgage,  so  as  to  revest  the  title  in  him.* 

A  mortgage  given  in  part  to  secure  a  debt  of  the  mortgagor, 

1  Morrison  v.  Mendenhall,  18  Minn.  232.     decision  was  reached  in  the  former  case 
See  Atkinson  v.  Patterson,  46  Vt.  750.  without   this    special  form   of  condition. 

2  Abbott  ?;.  Upton,    19    Pick.    (Mass.)     See  §§  379-387. 

434;    Bonham   v.    Galloway,    13   111.    68.  ^  Abbott  v.   Upton,  supra;  Wallace  v. 

The  condition  in  this  latter  case  was  that  Goodall,  18  N.  H.  439;  Hall  v.  Cushman, 

if  the  mortgagor  should  pay  and  satisfy  16  lb.  462;  Weeks  v.  Eaton,  15  lb.  145; 

his  note,  by  renewal  or  otherwise,    then  and   see  Jones   v.  Quinnipiack  Bank,  29 

the  mortgage  should  be  void ;  and  it  was  Conn.   25  ;    Carper   v.   Hunger,   62   Ind. 

renewed    with    different    sureties.      One  481. 

ground  of  the  decision  was  that  a  trans-  *  Murray  v.  Catlett,  4  Greene  (Iowa), 

fer  to  others  was  not  within  the  contem-  108;  Camp  v.   Smith,  5  Conn.  80.    The 

platioD  of  the  parties  at  the  time  of  the  condition  of  the  mortgage  in  this  case  was 

execution  of  the  mortgage.     But  the  same  that  the  mortgagor  would  "  well  and  truly 

710 


WHAT   CONSTITUTES   AN   ASSIGNMENT.      [§§  803,  804. 

and  in  part  to  secure  the  mortgagee  from  liability  as  surety,  is  as- 
signable, and  the  principal  creditor  is  not  entitled  to  be  subrogated 
to  the  morts:agor  as  against  the  assignee.^ 

It  must  appear,  however,  that  the  assignment  was  made,  or  at 
least  agreed  upon,  at  the  time  the  assignee  paid  the  debt  for  which 
the  mortgage  was  given  as  indemnity  ;  otherwise  the  payment 
will  discharge  the  debt,  and  the  assignment  will  not  pass  any  in- 
terest as  against  any  intervening  interest.  Thus,  for  instance, 
where  a  third  person,  under  an  agreement  with  the  principal 
debtor,  and  not  with  the  surety,  who  held  the  mortgage,  paid  the 
debt  in  three  instalments,  but  did  not  take  an  assignment  of  the 
mortgage  until  the  time  of  paying  the  last  instalment,  it  was  held 
that,  in  the  absence  of  proof  of  any  arrangement  with  the  mort- 
gagee for  an  assignment,  the  first  two  payments  extinguished  the 
mortgage  pro  tanto,  and  that  it  was  not  in  the  power  of  the  par- 
ties to  revive  it  as  against  intervening  incumbrancers.^ 

803.  The  assignment  of  a  mortgage  conditioned  for  the 
support  of  the  mortgagees,  after  a  breach  of  the  condition,  does 
not  operate  as  a  release  of  the  claim  for  support.  The  assignee 
may  claim  the  performance  of  the  condition  of  the  mortgage  for 
the  benefit  of  the  mortgagee.  The  mortgagor  has  no  occasion  to 
object  to  the  assignment.  This  affects  his  rights  and  duties  in 
only  one  respect:  if  he  has  notice  of  the  assignment,  he  must  pay 
to  the  assignee  any  sum  that  is  due  as  damages  for  past  breaches 
of  the  condition  to  support."^ 

IV.    What  constitutes  an  Assignment. 

804.  Assignment  of  mortgage  without  the  debt.  —  In  gen- 
eral, if  an  assignment  of  a  mortgage  be  made  without  any  trans- 
fer of  the  note,  bond,  or  debt  secured  by  the  mortg;ige,  the  as- 
signee takes  only  a  naked  legal  estate,  which  he  will  hold  in  trust 
for  the  owner  of  the  note  or  other  mortgage  debt.*  The  transfer 
of  the  debt  is  essential  to  an  etfective  assignment  of  the  mortgage. 

pay  said  note  according  to  its  tenor."    Be-  ^  Pelton  o.  Kunpp,  21  Wis.  63. 

fore  the  maturity  of  the  note  he  tohl  the  •'  See  §§  388-395;    Mitcliell   v.   Burn- 

mortgajree  that  he  must  provide  for  the  ham,  57  Me.;!l4  ;  Joslyii  v.  rnrliii,  54  Vt. 

note;  and  four  days  before  it  became  due  670 ;  Saviii;,'s  Bank  v.  Holt,  58  Vt.  166. 

the  mortgagee  arranged  for  its  payment  *  New  York:  Murritt  t'.  Bartholiik,  36 

by  another  to  whom  he   transferred   the  N.  Y.  44  ;  S.  C.  47  Barb.  25.1;  Aymar  w. 

mortgage.  Bill,  5  .Johns.  Ch.  570;  Jack-ion  v.  Wil- 

1  §  883  a ;  Waller  i;.  Ogleaby,  H5  Tenn.  lard,  4  .Johns.  41  ;  Cooper  v.  Newland,  17 

.'5--M  •  3  S.  W.  Uep.  504.  Abb.  I'r.  342.     Iowa:  Swan  i;.  Yaplo,  35 

711 


§  804.]  ASSIGNMENT   OF    MORTGAGES. 

When  it  is  said  that  a  transfer  of  a  mortgage  without  the  debt 
secured  by  it  is  a  nullity,i  the  qualification  should  be  made  that 
where  the  mortgagee  has  possession  by  virtue  of  his  mortgage,  or 
where  the  mortgagee  is  not  in  possession,  but  the  condition  has 
been  broken,  a  conveyance  or  assignment  of  the  mortgaged  prem- 
ises would  be  valid  to  transfer  the  right  of  possession.^ 

A  purchaser  of  the  mortgage  title,  not  finding  the  note  in  the 
possession  of  the  mortgagee,  is  held  to  take  it  subject  to  the 
rights  of  any  person  to  whom  the  mortgage  debt  has  been  previ- 
ously assigned.^  If,  however,  a  mortgagee  makes  a  deed  or  re- 
lease of  the  premises  or  a  part  of  them  to  a  person  holding  from 
other  sources  a  valid  title  to  the  premises  subject  only  to  the  in- 
cumbrance of  the  mortgage,  and  who  has  no  object  in  acquiring 
possession  of  the  personal  obligation,  but  is  only  concerned  in  pei'- 
fecting  his  title,  a  deed  or  transfer,  unaccompanied  with  the  mort- 
gage debt,  avails  to  discharge  the  mortgage  lien.  If,  therefore, 
the  purchase  of  a  portion  of  an  estate  subject  to  a  mortgage, 
which  the  mortgagee  has  assigned  by  an  unrecorded  assignment, 
afterwards  takes  a  quitclaim  deed  of  the  whole  estate  from  the 
mortgagee,  he  acquires  a  good  title  to  the  part  which  he  pre- 
viously held  as  against  the  mortgagee  ;  but  as  to  the  residue  no 
such  title  as  would  prevail  against  the  prior  purchaser  of  the 
mortgage  debt  accompanied  by  an  assignment  of  the  mortgage, 
though  not  recorded.^ 

Iowa,  248;  Pope  v.  Jacobus,  10  Iowa,  262  ;  3  §  474.  Kellogg  v.  Smith,  26  N.  Y. 
gangster  v.  Love,  11  Iowa,  580.  Califor-  18  ;  Fletcher  v.  Carpenter,  37  Mich.  412  ; 
nia:  Peters  v.  Jamestown  Bridge  Co.  5  Haescig  v.  Brown,  34  Mich.  503. 
Cal.  334.  Alabama :  Duval  I'.  McLoskey,  *  Wolcott  v.  Winchester,  15  Gray 
1  Ala.  708.  Florida:  Carter  y.  Bennett,  4  (Mass.),  461.  "As  a  purchaser,"  says 
Fla.  283.  Indiana:  Johnson  v.  Cornett,  Mr.  Justice  Dewey,  delivering  the  opinion 
29  Ind.  59  ;  Hamilton  v.  Browning,  94  of  the  court,  "  he  must  have  known  that 
Ind.  242.  Michigan  :  Bailey  v.  Gould,  the  possession  of  the  debt  was  essential  to 
Walk.  478.  Missouri  :  Thayer  v.  Camp-  an  effective  mortgage,  and  that  without  it 
bell,  9  Mo.  280.  New  Hampshire :  Bell  v.  he  could  not  maintain  an  action  to  fore- 
Morse,  6  N.  H.  205  ;  Hutchinsf.  Carleton,  close  the  mortgage.  The  not  finding  it  in 
19  N.  H.  487.  Maine:  Lunt  v.  Lunt,  71  the  possession  of  the  mortgagee,  and  not 
Me.  377.  South  Carolina  :  Cleveland  v.  stipulating  for  any  transfer  of  such  debt, 
Cohrs,  10  S.  C.  224.  Minnesota :  O'Mul-  are  circumstances  that  should  estop  him 
cahy  V.  HoUey,  28  Minn.  31.  from  setting  up  any  title  against  the  bond 

1  Carpenter  v.  Longan,  16  Wall.  271  ;  Jide  purchaser  of  the  debt,  who  had  pos- 
Thayer  v.  Campbell,  9  Mo.  280.  session  of  the  bond,  and  an  .assignment  of 

2  Pickett  V.  Jones,  63  Mo.  195 ;  Welsh  the  mortgage  in  due  form,  to  vest  the  legal 
V.  Phillips,  54  Ala  309  ;  Campbell  v.  estate  in  him  as  against  the  assignor,  and 
Birch,  60  N.  Y.  214.  only  defective  as  to  any  others  in  not  being 

712 


WHAT    CONSTITUTES    AN   ASSIGNMENT.  [§  805, 

805.  An  assignment  of  the  mortgage  generally  carries  the 
debt.  The  assignment  of  itself  conveys  the  right  to  receive  pay- 
ment of  the  notes,  if  these  be  actually  sold  and  delivered  to  the 
assignee  of  the  mortgage ;  or  if  they  be  in  terms  included  in  the 
assignment,  though  they  be  not  actually  delivered  to  the  assignee.^ 
In  a  proceeding  to  foreclose,  it  is  necessary  to  produce  the  notes 
in  order  to  rebut  the  presumption  of  payment  which  would  result 
from  tiieir  absence.  The  note  is  the  most  direct  and  proper  evi- 
dence of  the  debt.  If  the  note  be  not  produced  its  absence  must 
be  accounted  for.^  But  the  beneficial  interest  in  the  debt  is,  how- 
ever, general!}'  included  in  an  assignment  of  the  mortgage,  al- 
though the  terms  of  the  assignment  embrace  the  mortgage  alone. 
This  would  be  the  presumed  intention  of  the  parties  in  all  cases 
when  the  debt  has  not  been  already  transferred  to  another,^  and 
an  adequate  consideration  is  paid.*  The  mortgage  being  merely 
an  incident  of  the  debt  cannot  be  assigned  separately  from  it,  so 
as  to  give  any  beneficial  interest.  The  incident  may  pass  by  a 
grant  of  the  principal,  but  not  the  principal  by  the  grant  of  the 
incident.^ 

Whether  a  deed  by  the  mortgagee  or  a  formal  assignment  of  a 
mortgage  by  him,  without  a  transfer  of  the  notes,  passes  the  ben- 
eficial interest  in  the  security,  is  a  question  to  be  determined  by 
the  intention  of  the  parties,  which  may  be  gathered,  not  merely 
from  the  words  of  the  deed  or  assignment,  but  from  the  situation 
of  the  parties  and  the  nature  of  the  transaction.^  The  mere  cir- 
cumstance that  the  assignment  would  be  inoperative,  unless  tlie 
debt  be  held  to  pass  with  it,  is  not  sufficient,  it  would  seem,  to 
give  the  assignment  that  effect.  The  result  of  such  holding 
would  be  to  reverse  the  maxim  that  the  incident  passes  by  a 
grant  of  the  principal,  and  would  establish  the  contrary  rule  that 
the  principal  follows  the  incident."  The  fact  that  an  assignment 
was  made  at  the  request  of  tlie  mortgagor  to  one;  who  advanced 
him  money  at  the  time  is  evidence  of  an  agreement  between  the 

recorded."    And  gee  Johnson  i;.  Leonards,  Cooper  v.  Newland,  17  Al)li.  (N.  Y.)  Pr. 

68  Me.  2.-57.  342. 

1  IJaMwin  r.  l{ai.ke,  4  Ben.  4.3:! ;  Wil-  *  Fletcher  v.  Carpenter,  37  Mich.  412  ; 
liams  V.  TVacliey,  8'>  N.  C.  402.  Ilcwell  v.  Conlbourn,  54  Md.  59. 

2  K'wK  V.  Harrington,  2  Aik.  (V't.),  33;  ^  Hiiclicock  r.  Merrick,  18  Wis.  357; 
Edgeil  V.  Stanford,  3  Vt.  202.  Clevcliind  r.  Colirs,  10  S.  C.  224. 

«  Northampton   Hank  v.  Balliot,  8   \V.  «  HiiikKy  «.  Chaimian, '.t  Conn.  5;  and 

&  S.  (I'a.)  311  ;   Philips  v.  Hank  of  Lew-  see  Strontr  r.  Jackson,  123  Mass.  »;<). 

istown,   18   Pa.  St.    3'.t4  ;  Merritt  v.  Bar-  ''  Per  Parker,  J.,  in   Morrill  v.  IJartlu)^ 

tholick,  30  N.  y.  44  ;  S.  <J.  47  IJarh.  2.'i3  ;  lick,  mpra. 

713 


§§  806,  807.]  ASSIGNMENT   OF   MORTGAGES. 

parties  that  the  mortgage  should  no  longer  continue  a  security  for 
the  payment  of  the  debt  which  it  was  originally  given  to  secure, 
but  should  be  security  for  the  debt  then  created. ^ 

806,  The  mere  delivery  of  the  mortgage  deed  without  the 
bond  or  note  does  not  constitute  a  transfer  of  it  either  by  way  of 
sale  or  pledge,  though  the  full  consideration  was  paid  or  money 
was  advanced  upon  it.^  There  is  in  such  case  a  presumption 
against  any  transfer.  In  England  such  a  deposit  of  the  papers 
would  constitute  a  valid  lien,  and  is  a  very  common  mode  of  se- 
curing a  loan.  But  in  this  country,  under  the  recording  acts,  no 
lien  upon  real  estate  can  be  created  by  a  deposit  of  title  deeds. 
Although  an  assignee  b}'  a  regular  deed  of  assignment  has  knowl- 
edge that  the  mortgage  has  been  deposited  with  a  solicitor  for 
the  purpose  of  having  an  assignment  of  it  made  to  another,  he 
acquires,  by  the  deed  of  assignment  and  an  indorsement  of  the 
note,  a  prior  lien  upon  the  mortgaged  property,  and  it  does  not 
matter  that  the  mortgage  deed  itself  is  not  delivered  to  him. 

807.  When  a  mortgage  has  been  formally  assigned  and 
the  mortgage  note  delivered  to  the  assignee  without  any  in- 
dorsement of  it,  the  mortgagor  is  not  justified  in  refusing  pay- 
ment to  the  assignee  on  the  ground  that  the  note  has  not  been 
indorsed  by  the  payee.^  The  formal  assignment,  duly  acknowl- 
edged and  recorded,  and  the  possession  of  the  note,  are  the  best 
possible  evidence  of  ownership,  and  the  assignee  is  entitled  to 
demand  and  enforce  payment  whether  the  note  is  indorsed  or  not. 
Such  an  assignment  is  a  good  equitable  transfer  of  the  mortgage 
and  note.^  It  is  sufficient  evidence  of  an  intention  to  pass  the 
beneficial  interest  in  them. 

When,  however,  there  is  no  separate  obligation  for  the  mort- 
gage debt,  and  no  express  covenant  in  the  mortgage  for  the  pay- 
ment of  it,  then  the  remedy  upon  the  mortgage  is  confined  to  the 
lands,  and  an  assignment  of  the  mortgage  necessarily  transfers 
all  the  mortgagee's  rights  under  it.^  The  mortgage  is  then  the 
principal  and  only  thing,  and  is  not  an  incident  to  anything  else. 

1  Campbell  v.  Burch,  1   Lans,  (N.  Y.)  Otherwise,  see  Kelly  r.  Burnham,  9  N.  H. 

178.  20  ;  Thorndike  v.  Norris,  24  N.  H.  454. 

-  Bowers   v.   Johnson,   49   N.  Y.  432 ;         *  Pratt  v.  Skolfield,  45  Me.  386.     See 

Merritt  ;;.  Bartholick,  36  N.  Y,  44  ;  S.  C.  Strong  v.  Jackson,  123  Mass.  60. 
47  Barb.  253;  Warden  y.  Adams,  15  Mass.         5  Caryl  v.  Williams,  7  Lans.    (N.  Y.) 

233.     See  §§  179-187,  457.  416  ;  Severance  v.  Griffith,  2  lb.  38 ;  Hone 

3  Pease   v.  Warren,   29   Mich.  9;   and  v.  Fisher,  2  Barb.  (N.  Y.)  Ch.  559,  560; 

see  King  v.  Harrington,  2  Aik.  (Vt.)  33.  Coleman  v.  Van  Rensselaer,  44  How.  (N. 

714  Y.)  Pr.  368. 


WHAT   CONSTITUTES   AN  ASSIGNMENT.  [§  808. 

The  assignee  of  a  mortgage  without  the  debt  can  maintain  no 
action  upon  it  except  at  the  request  of  the  holder  of  the  bond  or 
note  secured  by  it.  Judgment  could  only  be  entered  upon  pro- 
ducing the  separate  obligation  for  the  debt.^  According  to  the 
principles  of  equity  courts,  the  assignee  of  the  legal  title,  holding 
it  as  trustee  for  the  benefit  of  the  holder  of  the  mortgage  debt, 
would  be  compelled  either  to  foreclose  the  mortgage  for  the  benefit 
of  the  holder  of  the  debt,  or  to  assign  it  to  him. 

Contrary  to  the  generally  received  doctrine,  it  is  held  in  Illinois 
that  a  mortgage  cannot  be  assigned  so  as  to  vest  the  legal  title 
in  the  assignee,  unless  the  debt  secured  be  of  a  character  assigna- 
ble at  law  ;  or,  in  other  words,  unless  it  be  negotiable.  If  it  be 
negotiable,  the  assignee  becomes  the  legal  holder  of  the  indebted- 
ness, and  the  mortgage  as  a  mere  incident  passes  with  it,  and  the 
legal  title  to  that  vests  in  the  assignee.  Therefore  it  is  held  that 
a  power  of  sale  in  a  mortgage  passes  to  the  assignee  in  the  latter 
case,  and  may  be  exercised  by  him  ;  but  in  the  former  case  the 
assignment  vests  only  an  equitable  interest  in  the  assignee,  and 
therefore  the  power  can  be  exercised  only  by  the  mortgagee  him- 
self.2 

808.  A  deed  of  release  or  quitclaim  or  other  conveyance  is 
sufficient  to  pass  the  interest  of  the  mortgagee,  when  there  is  no 
separate  obligation  for  the  payment  of  the  debt ;  ^  and  is  sufficient 
also  when  there  is  a  separate  obligation,  and  this  is  delivered 
with  the  deed.*  A  warranty  deed  is  not  only  equally  effectual, 
but  would  also  pass  any  title  subsequently  perfected  by  the  mort- 
gagee.^ The  warranty  would  also  operate  as  an  equitable  assign- 
ment of  a  separate  debt.^  Such  also  is  the  effect  of  a  conveyance 
by  one  having  an  absolute  title  to  property  which  he  really  holds 
by  mortgage  title,  if  the  purchaser  from  him  has  notice  of  the  sep- 
arate defeasance,  or  of  circumstances  which  make  the  transaction 

'  Webb  V.  Flanders,  32  Me.  175;  Gar-  Hampshire:    Weeks  v.   Eaton,  15  N.  II. 

roch  V.  Sherman,  6  N.  J.  Eq.  (2  llalst.)  145.     As  to  llie  effect  of  a  record  of  an 

219.  assif^ninent,  see  §  474. 

-'  Mason  v.  Ainswortli,  58  111.  1C3.  *  Dixfield  v.  Newton,  41  Me.  221  ;  Dear- 

•'  Maasacliusetts  :    Welch    v.    Prie.st,   8  born  y.  Taylor,  18  N.  II.  153;  Ilohson  i;. 

Allen,  165;  Hunt  v.  Hunt,  14  Pick.  374,  Holes,  20  N.  II.  41  ;  Furhush  v.  Goodwin, 

382  ;  Freeman  v.  M'Gaw,  15  Pick.  82,  86;  25  N.  H.  425. 

Thompson    v.   Kenyon,    100    Mass.    108.  ''  Kuf,'t{!e3  i>.  Barton,  13  Gray  (Ma.s».), 

New  York :  Severance  v.  Griflith,  2  LanH.  506 ;    Lawrence     v.     Stratton,     6    Cush. 

38,     Maine:     Dorkray    v.    Noble.    8    Me.  (Mus.s.)  163,  16'J. 

278  ;  Hill  v.  More,  40  Mc.  515,  525.     New  «   Welsh  v.  PLillii.H,  54  Ala.  30'J. 


71/ 


§  808.]  ASSIGNMENT   OF   MORTGAGES. 

a  mortgage.!  There  are  other  cases  in  which  a  deed  of  the  land 
by  the  mortgagee  will  pass  no  interest  at  all,  unless  it  be  a  mere 
naked  legal  estate.  Such  is  the  case  when  the  mortgagee  has 
already  transferred  the  mortgage  debt.^  Moreover,  the  deed  alone 
will  not  pass  the  mortgage  debt,  unless  the  intention  to  transfer 
this  as  well  is  expressed  in  it.  This  would  doubtless  be  the  case 
when  it  appeared  that  the  mortgagee  had  control  of  the  debt,  and 
received  full  consideration  for  it.^ 

A  conveyance  by  a  mortgagee  of  a  portion  of  the  mortgaged 
premises  by  warranty  deed  operates  as  an  equitable  assignment  of 
a  proportionate  part  of  the  mortgage  debt.* 

Where  the  legal  title  is  regarded  as  remaining  in  the  mortgagor, 
and  the  mortgagee  only  acquires  a  right  to  enforce  payment  of  his 
claim,  it  is  held  that  a  deed  made  by  the  holder  of  the  mortgage 
conveying  all  his  "  estate,  title,  and  interest "  in  the  real  estate 
mortgaged  will  not  operate  as  an  assignment  of  the  mortgage,  for 
this  is  a  conve3^ance  of  the  land,  in  which  he  has  no  title.  His 
interest  is  a  chattel  interest,  inseparable  from  the  debt  it  was  given 
to  secure.^  In  like  manner,  it  is  held  that  a  conveyance  by  the 
mortgagee  of  all  his  right,  title,  and  interest  in  the  land  passes 
nothing  unless  the  debt  be  assigned,  as  the  mortgage  is  a  mere 
security  incident  to  the  debt.^ 

It  is  held  that  an  assignment  of  a  mortgage  to  be  effectual  must 
either  be  formal,  or  it  must  appear  from  the  instrument  that  it  was 
intended  to  operate  as  such.  A  conveyance  by  the  mortgagee  be- 
fore entry  for  condition  broken  is  inoperative,  unless  intended  as 
an  assignment  of  the  mortgage  and  debt,  and  such  intention  be 
made  to  appear.  Although  the  mortgage  be  in  the  form  of  an 
absolute  deed  and  bond  for  reconveyance,  if  the  bond  is  recorded 
with  the  mortgage  the  mortgagee  cannot  convey  any  interest  in 
the  property  before  condition  broken,  unless  it  be  by  assignment. 

1  Decker  v.  Leonard,  6  Lans.  (N.  Y.)  temore  v.  Gibbs,  24  N.  H.  484 ;  Weeks  v. 
264 ;  Leahigh  v.  White,  8  Nev.  147 ;  Union  Eaton,  15  N.  H.  145;  Furbush  v.  Good- 
Mut.  F.  Ins.  Co.  V.  Slee  (111.),  13  N.  E.  win,  25  N.  H.  425;  Hobson  «.  Roles,  20  N. 
Rep.  222.  H.  41 . 

If  the  purchaser  has  not  such  notice,  but  ^  Ellison  v.  Daniels,  1 1  N.  H.  274 ;  Par- 

in  good   faith   purchases  an   indefeasible  ish  v.  Gilmanton,  lb.  293,  298. 

title,  the  mortgagee  will  in  equity  be  treated  *  Smith  v.  Hitchcock,  130  Mass.  570. 

as  a  constructive  trustee  for  the  price  for  ^  Swan  v.  Yaple,   35   Iowa,   248,   and 

which  he  sold  the  land,  after  deducting  cases   cited  ;    and  see   Aymar  v.   Bill,   5 

therefrom  the  amount  of  the   mortgage  Johns.  (N.  Y.)  Ch.  570.     See  §§  17-59. 

debt.     LinneU  v.  Lyford,  72  Me.  280.  6  Peters  v.  .Jamestown    Bridge  Co.   5 

2  Bell  r.  Morse,  6  N.  H.  205,  210 ;  Whit-  Cal.  334 ;  Nagle  v.  Macy,  9  Cal.  426,  428  ; 

716  Delano  v.  Bennett,  90  111.  533. 


WHAT   CONSTITUTES  AN  ASSIGNMENT.  [§  809. 

Unless  intended  to  operate  as  an  assignment  of  the  mortgage  and 
a  transfer  of  the  debt,  a  conveyance  by  the  mortgagee  to  a  third 
person  is  entirely  inoperative.  The  intention  that  a  deed  shall 
have  this  operation  must  be  made  to  appear.^ 

But  if  the  mortgagee  be  in  possession,  his  conveyance  of  the 
mortgaged  property  by  warranty  deed  or  quitclaim  is  regarded  as 
passing  his  mortgage  interest,  although  no  mention  in  terms  be 
made  of  the  debt.^  It  moreover  transfers  his  right  of  possession, 
and  enables  the  grantee,  and  those  claiming  under  him,  to  main- 
tain an  action  against  any  person  who  does  not  show  a  better 
title.3 

8C9.  A  deed  of  the  mortgaged  premises  by  the  heir  of  a 
deceased  mortgagee  before  foreclosure,  and  before  a  decree  of 
distribution  of  the  estate,  will  not  operate  as  an  assignment  of  the 
mortgage,^  and  will  not  even  convey  any  title  sufficient  to  enable 
the  grantee  to  maintain  a  writ  of  entry  against  such  heir,  inas- 
nmch  as  a  mortgage  is  assets  in  the  hands  of  the  personal  repre- 
sentative.^ The  administrator  may,  notwithstanding  such  deed, 
take  possession  of  the  premises  and  foreclose  the  mortgage,  if  no 
redemption  be  made.  The  conveyance  by  the  heir  does  not  pass 
the  legal  estate,  because  he  has  no  legal  estate  in  the  premises. 
The  mortgage  title  as  well  as  the  debt  vests  solely  in  the  adminis- 
trator. If  he  obtains  an  irredeemable  interest  by  foreclosure,  this 
is  only  the  perfecting  of  the  interest  he  already  has.  He  may 
then  sell  the  lands  by  license  of  court  for  the  payment  of  debts; 
and  if  not  sold  he  holds  them  for  the  benefit  of  the  same  persons, 
and  in  the  same  proportions  that  he  holds  the  personal  estate  of 
deceased,  and  they  may  claim  partition  accordingly.^ 

But  such  a  deed  of  the  mortgaged  property  by  the  heir  has 
been  held  a  good  assignment  in  equity  against  all  the  world  ex- 
cept the  personal  representative  and  creditors  whose  rights  might 
be  affected  :  a  stranger  not  being  allowed  to  question  its  validity 
and  effect." 

•  Greve  v.  Coffin,  14  Minn.  345;  John-  *  Douglas  v.  Durin,  51  Mo.  121  ;    Al- 

son  r.  Lewis,  13  Minn.  364;  Hill  v.  Ed-  bright  w.  Cobb,  30  Mich.  355. 

wards,  1 1  Minn.  22,  20  ;  Gale  v.  IJattin,  12  »  Taft  v.  Stcveus,  3  Gray  (Mass.),  504. 

Minn.  287.  •'  Taft  o.  Stevens,  supra;  Gen.  Stat,  of 

•^  Lamprey   v.   Nudd,   29   N.    II.    29'J  ;  Muss.  cli.  97,  §  14. 

Smiih   V.   Smith,  15  N.  11.55;  Hinds  i-.  ^  Welsh  w.  Pliillips,  54  Ahi.  300;  Cook 

Ballon,  44  N.  II.  CIO.  v.  I'arhani,  03  Ala.  450. 

3  Wallace   v.  (ioodall,    18  N.   II.    439  ; 
Hutchins  v.  Carlcton,  10  N.  II.  487,  514. 

717 


§§  810,  811.]  ASSIGNMENT    OF   MORTGAGES. 

810.  A  mortgage  of  land  by  one  whose  only  title  to  it  is  in 
mortgage  passes  his  mortgage  interest.  It  is  in  legal  effect  an 
assignment  of  his  mortgage.^  Although  the  debt  be  not  at  the 
time  formally  transferred  with  the  mortgage,  it  may  well  be  in- 
ferred that  the  intention  of  the  parties  was  to  make  a  complete 
assignment  of  the  mortgage.^ 

811.  A  conveyance  by  a  mortgagee  of  a  part  of  the  mort- 
gaged estate  to  a  third  person  is  in  like  manner  regarded  as  an 
equitable  assignment  of  the  mortgage  to  the  extent  of  the  pur- 
chase money  of  such  part,  especially  when  the  purchaser  has 
bought  in  good  faith  from  a  mortgagee  in  possession,  with  the 
assurance  on  his  part  that  he  had  a  perfect  title.^  "  It  is  as  im- 
portant," says  Mr.  Justice  Hoar,*  "  to  be  able  to  ascertain  from 
the  registry  the  existence  or  continuance  of  a  mortgage,  as  of 
any  other  legal  title.  Not  infrequently  the  whole  or  part  of  an 
estate  held  in  mortgage  is  released  or  conveyed,  when  the  debt 
is  not  paid.  And  in  the  absence  of  fraud,  a  conveyance  by  the 
party  who  appears  on  the  record  to  be  the  owner  of  the  mortgage 
should  be  sufficient  to  protect  a  purchaser  who  has  no  actual  or 
constructive  notice  of  title  in  any  other."  Although  a  transfer  by 
a  mortgagee  of  his  entire  interest  under  a  mortgage  is  ineffectual 
unless  accompanied  by  the  mortgage  debt,  the  rule  is  different 
when  a  portion  only  of  the  mortgaged  premises  is  conveyed.  A 
purchaser  in  the  latter  case,  having  in  view  merely  to  acquire  the 
title  to  land,  has  no  occasion  to  acquire  the  debt,  and  the  absence 
of  it  does  not  imply  bad  faith  on  his  part.^ 

The  mortgagee  by  a  deed  to  a  third  person  of  a  part  of  the 
mortgaged  premises  transfers  his  interest  in  such  portion,  but  he 
does  not  discharge  it  from  the  mortgage  so  far  as  the  mortgagor 
is  concerned  ;  only  a  release  to  him  or  payment  by  him  will  have 
that  effect.*^ 

1  Murdock  r.  Chapman,  9  Gray  (Mass.),  2  Gray,  141;  Welch  v.  Priest,  8  Allen, 
156;  Central  Bank  v.  Copeland,  18  Md.  165;  Grover  v.  Thatcher,  4  Graj-,  526; 
305.  Raymond  v.  Raymond,  7  Cush.  605,608; 

2  Dudley  v.  Cadwell,  19  Conn.  218.  Smith  v.  Hitchcock,  130  Mass.  570.  Maine  : 
In  this  case  the  mortgage  notes  were     Johnson  v.  Leonards,  68  Me.  237.    Illinois : 

not  delivered  till  long  after  the  making  Union  Mat.  L.  Ins.  Co.  v.  Slee,  12  N.  ¥j. 

of  the  mortgage,  but  the  jury  found  that  Rep.  543. 

they  were  parts  of  one  transaction,  and  *  Welch  v.  Priest,  suyra. 

that  an  assignment  of  the  mortgage  was  ^  Wolcott     v.     Winchester,     15     Gray 

what  was  really  intended.  (Mass.),  461. 

^  Massachusetts :  McSorley  v.  Larissa,  "^  Wyman  v.  Hooper,  supra  ;  Grover  v. 

100  Mass.  270 ;  and  see  Wyman  v.  Hooper,  Thatcher,  supra. 

718 


EQUITABLE   ASSIGNMENTS.  [§§  812,  813. 

812.  An  ineffectual  sale  under  a  po"wer  in  the  mortgage,^  or 
an  irregular  sale  under  a  decree  of  foreclosure,^  operates  as 
an  assignment  of  the  mortgage  to  the  purchaser,  if  he  has  paid 
the  purchase  money  and  it  has  been  applied  to  the  payment  of 
the,  mortgage  debt.  In  like  manner  the  assignment  of  a  decree 
in  a  foreclosure  suit  for  a  residue  of  the  debt  after  a  sale  of  the 
property,  if  the  decree  proves  to  be  invalid  by  reason  of  there 
being  no  personal  service  or  otherwise,  will  operate  as  a  transfer 
of  the  mortgage  debt,  with  authority  to  enforce  it  by  appropriate 
remedies. 2  The  assignment  of  a  judgment  rendered  on  the  mort- 
gage note  or  bond  is  an  equitable  assignment  of  the  mortgage ;  * 
and  an  assignment  of  a  judgment  for  a  part  of  the  mortgage  debt 
carries  an  interest  fro  tanto  in  the  mortgage.^ 

As  has  already  been  observed,  in  several  of  the  states  a  mort- 
gage is  considered  merely  a  chattel  interest,  and  not  a  convey- 
ance of  land  within  the  statute  of  frauds.  In  these  states  the 
technical  views  of  the  rights  of  the  parties  to  a  mortgage  have 
given  place  to  the  equitable  views  of  it  entertained  by  courts  of 
equity,  and  a  parol  assignment  is  sufficient  if  accompanied  by  a 
transfer  of  the  bond  or  other  evidence  of  the  mortgage  debt. 

V.   Equitahle  Assignments. 

813.  An  equitable  assignment  of  a  mortgage  may  be  made 
by  a  sale  of  it,  without  either  a  formal  transfer  of  the  mortgagee's 
interest  in  the  property,  or  an  indorsement  of  the  note. 

The  equitable  interest  of  the  purchaser  enables  him  to  deal 
with  the  mortgage  for  all  beneficial  purposes.^  He  may  enforce 
it  against  the  property  and  the  person  liable  upon  it.  Under 
the  old  practice  this  would  be  done  in  the  name  of  the  assignor 
or  person  in  whom  the  legal  title  remains  ;  ^  but  under  the  codes 
adopted  in  some  of  the  states,  by  which  all  actions  are  prosecuted 

1  §  1902;  Brown  v.  Smith,   116   Mass.  -^  Lillibridge  v.  Tiegeut,  30  Mich.  105; 

108 ;  Jaclison  i;.  Bowen,  7  Cow.  (N.  Y.)  and  see  Drury  v.  Morse,  3  Allen  (Mass.), 

13;   Pvobinson   v.    Kyan,   2f>   N.  Y.   320;  445. 

Taylor  i;.  A.  &   M.  As.so.   68   Ala.  229;  *   Wayman  v.  Cochrane,  35  111.  152. 

Johnson  v.  Sandhoff,  30  Minn.  197.  ••  Pattisou  v.  Hull,  9  Cow.  (N.  Y.)  747. 

-  Brol.st  V.  Block,  10  Wall,  519  ; -01m-  «  Nelson  v.  Ferris,  30  Mich.  497. 

sted  V.  Klder,  2  Sandf.  (\.  Y.)  325  ;  Moore  '  Young  v.  Miller,  6  Gray  (Mass.),  152, 

v.  Cord,  14  Wis.  213;  Muir  i;.  Berkshire,  153;    Bryant   v.   Uamon,  lb.  564;   Par- 

52  Ind.    149;   Johnson  v.   Robertson,  34  tridge  i-.  Partridge,  38  Pa.  St.  78 ;  Crane 

Md.  1C5;  Stackpole  v.  Robbins,  47  Bar!),  r.  March,  4   Pick.  (Mass.)  131  ;  Vose  i;. 

(N.  Y.)  212;  and  see  Hill  v.  More,  40  Me.  Handy,  2  Me.  322 ;  Dimon  v.  Dimon,  10 

51.5.  N.  J.  L.  (5  Halst.)  15G. 

719 


§  813.]  ASSIGNMENT   OF   MORTGAGES. 

in  tlie  name  of  the  party  in  interest,  the  mortgage  would  be  en- 
forced in  the  purchaser's  own  name.^ 

But  the  mere  possession  by  a  third  person  of  a  mortgage  not 
assigned,  and  a  note  not  indorsed  by  the  mortgagee,  is  not  suffi- 
cient evidence  of  his  ownership  of  them  to  enable  him  to  sustain 
an  action  upon  them.  He  must  allege  and  prove  his  ownership 
by  other  evidence.^  He  must  show  that  there  was  an  intention 
to  transfer  a  beneficial  interest  in  the  securities  by  the  mere  man- 
ual delivery  of  tliem.^''  One  who,  having  agreed  with  the  mort- 
gagor to  take  an  assignment  of  an  overdue  mortgage,  paid  the 
amount  of  it  to  the  mortgagee  and  received  a  delivery  of  the 
bond,  and  also  a  discharge  of  the  mortgage,  wliicli  was  never  re- 
corded, was  regarded  as  having  a  good  equitable  assignment  of 
the  mortgage.^ 

Where  an  assignment  by  a  transfer  of  the  note  enables  the  as- 
signee to  foreclose  the  mortgage  in  his  own  name,  the  assignment 
is  in  effect  not  merely  an  equitable  but  a  legal  assignment.^  In 
such  case,  upon  the  death  of  the  mortgagee,  no  beneficial  interest 
in  the  estate  passes  to  his  administrator.^ 

When  it  plainly  appears  by  the  pleadings  in  an  action  to  fore- 
close that  the  debt  was  assigned,  it  is  not  necessary  to  aver  that 
the  mortgage  was  assigned.  It  is  a  conclusion  of  law  that  the 
mortgage  passed  with  the  debt  as  an  incident  to  it.^ 

A  married  woman  may,  without  the  consent  of  her  husband, 
make  an  equitable  assignment  of  a  note  and  mortgage  executed 

1  Iowa:    Sangster   v.  Love,    11    Iowa,  that  the  assignee  of  any  "  bond,  note,  or 

580;  Crow  i;.  Vance,  4  Iowa,  434;  Ran-  writing,  not  negotiable,"  may  assert  his 

kin  V.  Major,  9  Iowa,  297.     New  Jersey:  equitable  title  in  a  court  of  law,  even  in 

Allen  V.  Pancoast,  20  N.  J.  L.  68;  Kinna  his  own  name.     Code  1873,  cli.  141,  §  17; 

!•.  Smith,  3  N.  J.  Eq.  14  ;  Kamena  u.  Huel-  and  see    Garland   v.   Richeson,  4    Rand. 

big,  23  N.J.  Eq.  78;  Mulford  V.Peterson,  (Va.)    266;    Chiiksons   v.   Doddridge,  14 

35N.  J.  L.  127.     New  Hampshire:  South-  Gratt.  (Va.)  42,  44. 

erin   v.   Mendum,    5   N.    H.  420.     Ohio  :         ^  Andrews  v.  Puweis,  35  Wis.  644,  and 

Paine  r.  French,  4  Ohio,  318,  320.     Louis-  cases   cited.     See   Ilatscig   v.  Brown,  34 

iana :  Williams  v.  Morancy,  3  La.  Ann.  Mich.  503. 

227.    Indiana:  Reeves  v.  Hayes,  95  Ind.         ^  gtrause  i;.  Joseph  thai,  77  N.  Y.  622. 
521 ;  Clearwater  v.  Rose,  1   Blackf.  137,         *  Johnson  v.  Parmely,  14  Hun  (N.  Y.), 

138;  Gowerf.  Howe,  20  Ind.  396.    New  398. 

York:   Runyan  v.  Mcrsereau,   11  Johns.         ^  Southerin  w.  Mendum,  supro;  Rigney 

534  ;  Jackson   v.  Blodget,  5   Cow.  202  ;  v.  Lovejoy,  13  N.  H.  247. 
Green  v.  Hart,  1  Johns  580.     Connecticut:         ^  Crosby  v.  Brownson,  2  Day  (Conn.), 

Austin  V.  Burbaiik,  2  Day,  474.  425  ;  Dudley  v.  Cadwell,  19  Conn.  218. 

In  Virginia  it  is   provided   by  statute         ^  Kurtz  v.  Sponable,  6  Kaus.  395. 

720 


EQUITABLE   ASSIGNMENTS.  [§  814. 

to  her,  by  the  mere  sale  and  delivery  of  them,  although  she  could 
not  bind  herself  by  an  indorsement  of  the  note.^ 

814.  After  an  assignment  of  the  mortgage  note  the  mort- 
gagee cannot  discharge  the  mortgage  if  the  note  be  negotiable 
and  it  be  assigned  to  an  innocent  party,  before  due  and  for  a 
good  consideration,  although  the  note  be  without  any  considera- 
tion ;  and  satisfaction  so  entered  will  be  vacated  by  a  court  of 
equity .2  The  holder  of  the  note  is  entitled  to  the  protection  ac- 
corded to  the  holder  of  commercial  paper.  He  may  recover  the 
full  amount  due  on  it,  and  is  not  limited,  in  an  action  to  foreclose 
the  mortgage,  to  the  amount  he  actually  paid  for  the  securities, 
with  interest.^  This  statement  is  upon  the  assumption  that  there 
is  no  statute  requiring  assignments  of  mortgages  to  be  recorded. 
Purchasers  are  bound  to  know  that  if  the  mortgagee  has  indorsed 
the  notes  before  maturity  to  a  bond  fide  holder,  the  mortgagee 
has  no  longer  authority  to  satisfy  the  mortgage  ;  and  therefore 
they  are  bound  to  ascertain  whether  the  mortgagee  still  held  the 
notes  at  the  time  he  discharged  the  mortgage.^  The  notes  in 
such  case  become  the  evidence  of  the  mortgagee's  authority  to 
enter  satisfaction  of  the  lien.-^ 

The  assignee  takes  free  from  existing  equities  between  the 
mortgagor  and  mortgagee.'^  He  holds  the  mortgage  by  the  same 
title  that  he  holds  the  notes,  and  subject  to  no  defence  that  would 
not  be  good  against  them."  The  assignment  by  express  terms 
may  be  made  subject  to  all  existing  equities,  as  where  it  contains 
a  clause  declaring  it  "subject,  however,  to  all  the  rights  of  the 
said  mortgagor  in  and  to  the  same."  ^ 

A  mortgagee  who  discharges  a  mortgage  of  record  after  having 
assigned  it,  the  discharge  being  effectual  because  the  assignment 

1  Baker   i-.   Armstrong,    57    Ind.    189  ;  *  Reeves  v.  Hayes,  supra,  quoting  text. 

Moreau  v.  Branson,  37  Ind.  195.  ^  Catherwood    v.    Burrows,   supra,  per 

■•^Gordon    r.    Miilliare,    13    Wis.    22;  Elliott,  J. ;  Smith  v.  Perkins,  8  Biss.  73  ; 

M'Cormick  v.  Digby,  8  Blackf.  (Ind.)  99  ;  Swift  v.  Smith,  102  U.  S.  442  ;  Reeves  v. 

Sample  v.  Rowe,  24  Ind.  208 ;  Lapping  v.  Hayes,  supra,  overruling  Ayers  v.  Hays, 

Duffy,  47  Ind.  51  ;  Dixon  v.  Hunter,  57  60  Ind.  452. 

Ind.  278;  Catherwood  v.  Burrows  (Supe-  •■'  Crosby  v.  Roub,    16  Wis.    616  ;  An- 

rior  Ct.  Marion  Co.  Ind.  1879),  7  Reporter,  drews  v.  Hart,  17  Wis.  297;   Cornell  v. 

492;  Ilagerman  i;.  Sutton,  91   Mo.  519;  Ilichens,  11   Wis.  353  ;  Fisher  v.  Otis,  3 

Craft  V.  I'hillips  (Pa.),  12  Atl.  Rep.  331  ;  Chand.  (Wis.)  83. 

Reeves  y.  Hayes,  95  Ind.  521,  523,  quoting  ^  Mjinineau    v.   McColluin,   4   Chand. 

text ;  Gottschalk  v.  Neal,  6  Mo.  App  597  ;  (Wis.)  153  ;  Cornell  v.  Iliehens,  supra.     , 

Vandcrcook  v.  Baker,  48  Iowa,  199.  *  Fisher  v.  Otis,  supra. 

3  Bange  v.  Flint,  25  Wis.  544. 

VOL.  I.               40  721 


815-817.] 


ASSIGNMENT    OF   MORTGAGES. 


has  not  been  recorded,  is  liable  to  the  holder  of  the  mortgage  for 
the  amount  secured  by  it,  whether  his  intention  in  discharging  it 
was  fraudulent  or  not.^ 

815.  A  bond  for  a  conveyance  of  real  estate,  when  assigned 
as  security  for  a  debt  is  in  the  nature  of  a  mortgage.  The  as- 
signee does  not  acquire  by  the  assignment  an  absolute  and  uncon- 
ditional right  to  the  benefit  of  the  agreement ;  but  he  may  fore- 
close the  interest  of  the  assignor  under  the  bond,  and  a  sale  of 
such  interest  vests  in  the  purchaser  all  the  interest  which  the  as- 
signor had  by  means  of  it.^ 

816.  A  power  of  attorney  to  one  authorizing  him  to  enforce 
the  payment  of  a  mortgage  which  is  delivered  to  him  without 
assignment,  and  of  a  note  also  delivered  without  indorsement, 
operates  as  a  good  equitable  assignment,  and  the  mortgagee  can- 
not afterwards  make  a  valid  discharge  of  the  mortgage.^ 

817.  If  the  note  or  other  debt  secured  by  a  mortgage  be 
transferred  without  any  formal  assignment  of  the  mortgage, 
or  even  a  delivery  of  it,  the  mortgage  in  equity  goes  with  the 
debt,  unless  there  be  an  agreement  to  the  contrai'y.*     A  mortgage 


1  Ferris  v.  Heudrickson,  1  Edw.  (N.  Y.) 
132. 

2  Wilson  V.  Fatout,  42  Ind.  52. 

3  Cutler  t'.  Haven,  8  Pick.  (Mass.)  490. 
^  Batesville  Institute  v.  Kauffman,   18 

Wall.  151  ;  Myers  I'.  Hazzard,4  MeCrary, 
94,  97.  Alabama  :  Prout  v.  Hoge,  57  Ala. 
28;  Emanuel  v.  Hunt,  2  Ala.  190 ;  CuUum 
V.  Erwin,4  Ala.  452  ;  Graliam  v.  Newman, 
21  Ala.  497  ;  Center  v.  P.  &  M.  Bank,  22 
Ala.  743.  California:  Ord  v.  McKee,  5 
Cal.  515 ;  Bennett  v.  Solomon,  6  Cal.  134. 
Colorado :  Fassett  v.  Mulock,  5  Colo.  466. 
Connecticut :  Lawrence  v.  Knap,  1  Root, 
248.  Georgia :  Winstcad  ;.'.  Bingham,  4 
Woods,  510;  14  Fed  Eep.  1;  dictum  to 
the  contrary  in  Planters'  Bank  v.  Prater, 
64  Ga.  609,  not  sound  law ;  Roberts  v. 
Mansfield,  32  Ga.  228.  Section  1996  of  the 
Code,  requiring  assignments  of  liens  to  be 
in  writing,  does  not  apply  to  mortgages. 
Winstead  v.  Bingham,  supra.  Illinois : 
Pardee  v.  Lindley,  31  111.  174;  Mapps  v. 
Sharpe,  32  111.  13  ;  Lucas  v.  Harris,  20 
111.  165  ;  Vansant  v.  Allmon,  23  111.  30; 
Worcester  Nat.  Bank  v.  Cheeney,  87  111. 
602  ;  Miller  v.  Earned,  103  III.  562  ;  Gaff 
V.  Harding,  48  111.  148;  Towner  y.  McClel- 

722 


land,  1 10  111.  542  ;  Union  Mut.  L.  Ins.  Co. 
V.  Slec,  12  N.  E.  Rep.  543.  Indiana :  Bur- 
ton V.  Baxter,  7  Blackf.  297  ;  Blair  v. 
Bass,  4  lb.  539  ;  French  v.  Turner,  15  Ind. 
59  ;  Gabbert  v.  Schwartz,  69  Ind.  450 ;  Bay- 
less  V.  Glenn,  72  Ind.  5 ;  Reeves  r.  Hayes, 
95  Ind.  521,  524.  Iowa:  Bank  of  Indiana 
V.  Anderson,  14  Iowa,,544 ;  Crow  v.  Vance, 
4  Iowa,  434 ;  Updegraft  v.  Edwards,  45 
Iowa,  513 ;  Preston  v.  Case,  42  Iowa,  549  ; 
Walker  v.  Schreiber,  47  Iowa,  529.  Kan- 
sas: Perkins  v.  Matteson,  19  Pac.  Rep. 
633.  Kentucky :  Miles  v.  Gray,  4  B.  Mon. 
417  ;  Burdett  v.  Clay,  8  lb.  287.  Louis- 
iana :  Scott  y.  Turner,  15  La.  Ann.  346; 
Forstall's  Succession,  3  So.  Rep.  277  ; 
Miller  v.  Cappel,  36  La.  Ann.  264. 
Maine  :  Vose  v.  Handy,  2  Me.  322.  Massa- 
chusetts :  Morris  v.  Bacon,  123  Mass.  58  ; 
Belcher  i;.  Costello,  122  Mass.  189  ;  Wolcott 
V.  Winchester,  15  Gray,  461.  Michigan 
Martin  v.  McReynolds,  6  Mich.  70.  Mis 
sissippi  :  Holmes  v.  McGinty,  44  Miss.  94 
Dick  V.  Mawry,  17  Miss.  (9  S.  &  M.)  448 
Missouri:  Laberge  v.  Chauvin,2  Mo.  179 
Chappell  y.  Allen,  38  Mo.  213;  Potter  v 
Stevens,  40  Mo.  229  ;  De  Laureal  v.  Kern 
per,    9  Mo.   App.    77 ;    Boatman's    Sav 


EQUITABLE   ASSIGNMENTS. 


[§  817. 


which  purports  to  secure  a  note,  when  in  fact  it  was  made  to  se- 
cure future  advances,  may  be  assigned  by  assigning  the  account 
for  such  advances,  without  a  formal  assiernment  of  the  mortcage.^ 
The  mortgage  title,  if  it  does  not  legally  pass  to  the  assignee  by 
such  assignment,  as  some  authorities  hold,  remains  in  the  mort- 
gagee as  trustee  for  the  holder  of  the  debt,  even  though  the  latter 
did  not  know  at  the  time  of  the  transfer  of  the  existence  of  the 
security.-  Whenever  it  comes  to  his  knowledge  he  may  affirm 
the  trust  and  enforce  the  security.  The  only  hazard  which  the 
equitable  assignee  takes  is  that  the  mortgagee  may  discharge 
the  mortgage,*^  unless  the  assignee  be  chargeable  with  notice  of 
the  rights  or  equities  of  other  persons  in  the  mortgage  debt  and 
security.^  If  the  mortgagor,  after  notice  of  such  an  assignment, 
pay  the  debt  to  the  mortgagee,  he  does  it  in  his  own  wrong  and 
must  suffer  the  loss.  If  the  mortgagee  pass  the  legal  title  to  an- 
other, the  latter  becomes  the  trustee  of  the  owner  of  the  note.^ 

Such  an  assignment  has  generally,  however,  no  effect  upon  the 
legal  estate.  It  is  true,  as  has  already  been  noticed  at  length  in 
the  first  chapter,  that  by  legislative  enactment,  or  by  judicial  con- 
struction in  several  states,  the  legal  character  of  a  mortgage  at 
common  law  no  longer  exists  ;  but  generally  the  distinction  is 


Bank  v.  Giewe,  84  Mo.  477  ;  Lee  v.  Clark, 
89  Mo.  553 ;  Hagerman  v.  Sutton,  91 
Mo.  519  ;  4  S  W.  Kep.  73  ;  Bell  v.  Simp- 
son, 75  Mo.  485.  Nebraska:  Kuhns  v. 
Bankcs,  15  Neb.  92.  New  Hampskire : 
Southerin  i".  Menduin,  5  N.  II.  420; 
Downer  v.  Button,  26  N.  11.338;  Blake 
V.  Williams,  36  N.  H.  39;  Kigncy  v. 
Lovejoy,  13  N.  II.  247;  Smith  r.  Moore, 
1 1  N.  fl.  55 ;  Page  v.  Tierce,  26  N.  II.  317. 
New  Jersey :  Harris  v.  Cook,  28  N.  J.  Eq. 
345;  Galway  v.  Fullerton,  17  N.  J.  Eq. 
389,  394 ;  Denton  v.  Cole,  30  N.  J.  E(i. 
244  ;  Ferry  v.  Mcckert,  32  N.  J.  Eq.  38. 
New  York :  Neilson  v.  Blight,  1  Johns. 
Cas.  205  ;  Green  v.  Hart,  1  Joiins.  580, 
5'JO;  Kvertson  v.  Bootli,  19  Johns.  480, 
491  ;  Tattison  v.  Hull,  9  Cow.  747  ;  Juck- 
.son  «.  Blotlget,  5  Cow.  202;  Langdon  v. 
IJucl,  9  Wend.  80;  I'arnielee  v.  Dann, 
23  Barb.  461  ;  Gould  v.  Marsh,  1  Hun, 
5G6.  North  Carolina:  llyman  r.  Deve- 
reux,  63  X.  C.  62  J.  Ohio  :  ruiiie  v.  Ercntli, 
4   Ohio,  .'il8.     Oregon:   \N'iits(Mi    ;•.    Dun- 


dee M.  &  T.  I.  Co.  12  Oregon,  474. 
Pennsylvania  :  Partridge  v.  Partridge,  38 
Pa.  St.  78 ;  Douk-y  v.  Hays,  17  Scrg.  &  K. 
400.  South  Carolina  :  Muller  v.  Wadling- 
ton,  5  S.  C.  342"  AValker  v.  Kee,  14  S.  C. 
142;  Cleveland  ;;.  Cohrs,  10  S.  C.  224. 
Texas:  Perkins  v.  Sterne,  23  Tex.  561. 
Vermont  :  Keycs  v.  Wood,  21  Vt.  331  ; 
Langdon  v.  Keith,  9  Vt.  299;  Pratt  v. 
Bank  of  Bennington,  10  Vt.  293  ;  Nash  v. 
Kelley,  50  Vt.  425.  Wisconsin :  Croft  v. 
Bunster,  9  Wis.  503;  Bice  v.  Cribb,  12 
Wis.  179;  Fisiier  i'.  Otis,  3  Cliand.  83; 
Blunt  V.  Walker,  11  Wis.  334;  Andrews 
V.  Hart,  17  Wis.  297;  Martineau  ;>.  Mc- 
Collum,  4  Chand.  1.53;  Woodruff  y.  King, 
47  Wis.  261. 

1  Moses  l:  Ilailiehl  (S.  C),  3  S.  E.  Hep. 
538. 

-  Jordan  v.  Cheney,  74  Me.  359. 

3  Morris  v.  Bacon,  123  Mass.  58. 

'  Strong  V.  Jackson,  123  Mass.  GO. 

^  Morris  v.  Bacon,  supra ;  Welcli  i'. 
(Joodwiii,  123  Mass.  71. 

723 


§  818.]  ASSIGNMENT    OF   MORTGAGES. 

kept  up,  and  "  great  convenience,  if  not  safety,"  is  found  in  it.^ 
"  The  true  character  of  a  mortgage,"  says  Chief  Justice  Shaw,"-^ 
"  is  the  pledge  of  real  estate  to  secure  the  payment  of  money,  or 
the  performance  of  some  other  obligation.  Its  object,  from  its 
creation  to  its  redemption  or  foreclosure,  is  that  of  a  pledge  for 
such  debt  or  duty.  It  may,  in  many  aspects,  be  called  a  real 
lien,  a  chattel  interest,  a  chose  in  action,  and  quasi  personal. 
But  as  it  binds  land,  and  may  lay  the  foundation  of  a  title  to  I'eal 
estate,  it  assumes  in  many  respects  the  character  of  a  land  title. 
It  is  so  in  its  origin,  by  deed  ;  in  the  mode  of  giving  it  notoriety, 
by  registration ;  in  its  transfer,  by  deed  of  assignment ;  its  dis- 
charge, by  deed  of  release ;  and  in  the  mortgagee's  remedj^  by 
writ  of  entry  against  the  mortgagor,  or  other  person  in  posses- 
sion under  him." 

But  whatever  may  be  the  equitable  interest  of  an  assignee  hav- 
ing only  an  equitable  assignment  of  a  mortgage,  as,  for  instance, 
by  the  delivery  of  the  mortgage  note  or  bond  without  a  formal 
assignment  of  the  mortgage,  he  has  no  legal  interest,  and  cannot 
sue  in  scire  facias,^  or  maintain  a  writ  of  ejectment,*  or  a  writ  of 
entry,^  in  his  own  name.  Such  an  assignee  at  most  is  only  a 
cestui  que  trust  having  an  equitable  interest  in  the  real  estate, 
the  legal  title  to  which  is  held  by  another,  either  as  an  actual  or 
resulting  trust.  He  has  no  legal  interest  in  the  land,  and  can 
maintain  no  action  at  law  in  respect  to  it.  His  rights  are  equi- 
table, and  must  be  pursued  in  a  court  of  equity.  He  may,  how- 
ever, use  the  name  of  the  legal  holder  of  the  mortgage  to  enforce 
the  legal  rights  that  appertain  to  the  mortgage.^ 

No  one  but  the  holder  of  the  mortgage  note  can  complain  that 
the  note  has  been  separated  from  the  mortgage,  or  the  mortgage 
from  the  note.  The  mortgagor  is  not  entitled  to  ^uy  relief  in 
equity  on  this  account." 

818.  The  mere  transfer  of  the  debt  does  not  at  common 
law  carry  with  it  the  mortgage  security  so  far  as  to  vest  the 
legal  interest  in  the  purchaser ;  but  only  gives  him  an  equitable 
interest,  which  must  be  enforced   in  the  name  of  the  person  who 

1  Chief  Justice  Shaw,  in  Young  v.  Mil-  5  Young  v.   Miller,   supra  ;  Bryant  v. 

ler,  6  Gray  (Mass.),  152.  Damon,  6  Gray  (Mass.),  564;  Warden  v. 

-  See  Young  v.  Miller,  supra.  Adams,  15  Mass.  23.3  ;  Dwinel  v.  Perley,  32 

3  Partridge  v.  Partridge,  38  Pa.  St.  78.  Me.  197  ;  Gould  v.  Newman,  6  Mass.  239. 

*  Cottrell  V.  Adams,  2  Biss.  351  ;  Ed-  o  Graham   v.   Newman,   21     Ala.   497  ; 

gerton  v.  Young,  43  111.  464 ;  Kilgour  v.  Kilgour  v.  Gockley,  supra. 

Gockley,  83  Bl.  109.  :  Matthews   v.  'Warner    (C.  C.    Mass. 

724  1881),  6  Fed.  Rep.  461 ;  112  U.  S.  600. 


EQUITABLE   ASSIGNMENTS.  [§  819. 

still  holds  the  legal  title.^  On  the  other  hand,  if  the  mortgage 
debt  has  been  paid,  a  mere  naked  mortgage  title  does  not  avail 
the  mortgagee  so  as  to  enable  him  to  maintain  an  action  npon  the 
mortgage.  He  has  a  mere  naked  seisin  without  any  beneficial 
interest.  And  if  the  debt  has  not  been  paid,  but  has  been  trans- 
ferred to  another  person,  the  beneficial  interest  no  longer  exists  in 
the  mortgagee,  but  in  the  assignee  of  the  debt,  who  must,  how- 
ever, enforce  his  security  in  the  name  of  the  mortgagee.  A  mort- 
gage is  available  as  a  security  only  as  it  is  connected  in  some  way 
with  the  debt  or  duty  which  it  secures.  To  one  who  has  not 
the  debt,  it  is  of  no  value  us  property,  as  it  could  at  most  be 
only  resorted  to  as  a  trust  for  the  benefit  of  the  holder  of  the 
note  .2 

When  the  debt  and  the  legal  title  to  the  mortgaged  estate  are 
separated  in  this  way,  if  the  holder  of  the  latter  will  not  volun- 
tarily use  this  title  for  the  benefit  of  the  person  entitled  to  the 
use  of  it,  it  may  be  necessary  to  resort  to  a  bill  in  equity  to  charge 
the  party  who  has  the  legal  title  as  a  trustee  for  the  holder  of  the 
debt,'^  or  to  assign  the  mortgage  to  him,*  whereupon  he  will  be 
compelled  either  to  maintain  a  suit  at  law,  or  to  foreclose  for  the 
benefit  of  the  assignee,  or  to  assign  the  mortgage  to  the  holder  of 
the  debt.^  Courts  of  law  will  enforce  this  equitable  principle  so 
fur  as  they  are  able. 

819.  The  law  implies  an  intention  that  the  mortgagee  shall 
hold  the  mortgage  title  in  trust,  when  the*  only  note  or  bond 
secured  by  the  mortgage  is  transferred  without  a  formal  assign- 
ment of  the  mortgage,  and  there  is  nothing  to  indicate  an  inten- 
tion of  the  parties  that  the  mortgage  security  is  not  to  go  with  it ; 
for  except  as  a  security  to  him,  the  barren  fee  in  the  mortgagee  is 
useless/'  But  the  question  has  been  raised  whether,  in  case  one 
of  two  notes  be  indorsed  without  any  expression  of  intent,  any 
resulting  trust  will  be  implied  in  favor  of  the  indorsee,  as  the 
mortgagee  still  has  a  beneficial  interest  in  the  mortgage  as  secu- 
rity for  his  remaining  note.' 

'  Olcott  V.  Crittenden  (Mich.),  3G  N.  W.  '^  Yoiin;,'  i-.  Miller,  6  Gray  (Mass.),  I.'j2  ; 

licp.  41.  Crane  r.  Marcli,  4  I'ick.  (Mass.)  131,  13G; 

-  Sanger  v.  Bancroft,  12  Gray  (Ma.sa.),  Woicott  v.  Winchester,  sitimi ;  Morris  ;;. 

•  jrj.'i,  per  Dewey,  J.  Bacon,  su/ira;  Mayo  v.  Merrick,  127  Mass. 

'  iVr  Dewey,  J.,  in   WoWott  r.   Win-  ."ill;  Torroy  v.  Deavitt,  .')3  Vt.  331;  Jor- 

ihc.ster,  I."}  (irny  (.Muss.),  4()l  ;  Jordan  v.  dan  i;.  Cheney,  sii/jra. 

Cheney,  74  Me.  S.'i'J.  ''  Per  Shaw,  C.  J.,  in  Vuniif,'  r.  Miller. 

*  Morris  v.  Baron,  123  Mass.  5S.  fi  Gray  (Mass.),   l.')2  ;  per  Dewey,  Justice 

6  Crane  v.  March,  4  Pick.  (.Miiss.)  131.  72r> 


§  820.]  ASSIGNMENT    OF   MORTGAGES. 

The  assignment  of  the  debt  secured  by  a  deed  of  trust  is  not 
an  assignment  of  the  trust.^  The  trustee  holds  the  trust  for  the 
benefit  of  the  equitable  assignee.  In  like  manner  the  indorse- 
ment of  a  note  secured  by  a  trust  deed  carries  with  it  the  security 
of  the  trust  deed,  though  the  trustee  named  in  it  must  enforce  the 
security.^ 

820.  An  assignment  by  transfer  of  the  debt  only  is  effec- 
tual bet"ween  the  parties.  The  mortgage  passes  as  an  incident 
to  the  note.  No  assignment  of  the  mortgage  is  necessary  as  be- 
tween the  parties,  or  as  against  the  mortgagor  or  others  having 
actual  notice  of  the  transfer  of  the  notes.  The  moi'tgagor  is 
bound  to  take  notice  of  such  an  assignment  upon  the  discharge 
of  his  debt,  because  proper  diligence  on  his  part  demands  that  he 
should  require  the  production  of  the  notes  before  paying.^ 

But  if  the  mortgagee,  while  the  notes  are  in  the  hands  of  the 
assignee,  cancels  the  mortgage  on  receiving  payment  from  the 
mortgagor,  who  then  makes  conveyance  or  a  new  mortgage  to  an- 
other person,  who  acts  in  good  faith  and  in  ignorance  of  the  fact 
that  the  original  mortgage  had  not  been  paid  to  the  proper  party, 
such  purchaser  or  subsequent  mortgagee  has  the  better  title.* 
Such  subsequent  purchaser  or  mortgagee  is  not  bound  to  take  no- 
tice of  an  assignment  by  transfer  of  the  notes  alone.  The  assignee 
of  the  notes  can  easily  protect  himself  by  requiring  an  assignment 
of  the  mortgage  and  recording  it,  and  thus  give  notice  of  his 
rights ;  and  if  he  omits  to  do  this,  he  should  be  the  party  to  suffer 
for  the  negligence.^  Where  a  mortgagee  assigned  a  note  secured 
by  mortgage,  and  subsequently  procured  a  conveyance  in  fee  of 
the  premises  from  the  mortgagor  to  himself,  and  the  land  was 
then  levied  upon  and  sold  as  the  property  of  the  mortgagee  to 
a  third  party,  the  only  interest  acquired  by  the  purchaser  was  the 
equity  of  redemption.^ 

in  Wolcotti'.  Winchester,  15  Gray  (Mass.),  *  §  472;  Bank  of  Indiana  i'.  Anderson, 

461,465.  14  Iowa,   544;    Walker  v.   Schreiber,  47 

1  Charter  Oak  L.  Ins.  Co.  i*.  Stephens  Iowa,  529 ;    Howard   v.   Ross,    5    Bradw. 

(Utah),  15  Pac.  Rep.  253.  (III.)  456. 

^  Bell  V.  Simpson,  75  Mo.  485.  ^  Quoted   with  approval   in  Torrey  v. 

^  Swan  V.  Yaple,  35  Iowa,  248  ;  Bremer  Deavitt,  siijira  ;   Ayers  v.   Hays,  60  Ind. 

Co.  Bank  I?.  Eastman,  34  Iowa,  392;  Crow  452;   Myers  v.  Hazzard,  4   McCrary,  94, 

V.  Vance,  4  Iowa,  434;  Bank  of  Indiana  103;  Lewis  v.  Kirk,  28  Ivans.  497;  S.  C. 

V.  Anderson,  14  Iowa,  544;  Pope  v.  Jaco-  42  Am.  Rep.  173. 

bus,  10  Iowa,  262  ;  Torrey  v.  Deavitt,  53  ^  Edgerton  v.  Young,  43  111.  464 ;  Camp- 

Vt.  331,335;  Keeves  v.    Hayes,  95  Ind.  bell  v.  Carter,  14  111.286,289;  Jarvis  v. 

521,  .537,  547  Erink,  14  111.  396,  398. 
726 


EQUITABLE   ASSIGNMENTS.  [§  821. 

The  measure  of  damages  in  an  action  by  the  assignee  of  the 
note  against  the  mortgagor  for  unlawfully  releasing  the  mortgage 
is  the  value  of  the  mortgage,  not  exceeding,  however,  the  amount 
due  upon  such  note.^ 

821.  Assignment  of  part  of  the  mortgage  debt.  —  There  is 
no  doubt  that  where  a  mortgage  is  conditioned  to  secure  the  pay- 
ment of  several  notes,  the  mortgagee  may,  if  he  choose,  assign  the 
whole  mortgage  interest  as  security  for  a  part  of  the  notes  trans- 
ferred at  the  same  time,  leaving  no  security  in  the  land  for  a  sub- 
sequent assignee  of  the  other  notes.^  But  if  the  mortgagee  in 
terms  assigns  only  such  part  of  the  mortgage  security  as  corre- 
sponds to  the  notes  transferred,  then  the  holder  of  the  remaining 
notes  is  entitled  to  the  remainder  of  the  security .^  An  assign- 
ment of  a  part  of  the  mortgage  notes,  in  the  absence  of  any  con- 
tract to  the  contrary,  is  held  to  operate  as  an  assignment  of  a  pro 
rata  interest  in  the  mortgage.^  The  assignee  of  the  mortgage  and 
part  of  the  notes  holds  the  security  in  trust  for  the  benefit  pro 
rata  of  one  who  had  previousl}^  taken  the  other  notes. ^ 

The  same  principle  applies  when  the  debt  secured  is  represented 
by  bonds  of  a  railroad  company  or  other  corporation.  The  secu- 
rity attaches  to  the  bonds  in  whosesoever  hands  they  may  be. 
Moreover,  an  interest  coupon  detached  from  the  bond  and  in  the 
hands  of  another  person  is  still  entitled  to  a  proportionate  share 
of  the  mortgaged  security.^ 

Tiie  rule  is  also  the  same  if  the  mortgage  debt  be  in  part  rep- 
resented by  a  note  and  in  part  by  an  open  account.  The  assign- 
ment of  the  note  carries  a  proportionate  part  of  the  security." 

If  a  mortgage  be  assigned  to  the  extent  of  three  of  the  mort- 
gage notes,  the  mortgagee  holding  two  other  notes  under  an  agree- 
ment that  his  security  should  not  be  impaired  as  to  them,  the 
assignee  becomes  a  tenant  in  common  with  the  mortgagee,  each 
being  owner  under  the  mortgage  of  such  part  of  the  estate  as  the 

1  Fox  V.  Wiay,  5G  Ind.  423.  Rep.  686;  Sargent  i-.  Howe,  21  111.   148; 

2  Warden    i-.   Adams,    15    Mass.    2.3.3;     Patrick's  Apj).  10,')  Pa.  St.  356. 
Langdon  v.  Keith,  9  Vt.  299.  *  Belding  ;;.  Manly,  21  Vt.  550;  Moore 

"  Wright  V.  Parker,  2  Aik.  (\'t)  212.  v.  Ware,  38  Me.  496;   Hcdiiiaii  v.  Purring- 

■»  Ke>e.s  V.  Wood,  21  Vt.  331;  Cooper  ton,  65  Cal.  271;  Norton  v.  Palmer,  142 

V.   Ulniann,  Walk.  (Mich.)  251  ;  Donley  Ma.ss.  4.33. 

r.  Hays,  17  S.  &  R.  (Pa.)  400;  Walker  «  Miller  v.  Rutland  &  Wash.  R.  R.  Co. 

V.  Schreihcr,  47    Iowa,  529;    Ilarinan    v.  40  Vt.  399;  .lonea   on    R.  R.  Securitica, 

Barhydt,  20  Neb.  625  ;  Studebaker  Maiiuf.  ch.  ix. 

Co.  1-.  McCargur,  20  Neb.  500;  30  N.  W.  '  Adger  v.  Pringle,  11  S.  C.  527. 

727 


§  822.]  ASSIGNMENT    OF   MORTGAGES. 

debt  due  to  each  bears  to  the  whole  mortgage  debt.  The  assio-nee 
in  such  case  cannot  foreclose  the  entire  mortgage,  but  only  to  the 
extent  of  his  interest.^ 

822.  A  mortgagee  holding  two  or  more  notes  secured  by- 
one  mortgage  can  transfer  the  mortgage  and  one  note,  so  as 
to  give  that  note  priority  in  satisfaction  out  of  the  mortgaged 
property  ;  ^  and  an  indorsement  of  one  note,  with  an  assignment 
of  the  mortgage,  is  sufficient,  in  the  absence  of  all  circumstances 
indicating  a  contrary  intention,  to  give  to  the  holder  of  such  note 
priority .3  The  mortgagee  may  by  agreement  fix  the  rights  of  the 
holders  of  the  several  notes  to  the  mortgage  security,  and  such  an 
agreement  may  be  implied  from  the  circumstances  of  the  trans- 
fer.* An  assignment  of  one  note  without  the  mortgage  may  im- 
ply a  priority  of  payment  over  any  notes  retained  and  owned  by 
the  mortgagee,  and  any  subsequent  indorsement  of  the  other 
notes  would  not  then  destroy  the  priority  of  the  note  transferred.^ 

An  assignment  of  a  part  of  the  amount  secured  "  out  of  the 
first  moneys  to  become  due  and  payable  "  gives  the  assignee  pri- 
ority of  payment  of  such  part  over  the  residue  secured  by  the 
mortgage.^ 

But  when  there  is  no  such  implication  of  an  intention  to  give 
priority  to  the  note  assigned,  the  indorsement  and  delivery  of  it 

1  Lane  v.  Davis,  14  Allen  (Mass.),  haps  stand  upon  another  principle  of  law, 
225.  namely,  that  when  two  or  more  have  equal 

2  Wright  V.  Parker,  2  Aik.  (Vt.),  212  ;  claims  in  equity,  and  one  has  a  legal  title, 
Cooper  V.  Ulmann,  Walk.  (Mich.)  251  ;  the  legal  title  shall  prevail.  Eastman  v. 
Bank  of  England  i'.  Tarleton,  23  Miss.  Foster,  8  Met.  (Mass.)  19,  per  Chief  Jus- 
173;   Gear  v.  McCanless,  60  Miss.  244;  lice  Shaw. 

McLean's  App.  103  Pa.  St.  255;  Walker  According  to  other  authorities,  however, 

V.  Dement,  42  111.  272.  the  assignment  of  the  mortgage  with  one 

In  Langdon  v.  Keith,  9  Vt.  299,  Mr.  note  does  not  necessarily  give  that  note 
Chancellor  CoUamer  adopts  the  views  and  priority,  but  operates  only  as  an  assign- 
language  of  the  court  in  Wright  v.  Parker,  ment  of  the  mortgage  pro  tanto.  Steven- 
supra.  "  If  the  mortgagee  choose  to  as-  son  v.  Black,  1  N.  J.  Eq  (Sax.)  338 ;  Page 
sign  all  his  interest  in  the  mortgaged  i>.  Pierce,  26  N.  H.  317  ;  Betz  u.  Heebner, 
premises,  to  secure  but  a  part  of  the  notes  1  Penn.  280;  Evving  v.  Arthur,  1  Humph, 
therein,  assigned  by  him,  he  has  a  right  to  (Tenn.)  537. 

do  so,  and  in  such  case  no  interest  in  the  ^  §  170I  ;  Foley  v.  Rose,  supra;  Rich- 
premises  could  remain  in  him."  ardson  v.  McKim,  20  Kans.  346  ;  Noyes 

^  §  1701 ;  Foley  v.  Rose,  123  Mass.  557  ;  v.   White,   9  Kans.   640.      See,  however, 

Solberg  v.  Wright,  33  Minn.  224.  Henderson  v.  Herrod,  18  Miss.  (10  S.  & 

*  Grattan  v.  Wiggins,  23  Cal.  16,  30,  M.)  631  ;  Knight  t;.  Ray,  75  Ala.  383;  Ab- 

and  cases  cited;  Mechanics'  Bank  v.  Bank  ney  v.  Walmsley,  33  La.  An.  589. 

of  Niagara,  9  Wend.  (N.  Y.)  410.  6  Thayer's  Appeal    (Pa.),  9  Atl.  Rep. 

The  assignee  of  one  note,  who  also  has  498. 
an  assignment  of  the  mortgage,  may  per- 

728 


EQUITABLE   ASSIGNMENTS.  [§  822. 

carries  with  it  a  j-^ro  rata  portion  of  the  security  and  nothing 
more.  This  is  the  generally  received  doctrine.^  The  holder  of 
the  security  may  foreclose  the  mortgage  in  his  own  name,  but  he 
will  hold  the  proceeds  of  sale  as  trustee  for  the  persons  entitled.^ 

When  successive  assignments  of  several  notes  or  bonds  secured 
by  a  mortgage  are  made  without  an  assignment  of  the  mortgage, 
the  rule,  "  Qui  prior  in  tempore,  potior  est  in  jure^  has  no  appli- 
cation. This  is  applicable  when  there  are  successive  charges  upon 
the  same  property  ;  but  as  between  several  obligations  secured 
by  the  same  mortgage,  much  difficulty  might  result  fx'oni  the  rule, 
on  account  of  the  uncertainty  and  fraud  that  might  attend  an 
inquiry  into  the  times  of  the  several  assignments.  And  yet  in 
several  states  the  rule  has  been  adopted  that  the  note  first  falling 
due  has  precedence  in  the  application  of  the  security,  and  is  to 
be  first  satisfied.^ 

In  the  beginning,  and  as  between  the  original  parties,  the  mort- 
gage stands  as  a  security  for  all  the  mortgage  notes  equally.  If 
the  mortgagee  assigns  one  of  the  notes,  retaining  the  others  to- 
gether with  the  mortgage,  the  mortgage  will  stand  as  security  for 
all  the  notes  p)ro  rata  ;  and  this  is  the  case  without  reference  to 
the  time  they  respectively  become  due.^  If  there  be  two  mort- 
gage notes,  and  upon  the  assignment  of  the  mortgage  one  of  them 

1  California:  Phelan   v.   Olney,  6  Cal.  Hancock's  Appeal,  34  Pa.   St.   155;  Mc- 

478;    Grattan   v.   Wiggins,   23    Cal.    16.  Lean's  Appeal,  103  Pa.  St.  255  ;  Patrick's 

Connecticut:  Smith  v.  Stevens,  49  Conn.  Appeal,  105  Pa.  St.  356.     South  Carolina : 

181.     Kentucky  :  Stockton  v.  Johnson,  6  Lynch  v.  Hancock,  14  S.  C.  66,  84.     In- 

B.  Jlon.  408  ;  Duncan  v.  Louisville,   13  diana  :    Sample    v.    Rowe,   24    Ind.   208. 

Bush,  378  ;  M'Clanahan  v.  Chambers,   1  Wisconsin  :  Ivoiston  v.  Brockway,  23  Wis. 

Mon.  43.     Maine  :  Moore  v.  Ware,  38  Me.  407.     Missouri :  Anderson  v.  Baunigart- 

496.     Massacliusetts  :    When  not  other-  ner,  27  Mo.  80.    Kansas:  Noyes  r.  White, 

wise  stipulated,  Bryant  v.  Damon,  6  Gray,  9  Kuus.  640.     Iowa  :  Walker  v.  Schreiber, 

564  ;  Foley  v.  Rose,  123  Mass.  557.     Mis-  47  Iowa,  529. 

sissippi  :    Terry  v.  Woods,  6  Sm.  &  M.  -  Sol  berg  v.  Wright,  33  Minn.  224. 

139  :   Henderson  i-.  Ilerrod,  10  lb.  631  ;  ^  §§  1699-1701  ;    Stanley  v.  Beatty,  4 

Bank  of  Kng.  v.  Tarleton,  23  Miss.  173.  Ind.  134  ;  Hough  v.  Osborne,  7  Ind.  140; 

New  Hampshire  :   Page  v.  Pierce,  26  N.  State  Bank  v.  Tweedy,  8  Blackf.  (lud.) 

H.  .•il7  ;  .Johnson  v.  Brown,  31  N.  H.  405.  447  ;  Doss  c.  Ditmars, 70  Ind.  451  ;  Wood 

New  Jersey :  Stevenson  i;.  Black,  1   N.  .1.  v.  Trask,  7   Wis.   566  ;    Grapengether  i-. 

Eq.  (Sax.)  .338  ;  Collerd  i'.  Hu.soii,  34  N.  Fcjervary,  9  Iowa,  163  ;  Rankin  v.  Major, 

J.  Eq.  38.     Vermont  :   Langdon  v.  Keith,  lb.  297  ;  Sangsler  v.  Love,  11  Iowa,  580; 

9  Vt.  299  ;   Bclding  i'.  Manly,  21  Vt.  550  ;  Hinds    v.    Mooers,    lb.    211;    Walker   v. 

Keyes  v.   Wood,   21    Vt.  331.      Illinois  :  Schrtibcr,  47  Iowa,   529  ;  Cullnni  v.  Er- 

Herring  v.  Woodhuil,  29   111.   92.     Ohio:  win,  4  Ala.  452;  M'Vay  v.  Hloodgood,  9 

Swart/.  V.  Leist,  13  Ohio  St.  419.     Penn-  Port.  (Ala.)  547. 

sylvania  :  DonKv  v.  Hays,  17  S.  &  R.400;  *  See  Engli.',h  v.  Carney,  25  Mich.  178. 

729 


§§  823,  824.]  ASSIGNMENT    OF   MORTGAGES. 

is  indorsed  without  recourse,  and  the  other  is  indorsed  in  bhink 
by  the  mortgagee,  upon  foreclosure  the  notes  are  entitled  to  the 
benefit  of  the  mortgage  security  pro  rata,  and  a  decree  placing 
the  deficiency  altogether  upon  the  indorsed  note,  and  requiring 
pa3'ment  of  it  from  the  mortgagee,  is  erroneous.^ 

An  assignment  of  a  mortgage,  so  far  as  it  secures  the  payment 
of  tlie  second  note  named  therein,  togetlier  with  the  second  note 
with  a  covenant  of  warranty  against  all  persons  claiming  under 
the  assignor,  transfers  the  mortgage  as  security,  first  for  the  pay- 
ment of  the  note  assigned  with  it,  and  then  in  trust  to  secure  the 
payment  of  the  other  note ;  and  if  such  assignment  is  recorded, 
it  charges  the  estate  in  the  hands  of  subsequent  purchasers  of  the 
mortgage  with  such  trust.^  Tlie  effect  of  such  an  assignment  is 
the  same  without  such  a  covenant  of  warranty .^ 

VI.    Construction  and  Effect  of  Assignments. 

823.  Law  of  place.  —  A  mortgage  of  course  takes  effect  by 
virtue  of  the  law  of  the  place  whei-e  the  land  is  situated.  But 
this  rule  does  not  extend  to  an  equitable  transfer  of  the  mortgage 
and  of  the  debt  to  which  it  is  incident.  An  assignment  of  the 
mortgage  is  a  new  contract  and  passes  a  chattel  interest,  and  the 
rights  of  the  parties  are  governed  by  the  law  of  the  place  where 
it  is  executed.*  In  the  absence,  however,  of  proof  that  the  law 
of  the  place  of  assignment  is  different  from  that  of  the  place 
where  the  property  is  situated  and  the  mortgage  is  sought  to  be 
enforced,  the  law  of  the  latter  place  will  govern.  The  foreign 
law  must  always  be  proved.^ 

824.  An  ordinary  assignment  passes  nothing  beyond  the 
mortgage  title.  The  words  of  grant,  in  an  ordinary  deed  of  as- 
signment of  a  mortgage,  do  not  operate  by  way  of  covenant  or 
estoppel  beyond  the  description  of  the  thing  assigned  ;  and  they 
cannot  have  the  effect  to  convey  or  extinguish  any  other  right  or 
interest  the  assignor  has  in  the  property,  as,  for  instance,  a  right 
of  entry  for  breach  of  a  condition  subsequent.  Neither  does  an 
assignment  in  ordinary  form  without  covenants  of  warranty  estop 

1  English  V.  Carney,  25  Mich.  178.  Hoyt  v.  Thompson,  19  N.  Y.  207  ;  Banli 

2  Bryant   v.  Damon,   6   Gray   (iMass.),     of    England   v.  Tarleton,  23  Miss.  173  ; 
564.     See  Norton  v.  Stone,  8  Paige  (N.     Murrell  v.  Jones,  40  Miss.  565,  583. 

Y.),  222.  5  Kennedy  v.   Chapin    (Md.),    10   Atl. 

3  Foley  V.  Rose,  123  Mass.  557.  Rep.  243. 
*  Dundas  v.  Bowler,  3  McLean,  397; 

730 


CONSTRUCTION   AND   EFFECT    OF   ASSIGNMENTS.  [§  824. 

the  assignor  to  set  up  an  after-acquired  title  ;  ^  nor  does  it  pass 
a  title  to  a  portion  of  the  premises  which  the  assignor  has  previ- 
ously acquired  by  a  purchase  under  a  foreclosure  of  a  prior  mort- 
gage of  that  portion.^  By  the  foreclosure  sale  the  assignor,  who 
has  become  absolute  owner  of  a  part  of  the  premises  free  from 
any  right  of  redemption,  no  longer  holds  that  as  mortgagee.  The 
assignment  conveys  a  title  in  mortgage,  and  not  an  absolute  title 
in  fee.  These  are  distinct  titles.  The  assignment  does  not  touch 
the  title,  whicli  the  assignor  holds  absolutely. 

Where  one  conveyed  land  upon  the  express  condition  that  the 
grantee  should  within  a  certain  time  erect  certain  buildings  on  it, 
and  took  back  a  mortgage  of  it  to  secui-e  the  payment  of  part  of 
the  purchase  money,  and  then  by  assignment  in  the  usual  form 
sold  and  conveyed  "said  mortgage  deed,  the  real  estate  thereby 
convej'Cd,  and  the  promissory  note,  debt,  and  claim  thereby  se- 
cured," it  was  held  that  only  the  mortgage  title  passed  to  the 
assignee  of  the  mortgage,  subject  to  be  defeated  by  breach  of  the 
condition  of  the  original  deed.^  "  The  real  estate  thereby  con- 
veyed," said  Mr.  Justice  Graj^  "  was  not  an  absolute  title  in  fee, 
but  a  title  in  mortgage,  and,  in  this  case,  a  title  subject  to  be 
defeated  by  the  mortgagors'  breach  of  the  condition  subsequent  in 
the  deed  to  them.  The  words  of  grant  in  the  assignment  cannot 
operate  by  way  of  covenant  or  estoppel  beyond  the  description  of 
the  thing  granted  and  assigned." 

Moreover,  the  assignment  of  a  moi'tgage  of  premises  upon  which 
the  mortgagee  has  a  right  of  entry  for  a  breach  of  a  condition 
subsequent,  as,  for  instance,  a  condition  for  the  payment  of  prior 
mortgages  upon  the  property,  does  not  convey  or  extinguish  the 
right  of  entry,"^  although  an  absolute  alienation  in  fee  before  an 
entry  for  the  breach  would  extinguish  the  right  or  possibility  of 
reverter;''  f(jr,  as  Coke  expresses  it,*^  "Nothing  in  action,  entry, 
or  reentry  can  be  granted  over  ;  "  and  the  reason  he  gives  for  the 
rule  is  "  for  avoiding  of  maintenance,  suppressing  of  rights,  and 

1  Weed  Sewing  Machine  Co.  i'.  luncr-  ^  Merritt  v.  Han  is,  102  Mass.  :V2(\,  nud 

son,  115  Mass.  .'j.'J4.  cn-sis  cited. 

-  Durfjiu   V.   Busfieltl,    114    Mass.   492.  ••  Hancock  v.  Carlton.  f>  Gray  (Mass.), 

Tiie  words  of  the  Uisignnient  wore  :"  Sell,  39;    Kicliard.son    r.   Canibrid;4;e,    2    Allen 

assign,  trannfer,  set  over,  and  convey  said  (Mass.),  118  ;  Merritt  r.^llarris,  102  Maas. 

inort^,'a;;e   deed,   the   real   estate   therehy  326. 

conveyed,  and  the  promissory  note,  dei)t,  '  llicc  i*.  Hoston  &  Worcester  H.  H.  Co. 

and    claim    therehy    secured."      And    see  12  Allen  (Mass.),  141,  and  cases  cited. 

Barnstable  Savintjs  Bank  r.  Barrett,  122  "  Co.    Litt.   214  (t ;   and   see   Co.  Litt. 

Mass.  172;  §  972.  309  a. 

731 


§§  825,  826.]  ASSIGNMENT    OF   MORTGAGES. 

stirring  up  of  suits,"  which  would  happen  if  men  were  permitted 
"  to  grant  before  they  be  in  possession." 

It  is  generally  true,  however,  that  one  assigning  a  bond  and 
mortgage  impliedly  warrants  their  validity,  and  is  liable  for  a 
breach  of  such  implied  warranty,^  if  he  had  knowledge  at  the 
time  of  the  transfer  of  their  invalidity.  But  if  he  has  no  knowl- 
edge of  any  defect,  it  would  seem  that  he  could  not  be  held  liable 
for  a  loss  sustained  by  the  assignee  by  reason  of  any  invalidity .^ 
A  warranty  of  the  validity  of  a  mortgage  is  a  warranty,  in  effect, 
that  the  bond  as  well  as  the  mortgage  is  valid ;  for  if  the  bond 
be  invalid,  the  mortgage,  which  is  dependent  upon  the  debt,  is 
invalid  also.3  But  ordinarily  an  assignment  of  a  mortgage  does 
not  in  any  way  warrant  the  title  to  the  mortgaged  property ;  and 
a  court  of  equity  cannot  relieve  a  purchaser  of  a  mortgage  of 
land,  the  title  of  which  proves  defective,  unless  the  seller  made 
representations  respecting  the  title  upon  which  the  purchaser  was 
justified  in  relying.* 

Ordinarily  an  assignment  does  not  charge  the  assignor  with 
any  liability  to  make  good  the  mortgage  debt  assigned  ;  but  he 
may,  by  special  terms  in  the  assignment,  guarantee  the  debt  just 
as  he  could  make  any  guaranty.  A  guaranty  of  the  assignee 
against  loss  from  the  mortgage  is  a  guaranty  limited  to  the 
amount  paid  on  the  assignment.^  If  an  assignee  having  a  guar- 
anty unreasonably  delay  the  collection  of  the  mortgage,  and  in 
the  mean  time  the  property  depreciates  in  value,  the  guarantor  is 
released.^ 

825.  A  mortgagor  cannot  set  up  an  after-acquired  title  as 
against  his  covenants  of  warranty.  Having  bought  laud  and 
given  a  mortgage  for  the  purchase  money  containing  covenants  of 
warranty,  he  cannot  set  up  a  title  adversely  to  an  assignee  of  his 
mortgage,  although  he  acquire  such  title  under  a  sale  for  taxes 
assessed  upon  the  land  before  he  bought  it.  Such  title  enures 
instantly  to  the  benefit  of  the  assignee.' 

826.  An  equitable  assignment  carries  a  power  of  sale,  in 
those  states  where  a  mortgage  is  regarded  as  merely  a  lien  and 
not  as  an  estate  in  the  land.     An  assignment  of  the  note  carries 

1  Ross  V.  Terry,  63  N.  Y.  613.  5  Griffith  v.  Robertson,  15  Hun  (N.  Y.), 

2  Littauer  v.  Goldman,   72  N.  Y.  506  ;     344.     See  §  829. 

Fant  V.  Fant,  17  Gratt.  (Va.)  11.  6  Griffith  v.  Robertson,  supra.     See  §§ 

2  Ross  V.  Terry,  supra.  1432,  1710. 

*  Vincent  r.  Berry,  46  Iowa,  571.  ^  ggg  §§  679,  682,   1483;  Gardiner  v. 

Gerrish,  23  Me.  46. 
732 


CONSTRUCTION    AND   EFFECT    OF   ASSIGNMENTS.  [§  827. 

with  it  as  an  incident  the  mortgage,  which  may  be  enforced  in 
the  name  of  the  assignee,  and  an  indorsement  and  delivery  of  the 
note  without  a  formal  assignment  of  the  mortgage  vests  the  power 
of  sale  in  the  assignee.  The  power  passes  from  the  mortgagee, 
and  can  no  longer  be  executed  by  him.^  But  in  Illinois  it  is  held 
that  an  assignment  of  the  mortgage  without  an  indorsement  of 
the  note,  inasmuch  as  the  mortgage  is  not  assignable,  either  at 
common  law  or  by  statute,  in  that  state,  will  not  pass  the  power 
of  sale  to  the  assignee,  but  it  will  still  remain  in  the  mortgagee, 
who  alone  can  exercise  it.^ 

827.  An  assignment  of  a  mortgage  may,  in  equity,  be 
sho"wn  to  be  in  fact  collateral  security  for  a  loan,  though  it  be 
absolute  in  form.  Such  evidence  does  not  vary  or  contradict  the 
writing,  but  establishes  a  limitation  inherent  in  the  transaction, 
and  a  court  of  equity  will  restrict  it  accordingly.'^  When  the 
mortgage  secures  a  negotiable  note,  the  assignee  who  has  taken 
it  as  collateral  security,  by  an  absolute  assignment  in  the  usual 
form,  though  for  only  a  small  part  of  the  amount  secured  by  the 
mortgage,  may  himself  assign  it  to  another  ;  and  this  second  as- 
signee, if  he  has  taken  it  before  it  was  due,  for  full  value,  without 
notice  of  the  limited  interest  of  the  assignor,  may  enforce  it  for 
the  full  amount.^  But  if  the  debt  secured  be  a  bond  or  other  non- 
negotiable  instrument,  the  second  assignee  would  in  such  case  ac- 
quire only  the  right  and  interest  of  the  first  assignee  ;'^  and  the 
assignor  who  pledged  the  mortgage  can  redeem  upon  paying  the 
amount  of  the  loan  for  which  it  was  pledged,  in  whosesoever  hands 
he  may  find  it.*" 

If  such  assignee  forecloses  the  mortgage,  and  at  the  sale  bids  it 
in  for  a  sum  less  than  the  amount  of  the  debt  which  the  assign- 
ment was  made  to  secure,  inasmuch  as  he  iiolds  the  mortgage 
after  satisfying  his  own  claim  as  trustee  for  his  assignor,  he  is  not 
allowed  to  purchase  the  premises  for  his  own  benefit,  but  they  are 
in  his  hands  subject  to  be  redeemed  by  his  cestui  que  trust.'     The 

1  Olds  V.  Cumniin;,'fl,  31   111.  188;  Tar-  part.     See  Norman  v.  Towne,  130  Mass. 

dee  V.  Lindlcy,  lb.  174.  52. 

^  Hamilton  u.  Lubukec,  .51  III.  415.  6  Bus),    i-.    Lathrop,    22    N.    Y.    535; 

«  Pond  V.  Eddy,  113  Mass.  14'J.  United  States  v.  SturKOS,  1  Paine,  525. 

*  Bri>,'','»  V.   Itiie,    130  Mass.  50.     Tho  «  Sweet  r.  Van  Wyek,  3  Uarb.  (N.  Y.) 

recital  in  the  aH.si;;nmint  of  the  consider-  Cli.  C47. 

ation  for  whicli  the  a.sHignmeut  wuh  made  '  lloyt  r.  Martense,  1<>  N.  Y.  231  ;  and 

is  not  alone  Huflicient  to  jiut  the  assit,'nee  aee  Slee  r.  Manhattan  Co.  1  I'aige  (N.  Y.), 

upon    in(jiiirv,  or   to   prove   fraud   on    hiH  48. 

733 


§  827.]  ASSIGNMENT    OF   MORTGAGES. 

effect  of  the  foreclosure  in  such  case  is  simply  to  bar  the  equity  of 
the  mortgagor  and  his  grantees  in  the  land,  and  it  has  no  opera- 
tion upon  the  rights  of  the  assignor  and  his  assignee  holding  it 
as  collateral  security  for  an  amount  less  than  the  mortgage  debt. 
The  assignee  holds  the  mortgage  only  as  security  for  the  debt  due 
him,  and  as  trustee  for  his  assignor  for  any  surplus.  The  equita- 
ble rule,  therefore,  which  forbids  a  trustee  or  person  acting  in  a 
fiduciary  capacity  to  speculate  upon  the  subject  of  the  trust,  ap- 
plies as  well  after  the  foreclosure  as  before.  Even  in  case  one 
assigning  a  mortgage  as  collateral  stipulates  in  the  assignment  to 
forfeit  all  interest  in  the  mortgage  in  case  he  fails  to  pay  the 
principal  debt  by  a  specified  day,  such  agreement  for  forfeiture 
amounts  to  nothing  in  equity,  and  the  assignor  still  retains  an 
interest  in  the  mortgage. ^ 

Of  course  payment  of  the  original  debt,  for  which  a  mortgage  is 
assigned  as  collateral  security,  does  not  necessarily  or  ordinarilj'^ 
discharge  the  mortgage  ;  but  if  this  was  originally  valid  it  remains 
valid,  and  the  assignee,  having  received  payment  of  the  original 
debt,  holds  the  mortgage  in  trust  for  his  assignor.  A  subsequent 
mortgagee  of  the  same  property  cannot  claim  in  such  case  that 
the  mortgage  is  satisfied.^ 

If  a  mortgagee  in  possession  assigns  his  mortgage  as  collateral 
security  for  a  debt,  this  is  an  admission,  which  the  mortgagor  may 
avail  himself  of,  that  it  is  a  subsisting  security.^ 

When  a  mortgage  fraudulent  in  its  inception,  as  against  the 
mortgagor's  creditors,  is  assigned  to  one  who  has  knowledge  of  the 
fraud,  he  stands  in  no  better  situation  to  enforce  it  or  to  claim 
protection  under  it  than  a  party  to  the  original  fraudulent  trans- 
action.* The  law  will  lend  him  no  aid  whatever  for  either  pur- 
pose. The  burden,  however,  of  proving  that  the  assignee  took 
the  mortgage  with  notice,  or  that  he  is  not  a  bona  fide  purchaser, 
is  on  the  party  who  sets  up  the  fraud.^ 

The  title  to  a  mortgage  that  was  fraudulent  in  its  inception  as 
against  the  mortgagor's  creditors,  becomes  valid  in  the  hands  of 
one  who  has   purchased   it   in   good    faith  without  notice  of  the 

^  Hughes  I'.  Johnson,  38  Ark.  285.  213  ;  Chamberlain  v.  Barnes,  26  Barb.  (N. 

-  First  Nat.  Bank  v.  Schussler  (Ky.),  2  Y.)  160. 

S.  W.  Rep.  145.                                     '  5  Marshall   v.   Billingsly,   7   Ind.   250; 

3  Borst  V.  Boyd,  3  Sandf.  (N.  Y.)   Ch.  Farmers'   Bank   of    Va.   v.   Douglas,    19 

501  ;  Hansard  t'.  Hardy,  18  Ves.  455,  459.  Miss.    (11    S.    &   M.)    469;    Langdon   v. 

*  Danbury   v.  Robinson,  14  N.  J.  Eq.  Keith,  9  Vt.  299. 

734 


CONSTRUCTION  AND   EFFECT   OF   ASSIGNMENTS.  [§  828. 

fraud.  The  contrary  of  this  was  asserted  in  some  of  the  earlier 
cases  in  this  country,  upon  a  distinction  taken  between  a  convey- 
ance fraudulent  as  against  creditors  and  one  fraudulent  against 
subsequent  purchasers  ;  the  former  being  held  absolutely  void,  and 
the  latter  voidable  only.  But  this  distinction  is  rejected  b}^  all 
the  later  authorities,  and  the  conveyance  in  both  cases  held  to  be 
voidable  only.^ 

It  is  competent  to  prove  by  parol  that  a  mortgage  was  not  as- 
signed absolutely  but  as  collateral  security  ;  and  to  show,  too,  that 
in  assigning  a  mortgage  for  a  larger  amount,  the  assignor  intended, 
by  a  statement  that  there  is  to  be  a  credit  upon  the  mortgage  re- 
ducing it  to  a  sum  named,  to  reserve  to  himself  the  amount  of  the 
mortgage  over  that  sum.^  And  where  such  a  mortgage  has  been 
assigned  as  collateral  security,  as  where  a  legatee  has  taken  an 
assignment  of  such  a  mortgage  from  the  executor,  the  assignee 
does  not  guarantee  the  sufficiency  of  it,  but  merely  undertakes  to 
use  due  diligence  in  collectino;  it.^ 

828.  Assignment  induced  by  false  representations.  —  If  the 
holder  of  a  mortgage  made  by  a  third  person  induces  another  to 
take  an  assignment  of  it  by  representations  as  to  the  responsibil- 
ity of  the  mortgagor  and  the  value  of  the  security,  which  are  false 
in  fact,  though  honestly  made  in  the  belief  that  they  are  true, 
and  they  are  relied  upon  by  the  purchaser,  they  are  in  legal  effect 
fraudulent ;  *  and  the  assignee  may  reclaim  the  consideration.  He 
must  have  used,  however,  reasonable  care  in  the  transaction,  and 
diligence  in  discovering  the  facts  afterwards.  Something  more 
than  mere  failure  of  consideration  is  requisite  to  entitle  him  to 
reclamation ;  ^  either  fraud  in  fact  or  in  legal  effect  is  necessary.^ 

Although  an  assignment  of  a  mortgage  be  made  for  the  pur- 
pose of  hindering,  delaying,  and  defeating  the  assignor's  creditors, 
if  the  assignee  purchases  it  in  good  faith  for  value,  without  notice 
of  the  fraudulent  intent  of  the  assignor,  or  of  circumstances  which 
siiould  have  put  him  ujion  inquiry,  his  title  cannot  be  ini[)eachi'd. 
As  against  him  it  does  not  avail  to  show  that  the  debtor's  assign- 
ment was   fraudulent,  unless  it  be  also  shown   that   tiio  assignee 

'  See  Daubury  v.  IJol.insou,  14  N.  J.  Kq.  *  Webster  c  Baiky,  31   Mich.  30.     See 

213,  where  the  eiirli  r  ciises  ure  cited   and  Goiiiiiau  r.  Stejjlicnsoii,  24  Wis.  75.     Mc- 

commciiied  upou  ;  uud  Hie  Orieiitul   Hank  Cundlesa  i*.  Kn^lc,  61  I'n.  St.  309. 

V.  Iluhkinsi,  3  M(;t.(.Mu-,H.)  332.                    |  ^  Uutinsiii  v.  llii.s.-ey,  30  Me.  203. 

-   Worniiith  f.  Tracy,   I.')    lluii   (N.  Y.)  «  I'eubtidy  r.   l-'eiiton,  3   I'.arb.    (N.   Y.) 

180.  Ch.  451. 

■'  llaintiioiid  r.  Lcwi.n,  1   How.  14. 

735 


§§  829-831.]  ASSIGNMENT    OF   MORTGAGES. 

participated  in  the  fraudulent  intent,  or  took  it  under  such  cir- 
cumstances that  he  is  chargeable  with  notice  of  the  fraudulent 
intent  on  the  part  of  the  assignor.^ 

829.  In  general,  it  may  be  said  that  an  assignment  of  a 
mortgage  is  an  assignment  of  all  the  securities  which  the  as- 
signor holds  against  the  mortgagor  or  others  for  the  same  debt, 
and  not  merely  of  the  claim  against  the  mortgagor.^  It  transfers 
any  judgments  that  may  have  been  obtained  against  indorsers  or 
others.  It  passes,  also,  a  mortgage  given  as  collateral  security  to 
the  mortgage  debt  assigned.^ 

830.  The  assignment  of  a  mortgage  does  not  carry  with  it 
a  separate  contract  of  guaranty  of  the  payment  of  the  mortgage 
debt,  if  that  is  strictly  a  personal  engagement,  and  it  is  construed 
to  be  such  when  it  is  made  to  the  holder  of  the  mortgage  by 
name,  "  his  executors  and  administrators."  The  surety  is  not 
holden  beyond  the  precise  terms  of  his  contract,  and  these  words, 
in  their  plain  and  natural  import,  do  not  signify  any  intention  to 
indemnify  any  one  but  the  person  to  whom  it  was  given.  This 
person  having  put  it  out  of  his  power  to  receive  payment,  the 
purpose  of  the  guarant}^  is  accomplished  and  the  guarantor  is 
discharged.^  A  guaranty  is  not  generally  a  negotiable  contract. 
If  a  guaranty  be  written  upon  a  mortgage,  and  the  mortgage  be 
assigned,  the  guarantor  may  set  up  in  defence  to  a  suit  by  the 
assignee  upon  the  guaranty,  the  want  of  consideration  for  the 
guarant}^^ 

831.  There  is  an  implied  covenant  in  an  assignment  of  a 
mortgage  that  the  assignor  will  not  receive  the  money  on  the  in- 
strument assigned,  or  that  if  he  does  he  will  pay  it  over  to  the 
assignee.  This  is  the  assignee's  only  security  until  he  gives  notice 
to  the  mortgagor.  If  the  assignee  omits  to  give  such  notice,  and 
the  mortgagor  pays  the  mortgage  to  the  assignor,  the  assignee's 
only  remedy  is  upon  this  implied  covenant.^ 

On  the  other  hand,  after  such  assignment  and  notice  to  the 
mortgagor,  the  latter  cannot,  upon  the  subsequent  insolvency  of 
the  mortgagee,  purchase  desperate  claims  against  him,  and  tender 
them  in  payment  of  the  debt,  althougli   the   mortgage  has  been 

1  Tantum  v.  Green,  21  N.  J.  Eq.  364 ;  ^  philips  v.  Bank  of  Lewistown,  supra. 
and  see  Gray  v.  Schenck,  4  N.  Y.  460;  *  Smith  v.  Starr,  4  Hun  (N.  Y.),  123. 
Spraguev.  Graham,  29  Me.  160.  ^  Bfiggg    „.  Latham   (Kans.),   13  Pac. 

-  Philips  V.  Bank  of  Lewistown,  18  Pa.  Kep.  129. 
St.  394.     See  §  824.  "  Horstman  v.  Gerker,  49  Pa.  St.  282. 

736 


WHETHER   ASSIGNEE   TAKES   SUBJECT    TO    EQUITIES.        [§§  832-834 

assigned  only  as  collateral  security.  The  debtor  is  bound  to  re- 
spect the  rights  of  the  holder  of  the  debt,  and  knowing  those 
rights  he  cannot,  according  to  the  rules  of  equity,  or  tlie  princi- 
ples of  the  common  law,  defeat  them.^  This  is  a  dilferent  ques- 
tion from  that  which  arises  when  the  rights  and  equities  of  the 
debtor  exist  at  the  time  of  the  assignment. 

There  is  no  implied  warranty  of  the  solvency  of  the  mortgagor, 
though  there  is  such  a  warranty  that  the  mortgage  debt  has  not 
alread}-^  been  paid.  But  in  case  it  has  been  paid,  the  assignor  is 
liable,  not  on  the  contract  of  assignment,  but  for  the  return  of 
the  money  or  thing  received  for  the  assign ment.'-^ 

832.  Usury.  —  If  a  mortgage  be  untainted  with  usury  in  its 
origin,  it  is  not  invalidated  by  a  subsequent  usurious  transfer,  as, 
for  instance,  by  being  pledged  as  security  for  a  usurious  loan.'' 
The  assignee  who  has  received  the  usury  may  be  liable  to  his  as- 
signor for  the  usury  taken  ;  but  the  mortgage  itself  remains  a 
valid  security  in  his  hands  against  the  mortgagor  and  the  mort- 
gaged property. 

833.  An  assignment  of  a  mortgage  may  be  cancelled  be- 
fore it  is  recorded,  and  the  note  being  indorsed  back  to  the  mort- 
gagee he  may  maintain  a  writ  of  entry  to  foreclose  the  mortgage. 
The  voluntary  surrender  of  the  only  legal  evidence  by  which  the 
assignee  could  establish  his  claim  may  be  regarded  as  in  the  na- 
ture of  an  estoppel.  By  cancelling  the  assignment  the  assignee 
voluntarily  precludes  himself  from  resorting  to  it.^  Moreover, 
upon  the  retransfer  of  the  note,  the  assignee  has  no  equitable  in- 
terest in  the  mortgage.  If,  therefore,  the  assignment  is  rendered 
useless  and  ineffectual  to  the  assignee,  the  mortgage  remains  un- 
discharged and  in  full  force,  and  the  right  of  enforcing  it  must  be 
vested  in  the  mortgagee,  who  alone  has  any  interest  in  it. 

VII.    Whether  an  Assignee  takes  subject  to  Equities. 

834.  An  assignee  for  value  of  a  negotiable  note  before 
due  takes  it  free  from  equities.  At  cominon  law,  so  far  as  a 
mortgage  is  merely  a  dcht  or  sec^urity  f«>i-  a  debt,  it  is  a  ciiosi;  in 

'  Philips  t'.  Bank  of  Lcwistown,  IK  l';i.  IJarli.   (N.  Y.)  .•(C  ;  ami  Hit'  Lovttt  (•.    Di- 

St.  .394,  4().'J.     Sec  Noiiliariiptoii   IJaiiii  i>.  iiioiid,  4  Kilw.  ( N.  Y.)  21i ;   l)«>niiiii};ton  v. 

Jlalliet,  8  \V.  &  S.  (I'a )  .'Jl  I .  Miilicr,  1 1  N.  J.  Kq.  (3  Stoi-I;.)  ;t(i2. 

-  Freiicli  u.  Turner,  l.")  Ind.  .'i'J.  *   Huwe    v.    Wilder,    II    Gray    (MaHs.), 

'  641;    I'earHall   v.   Kinf,'.sliinil,  "I   VAw.  iiOT. 
(N.   Y.)    rjfj  ;    Warner  v.    (JDiivcrricnr,   I 

VOL.  1.  47  7;J7 


§  834.]  ASSIGNMENT    OF    MORTGAGES. 

action  not  negotiable,  and  therefoie  not  assignable.  So  far  as  a 
mortgage  is  a  conveyance  of  the  legal  estate,  an  assignment  or 
conveyance  of  such  estate  may  be  made  by  a  deed  in  the  usual 
form.  A  mortgage  note,  if  negotiable  in  form,  is  of  course  as- 
signable by  indorsement,  and  the  assignee  takes  the  legal  title 
to  it. 

But  the  debt  being  the  principal  thing  imparts  its  character  to 
the  mortgage  ;  and  although  the  mortgage  itself  in  the  beginning 
is  only  assignable  in  equity,  the  legal  rights  and  remedies  upon 
the  debt  have  become  fixed  upon  this  incident  of  the  debt,  and 
the  equitable  principles  in  regard  to  the  mortgage  have  become 
naturalized  in  the  common  law  system.  When,  therefore,  the 
debt  secured  is  in  the  form  of  a  negotiable  note,  a  legal  transfer 
of  this  carries  with  it  the  mortgage  security  ;  and  inasmuch  as  a 
negotiable  promissory  note  by  the  commercial  law,  when  assigned 
for  value  before  maturity,  passes  to  the  assignee  free  of  all  equi- 
table defences  to  which  it  was  subject  in  the  hands  of  the  payee, 
it  does  not  lose  this  character  which  it  has  under  the  commercial 
law  when  it  is  secured  by  a  mortgage.  The  mortgage  rather  is 
regarded  as  following  the  note,  and  as  taking  the  same  character; 
and  it  is  the  generally  received  doctrine  that  the  assignee  of  a 
mortgage  securing  a  negotiable  note,  taking  it  in  good  faith  be- 
fore maturity,  takes  it  free  from  any  equities  existing  between  the 
original  parties.^ 

1  Beals  V.  Neddo,  1  McCrary,  206  ;  S.  Chand.  83  ;  Martineau  v.  McCoUum,  4  lb. 
C.  2  Fed.  Rep.  41 ;  Carpenter  ?;.  Longan,  153;  Kelley  v.  Whitney,  45  Wis.  110; 
16  Wall.  271 ;  Kenicott  v.  Supervisors,  II..  -S".  C.  7  Reporter,  126  ;  Blakely  v.  Twin- 
452;  Sawyer  v.  Prickett,  19  lb.  146,  166;  ing,  34  N.  W.  Kep.  132.  Kansas:  Bur- 
Hayden  v.  Drury,  3  Fed.  Rep.  782 ;  Hay-  bans  v.  Huteheson,  25  Kans.  625 ;  -S.  C. 
deu  V.  Snow,  9  Biss.  511  ;  Myers  v.  Haz-  13  Cent.  L.  J.  56  ;  Lewis  v.  Kirk,  28  Kans. 
zard,  4  McCrary,  94  ;  Swett  r.  Stark,  31  497.  Nebraska  :  Webb  r.  Hoselton,  4  Neb. 
Fed.  Rep.  858.  Massachusetts  :  Taylor  i'.  308.  Iowa:  Preston  v.  Case,  42  Iowa, 
Page,  6  Allen,  86.  Maine:  Sprague  v.  549;  Updegraft  v.  Edwards,  45  Iowa, 
Graham,  29  Me.  160;  Pierce  v.  Faunce,  513;  Farmers'  Nat.  Bank  v.  Fletcher,  44 
47  Me.  507.  New  Hampshire  :  Paige  v.  Iowa,  252.  Kentucky :  Duncan  v.  Louis- 
Chapman,  58  N.  H.  333.  New  York :  villc,  13  Bu.sh,  378.  Louisiana :  Billgery 
Gould  V.  Marsh,  4  Thomp.  &  C.  128;  S.  r.  Ferguson,  30  La.  Ann.  84.  Missouri: 
C.  1  Hun,  566.  Michigan:  Duttou  v.  Hagerman  i'.  Sutton,  91  Mo.  519;  4  S. 
Ives,  5  Mich.  515;  Cicotte  r.  Gagnier,  2  W.  Rep.  73 ;  Logan  v.  Smith,  62  Mo.  455, 
Mich.  381  ;  Bloomer r.  Henderson, 8  Mich,  overruling  an  earlier  case.  Indiana: 
395  ;  Reeves  v.  Scully,  Walk.  248  ;  Jones  Catherwood  v.  Burrows,  7  Reporter,  492 ; 
V.  Smith,  22  Mich.  360;  Helmer  v.  Kro-  Gabbert  v.  Schwartz,  69  Ind.  450.  South 
lick,  36  Mich.  371.  Wisconsin:  Croft  v.  CaroUna :  Dearman  v.  Trimmier,  2  S.  F. 
Bnnster,  9  Wis.  503,  510;  Cornell  r.  Rep.  501,  505,  per  Mclver,  J. 
Hichens,   11  Wis.  353;  Fisher  v.  Otis,  3         In  New  Jersey  it  is  provided  by  statute 

738 


WHETHER   ASSIGNEE   TAKES   SUBJECT    TO   EQUITIES.       [§  835. 

The  fact  that  the  note  is  payable  several  years  after  date,  or 
that  it  has  a  memorandum  upon  its  face  that  it  is  secured  by  a 
mortgage  upon  land,  does  not  affect  its  negotiability. ^ 

A  transfer  of  a  note  and  mortgage  made  by  a  separate  instru- 
ment, such  as  a  negotiable  bond  of  a  corporation,  which  recites 
that  the  note  and  mortgage  are  transferred  as  security  for  the 
bond,  and  are  transferable  only  in  connection  with  it,  is  held  in 
Wisconsin  to  be  in  effect  an  indorsement  of  the  note,  such  as 
autliorizes  a  holder,  who  takes  it  for  value  before  due,  without 
notice  of  any  defence,  to  enforce  it  against  the  maker.  Such  as- 
signee is  regarded  as  the  holder  of  the  legal  title  free  from  all 
equities. - 

835.  In  such  case  it  does  not  matter  that  the  considered 
tion  of  the  mortgage  was  wholly  void,  as  where  the  consid- 
eration was  the  price  of  intoxicating  liquors  sold  in  violation  of 
law  ; '"^  or  that  the  mortgage  was  originally  given  without  consid- 
eration.* The  negotiable  note  secured  by  the  mortgage  is  valid 
in  the  hands  of  a  bond  fide  indorsee  for  value  without  notice  of 
the  illegal  consideration  for  which  it  was  given.  When  the  mort- 
gage is  assigned  at  the  time  when  the  note  is  indorsed,  there  is 


that  mortgai^es  shall  be  assignable  at  law, 
aud  that  the  assignee  may  sue  in  his  own 
name;  but  that  in  such  suit  there  shall  be 
allowed  all  just  set-offs  and  other  defences 
against  the  assignor  that  would  have  been 
allowed  in  any  action  brought  by  him  and 
existing  before  the  defendant  had  notice 
of  such  assignment,  and  all  payments 
made  to  the  assignor  in  good  faitli  before 
such  notice.     Kev.  1877,  p.  70S. 

In  New  York  a  bond  is  almost  exclu- 
sively used  in  connection  with  a  mortgage. 
In  the  recent  case  of  Union  College  i;. 
Wheeler,  61  N.  Y.  88,  Mr.  Commissioner 
Dwight,  referring  to  the  cases  cited  in 
support  of  the  rule  above  stated,  said  : 
"  These  cases  have  not  yet  become  estab- 
lished law  in  this  state.  If  sound,  they 
must  be  made  to  rest  on  rules  of  law  at- 
tending the  transfer  of  negotiable  iia|)cr, 
and  I  annot  be  held  by  indirtctiou  to  over- 
throw a  rule  (concerning  the  ordinary  bond 
and  mortgage  which  has  become  (i.xcd  iti 
our  jurispriKleuce."  Likewise  in  Penn- 
sylvania a  bond  instead  of  a  nnut  is  al- 
most always  used.     Mr.  Justice  'J'homj) 


sou  said,  in  Horstman  i-,  Gerker,  49  Pa. 
St.  282,  that  although  a  mortgage  "  may 
be  assigned  so  as  to  permit  the  assignee  to 
sue  in  his  own  uame,  yet  it  is  sulject  to  the 
same  equities  aud  rules  tliat  govern  other 
non-negotiable  instruments  or  claims." 
No  case  iuvolving  the  question  of  the  ad- 
missibility of  equities  against  the  liolder 
of  a  negotiable  note  secured  by  a  mort- 
gage has  been  noticed.  See  Tryor  o. 
Wood,  31  Pa.  St.  142;  Twitchell  i;.  Mc- 
Murtrie,  77  l*n.  St.  383.  But  a  creditor 
taking  an  assignment  of  a  mortgage  as 
security  for  a  prciixisiing  indebtedness  is 
not  a  purchaser,  but  holds  it  subject  to 
equities.    Ashton's  Appeal,  73  Pa.  St.  153. 

1  Duncan  v.  Louisville,  13  Rush  (Ky), 
378. 

■^  Bange  v.  Fliut,  2.5  Wis.  .')44  ;  Crosby 
r.  lioub,  IC  Wis.  CKJ;  Mur|)hy  r.  Dun- 
ning, 30  Wi.s.  2'JG  ;  ('nllannn  r.  Judd.  23 
Wis.  343  ;  City  Hank  i-.  .McClillan,  21 
Wis.  112.  i'oittr<i,'n\  Iowa:  Franklin  r. 
Twogood,  IH  Iowa,  .'>l.');  2.')  lb.  .')20. 

•'  TaUor  V.  Page,  C  Allen  (.Mas.>».),  fiCi. 

*   Paige  r.  Chapman.  58  N.  II.  333. 

731) 


§  836.]  ASSIGNMENT    OF   MORTGAGES. 

no  principle  or  authority  which  makes  the  mortgage  less  valid 
than  the  note. 

A  bond  fide  assignee  for  value  of  a  mortgage  of  land  may  en- 
force it  by  foreclosure,  although  it  was  originally  given  as  consid- 
eration for  a  transfer  of  the  land  fraudulent  as  to  creditors,  and 
such  transfer  has  been  adjudged  void.  The  parties  engaged  in 
such  fraud  are  estopped  from  setting  it  up.^ 

836.  An  exception  to  this  general  rule  occurs  when  the  as- 
signment by  its  terms  is  made  subject  to  the  rights  of  the  mort- 
gagor. Thus,  for  instance,  whei'e  a  mortgage  made  partly  to  se- 
cure future  advances  was  assigned  by  the  mortgagee  by  a  deed 
which  purported  to  transfer  all  his  right,  title,  and  estate  in  the 
mortgaged  premises,  and  the  debt  or  note  secured  by  the  mort- 
gage, subject,  however,  to  all  the  rights  of  the  mortgagor  in  and 
to  the  same,  it  was  held  that  the  assignee  took  no  greater  rights 
than  the  mortgagee  himself  had.^  This  decision  was  placed  upon 
the  ground  that  this  language  was  used  in  its  ordinary  and  cur- 
rent meaning,  and  not  in  any  special  and  technical  sense,  and 
that  the  natural  construction  of  it  is  that  it  preserves  all  the  equi- 
ties of  the  mortgagor ;  and  this  construction,  not  being  incon- 
sistent with  the  purpose  and  intention  of  the  instrument,  must 
prevail.  But  the  fact  that  the  assignment  is  expressed  to  be  of 
the  mortgagee's  "  interest"  in  the  note  and  mortgage,  is  not  no- 
tice to  the  assignee  that  the  note  was  given  to  cover  future  ad- 
vances, and  that  the  full  amount  has  not  been  advanced  to  the 
mortgagor.^ 

In  a  recent  case  in  South  Carolina  the  general  rule  is  held  to 
apply  only  where  the  note  is  capable  of  being  used  and  is  used  in 
the  proceeding  to  foreclose  the  assigned  mortgage  ;  and  that  where 
the  note  has  lost  its  legal  vitality,  and  all  right  of  action  upon  it 
is  gone,  the  genei'al  rule  does  not  apply.  A  note  was  given  for 
the  price  of  a  horse,  and  was  secured  by  a  real  estate  mortgage. 
The  mortgagee  before  maturity  transferred  the  note  and  mort- 
gage as  collateral  security  for  an  existing  debt.  Afterwards  the 
horse,  not  answering  the  warranty,  was  returned  to  the  seller,  the 
mortgagee.  After  the  note  had  become  barred  by  the  statute  of 
limitations,  the  assignee  foreclosed  the  mortgage  and  sold  the 
land.  In  an  action  to  have  the  note  and  mortgage  cancelled,  and 
for  an  accouuting  for  the  proceeds  of  the  sale,  it  was  held  that, 

1  Smart   v.   Bement,  4   Abb.    (N.    Y.)         2  Fisher  v.  Otis,  3  Chand.  (Wis.)  83. 
App.  Dec.  253.  3  Bassett  v.  Dauiels,  136  Mass.  547. 

740 


WHETHER   ASSIGNEE   TAKES   SUBJECT   TO   EQUITIES.       [§  837. 

as  the  note  was  barred  at  the  time  of  the  foreclosure,  the  assignee 
could  not  rely  upon  the  protection  afforded  by  the  law  merchant 
to  innocent  purchasers  of  negotiable  paper  before  maturity,  but 
could  rely  only  upon  the  equitable  protection  extended  to  a  pur- 
chaser of  the  mortgage  without  notice  of  existing  equities  ;  and 
that,  as  the  assignee  gave  no  present  consideration  for  the  pur- 
chase, the  equitable  rule  was  not  applicable  ;  and  hence  he  took 
subject  to  the  defence  of  failure  of  consideration  for  the  making 
of  the  mortgage,  and  was  bound  to  account  for  the  proceeds  of 
the  sale  of  the  mortgaged  land.^ 

837.  If  the  mortgage  note  be  indorsed  before  maturity, 
and  the  mortgage  delivered  without  any  assignment  of  it  at  the 
time,  or  be  not  delivered  at  all,  the  indorsee  acquires  an  interest 
in  the  mortgage  which  he  may  enforce  through  the  mortgagee  as 
holding  it  for  his  benefit ;  ^  and  the  owner  of  the  equity  of  re- 
demption cannot,  in  a  suit  to  redeem,  set  off  against  the  indorsee 
claims  he  holds  against  the  mortgagee  acquired  after  such  in- 
dorsement and  delivery,  and  before  the  mortgage  was  assigned 
formally  to  the  purchaser.^ 

But  the  mere  delivery  of  a  negotiable  note  secured  by  mort- 
gage, without  indorsement,  gives  the  assignee  no  protection  against 
the  equities  existing  in  favor  of  the  maker  of  the  securities,  be- 
cause the  note  must  necessarily  be  enforced  in  the  name  of  such 
assignor.'*  Moreover,  such  holder  of  an  unindorsed  note,  without 
an  assignment  of  the  mortgage,  can  claim  no  interest  in  the  secu- 
rity as  against  a  subsequent  legal  assignee  in  good  faith  of  the 
mortgage,  and  of  a  duplicate  note  obtained  from  the  mortgagor 
by  the  artifice  of  the  mortgagee.  Tlie  purchaser,  taking  a  for- 
mal assignment  of    the  mortgage  and  indorsement  of   the  note, 

1  Dearman  v.  Triininier  (S.  C),  2  S.  E.  iug  away  the  remedy  upon  the  note,  chan}j;c 

Hep.  501.     Mr.  Justice  Mclvcr  delivered  tlie  character  of  the  title  by  which  lio  holds 

an  able  opinion,  in  which  he  says  that  he  the  mort<;af;;e,  when  the  well  settled  rule 

has  not  been   able   to  lind  a  sin<,'lc  case  is  that  the  loss  of  the  right  of  action  on 

where  the  question  has  been  considered  the  note  docs  not  deprive  the  holder  of  the 

under  the  circumstances  presented  in  the  mortgage  of  iiis  right  to  enforce  that  ? 

present  case.  -  Myers   v.   Ilaz/.ard,  4   McCrary,  94  ; 

In  regard  to  this  decision,  it  is  pertinent  (ireen    v.    Hart,    1    Johns.    (N.  Y.)    580; 

to  ask  whether  the  validity  of  the  assign-  Jackson  v.  Hlodget,  5  Cow.  (N.  Y.)  202  ; 

ment  is  not  to  be  determined  as  of  the  per  yiiaw,  C.  J.,  in   Young   v.   Miller,  6 

time  when  the  assignment  is  made?     If  Cray  (Mass.),  152  ;  Morris  «-.  Bacon,  12:1 

the  assignee  then  acquired  a  title  to  the  Mass.  58. 

mortgage  free  from   all   equities  existing  ■'  Breen    v.    Seward,    11    (Jray    (Mass.). 

between  the  parties  to  the  mortgage,  why  IIK. 

should  the  statute  of  limitations,  by  tak-  *   Blunt  v.  Norris,  12;i  Mass.  55. 

741 


§  837.]  ASSIGNMENT   OF   MORTGAGES. 

may  properly  rely  upon  the  record.  Having  no  actual  or  con- 
structive notice  of  title  in  any  other  than  the  party  who  appears 
by  the  record  to  be  the  owner  of  the  mortgage,  he  is  entitled  to 
the  protection  of  the  record.^  Such  a  case  is  quite  different  from 
one  where  the  mortgage  note  was  indorsed  to  a  holder  for  value, 
and  afterwards  the  mortgagee  assigned  the  mortgage  to  another 
and  delivered  to  him  another  note  similar  in  terms  to  that  de- 
scribed in  the  mortgage,  but  not  the  genuine  note.  In  the  latter 
case  the  indorsee  of  the  mortgage  note  is  entitled  in  equity  to  an 
assignment  of  the  mortgage,  which  the  mortgagee  or  any  subse- 
quent assignee  from  him  holds  in  trust  for  the  legal  assignee  of 
the  debt.2  But  if  a  recorded  assignment  shows  that  the  mort- 
gage debt  has  already  been  assigned,  a  subsequent  transfer  of  the 
mortgage  note  accompanied  by  an  assignment  of  the  mortgage 
confers  no  title  to  the  mortgage  debt.  Thus,  where  a  mortgage 
with  a  mortgage  note  indorsed  in  blank,  and  having  a  memo- 
randum upon  it  that  it  was  secured  by  mortgage  upon  real  estate, 
was  transferred  by  an  assignment,  which  purported  upon  its  face 
to  be  made  as  collateral  to  a  note  of  the  assignor  of  less  amount, 
and  the  assignee  afterwards  indorsed  the  smaller  note,  retaining 
the  mortgage  note,  and  transferred  the  mortgage  by  an  assign- 
ment in  like  words  to  the  first  assignment,  the  assignments  being 
duly  recorded,  the  latter  assignee  acquired  a  title  to  the  mortgage 
debt  which  the  holder  of  the  mortgage  note  could  not  impair  by 
a  subsequent  transfer  of  that  note,  accompanied  by  an  assignment 
of  the  mortgage.  A  purchaser  of  the  mortgage  note,  after  the 
record  of  the  previous  assignment  and  under  the  circumstances  of 
the  case,  could  not  be  regarded  as  an  innocent  purchaser  for  value 
without  notice.^ 

But  an  assignment  of  the  mortgage  without  the  debt  transfers 
only  a  naked  trust,  and  the  mortgagor  is  still  entitled  to  all  the 
equities  existing  in  his  favor  against  the  note,  in  the  same  manner 
as  if  the  mortgage  had  not  been  assigned.^  In  such  case,  even 
if  the  mortgage  be  assigned  in  part  fulfilment  of  a  pi'omise  to 
transfer  both  as  a  gift,  and  the  note  be  not  delivered,  there  is  no 
transfer  of  the  debt.^ 

If  a  mortgage  purporting  to  secure  a  promissory  note  be  ex- 
ecuted without  the  delivery  of  any  note,  an  assignee  of  the  mort- 

1  Blunt  i\  Norris,  123  Mass.  55.  *  Pope  v.  Jacobus,  10  Iowa,  262. 

2  Morris  v.  Bacon,  12.3  Mass.  58.  ^  Wilson  i'.  Carpenter,  17  Wis.  512. 

3  Strong  V.  Jackson,  123  Mass.  60. 

742 


WHETHER   ASSIGNEE  TAKES   SUBJECT   TO   EQUITIES.      [§  838. 

gage  takes  it  subject  to  all  equities  existing  between  the  original 
parties. 1 

838.  Contrary  to  the  general  doctrine,  it  is  held  in  a  few- 
states,  that  although  the  mortgage  note  is  negotiable,  the  mort- 
gage itself  is  only  assignable  in  equity,  and  therefore  the  assignee 
having  to  resort  to  equity  to  enforce  his  rights  is  compelled  to  do 
equity  towards  the  mortgagor,  and  allow  him  all  the  rights  of  de- 
fence he  had  against  the  mortgagee. ^  Although  the  purchaser  of 
a  note  before  maturity  takes  it  subject  to  no  equities  existing  be- 
tween the  original  parties,  yet  if  it  is  secured  by  mortgage  the 
non-assignable  character  of  the  security  qualifies  his  rights  and 
remedies  upon  the  note,  and  makes  it  subject  to  the  defences  and 
equities  to  which  it  was  liable  in  the  hands  of  the  assignor. 

A  mortgage  distinct  from  the  debt  has  no  value  in  itself,  and, 
if  assigned,  the  assignee  holds  it  in  trust  for  tlie  holder  of  the 
note  or  debt.  The  mortgage  is  not  assignable  either  by  statute 
or  by  the  common  law.^  The  mortgage  follows  the  notes  only  in 
equity,  and  is  subject  in  the  hands  of  the  assignee  to  any  defence 
which  would  avail  against  it  in  the  hands  of  the  mortgagee  him- 
self, although  the  assignee  may  have  purchased  the  note  in  good 
faith,  for  a  valuable  consideration  and  before  maturity.'*  By  the 
assignment  of  the  notes  the  assignee  obtained  an  equitable  inter- 
est in  the  mortgage,  which  courts  of  equity,  under  certain  circum- 
stances, will  enforce,  if  it  can  be  done  without  a  violation  of  the 
equitable  rights  of  others.  He  who  buys  that  which  is  not  assign- 
able at  law,  relying  upon  a  court  of  chancery  to  protect  and  en- 
force his  rights,  takes  it  subject  to  all  infirmities  to  which  it  is 
liable  in  the  hands  of  the  assignor. 

This  is  the  view  taken  by  the  courts  in  Illinois,^  Ohio,'"'  and 
Oregon." 

>  Biirliaiik  (■.  Warwick.  r)2  Iowa,  493.  '^  OMs   u.  Cuminiii;rs,  31    111.   188,    192; 

-  Johnson   ;•.  Carpenter,  7  Minn.  176;  Walker  v.  Dement,  42  111.  27.T  ;  Bryant 

llcstettcr   V.  Alexander,  22    Minn.  559;  v.  Vix,  83  III.   U;  Fortier  v.   Darst,  sm- 

I5ouli;,niy  v.  Ffirtier,  17  La.  Ann.  121.  prn  ;  Darst  v  Gale,  83  111.  130,  137  ;  Jen- 

'  Medley  v.  Elliott,  02  III.  .532.  kins  v.  Baner,  8  Bradw.  C34 ;  VoMcr  v. 

*  Olds  f.  CumminKH,  31  111.  188 ;  White  Strong,  5  lb.  223;  Grnssly  c.  Hcinhack, 

l:    Sutherland,    64    III.    181;    Fortier    v.  4  lb.   341;    Ellis   •).  Sisson,   90    III.   105; 

Darst,  31  III.  212;  Summer  v.  Wau;;h,  50  United  States  Mortir(i<jo  Co.  v.  OroHS,  93 

III.   531.      The    as»ii,'nment   of   the  note  1)1.483;  Chicajro,  Danville   &  Viiieenncs 

carries   the   security  of  a  deed   nnide   in  Uy.  Co.  /-.  Lccwenlhal,  93  111.  433  ;  Miller 

trust  to  anotlier  person,  and  a  court  of  v.  Earned,  103  III.  502. 

equity  will  compel  the  trustee  to  sell  for  •>  Bailv  ''.  Smith,  11  Ohio  St.  390. 

the  Ijenefitof  the  holder  of  the  notes.    Sar-  ''  {,'orhett  v.  Woodward.  5  S.-iwytr,  40.3  ; 

U'cnt  u.  Howe,  21  111.  14.  .V.  C.  II  ChicaKo  E.  N.  21(1. 

7  I. '5 


§§  839,  840.]  ASSIGNMENT    OF   MORTGAGES. 

In  New  Jersey  it  is  provided  by  statute  that  in  a  suit  by  an  as- 
signee of  a  mortgage,  all  just  set-offs  and  other  defences  shall  be 
allowed  against  him  which  would  have  been  allowed  if  his  as- 
signor had  brought  the  action.^ 

839.  The  ground  upon  which  the  decisions  rest  is  chiefly 
that,  while  notes  are  made  negotiable  by  commercial  usage,  or  by 
statute,  there  is  no  such  usage  or  provision  as  to  mortgages,  and 
therefore  the  assignee  of  a  mortgage  takes  it  as  he  would  any 
other  chose  in  action,  subject  to  all  the  equities  which  subsisted 
against  it  while  in  the  hands  of  the  original  holder.^ 

This  view  was  adopted  in  the  Territory  of  Colorado  in  a  case 
where  the  mortgagee  had  a  pledge  of  personal  property  in  addi- 
tion to  the  note  and  mortgage,  which  were  assigned  before  matu- 
rity to  a  hond  fide  purchaser.  Previous  to  the  assignment  a  part 
of  the  debt  had  been  paid  by  a  sale  of  a  portion  of  the  property 
pledged,  but  no  credit  was  indorsed  on  the  note.  It  was  held  that 
a  mortgagor,  in  a  suit  by  the  assignee  to  foreclose  the  mortgage, 
was  entitled  to  be  credited  with  such  payment.^ 

840.  The  generally  accepted  doctrine  was  aflarmed  by  the 
Supreme  Court  of  the  United  States  that  the  assignee  for  value 
before  maturity  of  a  negotiable  note  and  a  mortgage  securing  it 
is  unaffected  by  any  equities  to  which  it  would  be  subject  in  the 
hands  of  the  mortgagee,  and  of  which  the  assignee  had  no  notice.'* 
Mr.  Justice  Swayne  answers  the  view  of  the  last  named  case 
taken  in  the  lower  court,  and  in  the  decisions  with  which  that  is 
in  accord.  "  The  transfer  of  the  note,"  he  says,  "  carries  with  it 
the  security,  without  any  formal  assignment  or  delivery,  or  even 
mention  of  the  latter.  If  not  assignable  at  law,  it  is  clearly  so  in 
equity.  When  the  amount  due  on  the  note  is  ascertained  in  the 
foreclosure  proceeding,  equity  recognizes  it  as  conclusive,  and  de- 
crees accordingly.  Whether  the  title  of  the  assignee  is  legal  or 
equitable  is  immaterial.  The  result  follows  irrespective  of  that 
question.  The  process  is  only  a  mode  of  enforcing  a  lien.  All 
the  authorities  agree  that  the  debt  is  the  principal  thing  and  the 

1  R.  S.  1877,  p.  708,  §  31  ;  Woodruff  v.  security   for    negotiable    paper   was    uii- 

Morristown    Inst,  for  Savings,  34   N.  J.  known,  and  rested  upon  the  ground  that 

Eq.  174,  179.  in  an  action  at  law  on  the  covenant  or 

■•^  The  doctrine  that  an  assignee  can  en-  bond  in  general  use,  such  was  the  rule, 

force  the  mortgage  for  no  more  than  is  Duncan  v.  Louisville,  13  Bush  (Ky.),  37S, 

due  as  between  the  mortgagor  and  mort-  per  Cofer,  J. 

gagee  had  its  origin  at  a  time  when  the         ^  Longan  v.  Carpenter,  1  Colo.  205. 
practice  of  giving  mortgages  as  collateral         *  Carpenter  v.  Longan,  16  Wall.  271. 

744 


WHETHER   ASSIGNEE   TAKES   SUBJECT   TO   EQUITIES.       [§  841. 

mortgage  an  accessory.  Equity  puts  the  principal  and  accessory 
upon  a  footing  of  equality,  and  gives  to  the  assignee  of  the  evi- 
dence of  the  debt  the  same  rights  in  regard  to  both.  There  is  no 
departure  from  any  principle  of  law  or  equity  in  reaching  this 
conclusion.  There  is  no  analogy  between  this  case  and  one  where 
a  chose  in  action  standing  alone  is  sought  to  be  enforced.  The 
fallacy  which  lies  in  overlooking  tliis  distinction  has  misled  many 
able  minds,  and  is  the  source  of  all  the  confusion  that  exists.  The 
mortgage  can  have  no  separate  existence.  When  the  note  is  paid 
the  mortgage  expires.  It  cannot  survive  for  a  moment  the  debt 
which  the  note  represents.  This  dependent  and  incidental  rela- 
tion is  the  controlling  consideration,  and  takes  the  case  out  of  the 
rule  applied  to  choses  in  action  where  such  relation  of  dependence 
exists.     Accessoriumnon  chicit,  sequitur  principale.^'' 

841.  When  the  note  secured  is  overdue  or  non-negotiable, 
one  who  takes  an  assignment  of  the  mortscage  is  no  longer  enti- 
tied  to  this  protection,  but  takes  it  subject  to  all  defences  which 
the  mortgagor  might  have  set  up  against  the  original  mortgagee, 
although  he  has  no  notice  of  any  such  defence,  and  there  is  noth- 
ing upon  the  face  of  the  papers  to  indicate  it.  The  mortgage  and 
note  are  subject  to  the  same  equities  that  the  note  would  be  sub- 
ject to  if  not  secured.^ 

But  when  it  is  said  that  an  assignee  of  a  mortgage  and  note 
when  overdue  takes  them  subject  to  the  equities  existing  between 
the  parties  to  the  mortgage,  it  is  to  be  understood  that  onl}^  such 
equities  attach  as  attach  to  that  particular  note,  and  would  be  avail- 
able between  those  parties  to  control,  qualify,  or  extinguish  the  de- 
mand. The  only  defences  against  which  such  an  assignee  has  to 
guard  against  are  those  which  have  arisen  since  the  execution  of 
the  note,  and  which  are  not  collateral  but  relate  to  the  note  itself ; 
and  tliose  which  are  inherent  in  the  note,  and  would  show  it  to 
have  been  void  ab  initio^  such  as  fraud,  mistake,  or  absence  of  con- 
sideration. Tiierefore,  where  a  mortgage  note  was  indorsed  and 
the  ujortgage  assigned  after  maturity  by  the  mortgagee  to  his 
attorney  for  thci  purpose  of  colk-ction,  and  the  latter  sold  an<l 
transferred  thci  same  to  an  innocent  purcliaser  for  value,  and  with- 
out notice  of  the  want  of  aiitliority  in  the  attorney  or  of  his  fraud 
upcui  his  client,  ikj  relief  e;in  be  all'oided  th(;  latter.      Moreover,  as 

»  Fish  I'.  P'nnch,  15  Gniy  (.Mu8s.),  520;     73  Ind.  304;  Mclvciiiiii  v.   Kirkwooil,  .'lO 
Howard  I'.  Grcuham,  27  Gii.  347  ;  Ik-diJish     Miili.  544. 
V.  Ritchie,  17  Llla.  8G7 ;  Shurts  i;.  Awult, 

745 


§  842.]  ASSIGNMENT   OF   MORTGAGES. 

the  loss  must  fall  in  such  case  upon  one  of  two  innocent  parties, 
it  should  fall  upon  him  who  has  most  trusted  the  party  through 
whom  the  loss  came ;  and  in  this  case  the  loss  should  fall  upon 
the  mortgagee.^ 

Moreover,  an  assignment  made  to  secure  a  preexisting  debt  does 
not  give  the  assignee  the  position  of  a  purchaser  for  value,  and  en- 
title him  to  hold  the  mortgage  free  of  the  equities  to  which  his 
assignor  was  subject;  but  in  such  case,  although  he  takes  the  note 
before  maturity,  he  takes  it  subject  to  such  equities.^ 

The  fact  that  instalments  of  interest  are  overdue  and  unpaid 
upon  a  mortgage  note  at  the  time  of  its  assignment,  or  that  the 
note  is  indorsed  without  recourse,  does  not  affect  the  rights  of  the 
assignee  as  a  bond  fide  holder.^  Mere  circumstances  of  suspicion 
of  infirmity  in  the  title  to  the  note,  or  knowledge  of  facts  that 
would  excite  suspicion  in  the  mind  of  a  prudent  man,  if  there  is 
no  bad  faith,  does  not  affect  the  rights  of  a  purchaser.^ 

A  mortgage  given  to  indemnify  the  mortgagee  against  loss  as 
a  surety  upon  a  note  is  not  negotiable  under  the  law  merchant, 
for  the  mortgage  in  such  case  is  not  an  incident  to  the  note,  and 
does  not  as  such  pass  witli  it  to  a  third  person.  The  assignee  of 
such  a  mortgage  takes  it  subject  to  the  equities  between  the  mort- 
gagor and  mortgagee,  and  with  no  other  rights  than  his  assignor 
had.5 

842.  A  bond  not  being  a  negotiable  instrument  is  subject, 
when  assigned,  to  all  equities  existing  between  the  original  par- 
ties to  it;  and  of  couise  is  subject  to  such  equities  when  assigned 
with  the  mortgage,  which  is  collateral  to  it.^     The  rule,  that  the 

1  Eversole  v.  MauU,  50  Md.  95.  debt.     In  Crane  v.  March,  4  Pick.   131, 

2  Glidden  y  Hunt,  24  Pick.  (Mass.)  221;  before  the  Supreme  Court  of  the  latter 
Clark  V.  Flint,  22  Pick.  (Mass.)  231.  state,  Parker,  C.  J.,  referring  to  the  equi- 

3  Kelley  v.  Whitney,  45  Wis.  110;  S.  ties  of  the  holder  of  a  negotiable  note 
C.  7  Eeporter,  126;  19  Alb.  L.  J.  130  J  secured  by  mortgage,  said :  "In  the  form 
and  see  Cromwell  r.  County  of  Sac,  96  usually  practised  in  regard  to  mortgages, 
U.  S.  51;  National  Bank  v.  Kirby,  108  until  lately,  these  difficulties  could  not  oc- 
Mass.  497  ;  Jones  on  Railroad  Securities,  cur,  for  the  collateral  security  was  a  bond, 
§  199.  which,  not   being  assignable  at  law,  the 

*  Kelley  v.  Whitney,   supra;  Jones  on  action  upon   it   would   be  always  in   the 

Railroad  Securities,  §  207.  name  of  the  obligee,  and  the  assignee  in 

''  Corbett  v.  Woodward,  5  Sawyer,  403.  equity  could  avail  himself  of  no  means  of 

'^  This  is  the  form  of  obligation  chiefly  enforcing  payment  from  which  the  obligee 

used    in   connection   with    mortgages    in  would  be   restricted."     See    remarks    by 

New   York;    and   the   early   practice    in  Lord,  J.,  in  Strong  r.  Jackson,  123  Mass. 

Massachusetts  was  to  give  a  bond  rather  60,  63. 
than  a  negotiable  note  for  the  mortgage 

746 


WHETHKR   ASSIGNEE   TAKES   SUBJECT   TO   EQUITIES.       [§  842. 


assignee  of  a  mortgage  before  maturity  takes  it  free  from  existing 
equities,  applies  only  to  such  mortgages  as  are  collateral  to  nego- 
tiable notes.i 

Therefore  any  defence  to  which  the  bond  and  mortgage  were 
subject  in  the  hands  of  the  mortgagee  may  still  be  made  after 
they  have  been  transferred  to  another  for  value.  Fraud  and  du- 
ress in  procuring  the  execution  of  the  bond  is  a  defence  to  the 
mortgage  in  the  hands  of  an  assignee.^  The  consideration  may 
be  impeached.  Claims  in  set-off,  which  the  mortgagor  might  in- 
terpose against  the  mortgagee,  he  may  set  up  against  the  mort- 
gage in  the  hands  of  the  assignee.  The  assignee  takes  only  the 
title  that  the  mortgagee  had.  The  bond  is  a  mere  chose  in  action, 
and  the  mortgage  is  a  chose  in  action  also.  Neither  instrument 
having  anjMiegotiable  character,  the  mortgagor's  rights  in  respect 
to  the  obligation  are  not  changed  in  any  way  by  a  transfer  of  the 
mortgage.^  "  A  purchaser  of  a  chose  in  action,"  says  Lord  Thur- 
low,^  "  must  always  abide  by  the  case  of  the  person  from  whom  he 
buys ;  that  I  take  to  be  a  universal  rule."  Aside  from  negotiable 
jiaper,  which  under  the  commercial  law  has  peculiar  privileges, 
the  holder  of  a  chose  in  action  cannot  alienate  anything  but  the 


1  Wisconsin  :  Croft  v.  Bunster,  9  Wis. 
503;  Gouldiiig  v.  Bunster,  9  Wis.  51.3. 
New  Jersey :  Musgrove  v.  Kennell,  23  N. 
■I.  Eq.  75;  Losey  v.  Simpson,  11  N.  J. 
Eq.  246;  Vredenburgh  v.  Burnet,  31  N. 
J.  Eq.  229;  Dunn  v.  Seymour,  11  N.J. 
Eq.  278;  Andrews  v.  Torrey,  14  N.  J. 
Eq.  355;  Cornish  v.  Bryan,  10  N.  J. 
Eq.  146.  Iowa  :  Tabor  v.  Foy,  56  Iowa, 
539.  New  York :  Crane  r.  Turner,  67 
N.  Y.  4'37  ;  Union  College  v.  Wheeler,  61 
\.  Y.  88,  107;  Ingraham  d.  Disborough, 
4  7  N.  Y.  421  ;  Kice  v.  Dewey,  54  Barb. 
155;  Ciute  v.  Robison,  2  Johns.  595; 
Hank  of  Niagara  v.  Ro.sevelt,  9  Cow.  409  ; 
S.  C.  Hopk.  579 ;  Ellis  r.  Mcsservie, 
1 1  Taige,  467 ;  S.  C.  Evans  v.  Ellis,  5 
Denio,  640;  Pendleton  v.  Fay,  2  Paige, 
202  ;  James  v.  Morey,  2  Cow.  246 ;  Hart- 
ley V.  Tatham,  10  Bosw.  273;  Bank 
for  Savings  in  N.  Y.  v.  Frank,  45  Supe- 
rior Ct.  404 ;  Wanzcr  v.  Cary,  76  N.  Y. 
526.  Michigan  :  Heeves  v.  Scully,  Walk. 
:i48;  Huhsi-11  v.  Waiie,  Walk.  31;  N'ich- 
ols  r.  Lee,  10  Mich.  526.  Pennsylvania: 
Mott  V.  Clark,  9  Pa.  St.  399  ;    I'r.vor  v. 


Wood,  31  Pa.  St.  142;  Twitchell  v.  Mc- 
Mnrtrie,  77  Pa.  St.  383;  Horstman  v. 
Gerker,49  Pa.  St.  282;  Reineman  v.  Robb, 
98  Pa.  St.  474;  Earnest  v.  Iloskins,  100 
Pa.  St.  551  ;  Theyken  v.  Howe  Machine 
Co.  109  Pa.  St.  95.  South  Carolina :  May- 
bin  V.  Kirby,  4  Rich.  Eq.  105,  116;  Moffatt 
V.  Hardin,  22  S.  C.  9.  Nebraska  :  Richard- 
son V.  Woodruff,  20  Neb.  i;52. 

"  Martineau  v.  McColhim,  4  Cliand. 
(Wis.)  1.53. 

■^  New  York:  Davis  v.  Bcchstein,  69 
N.  Y.  440  ;  Moore  v.  Metro])olitan  Nat. 
Bank,  55  N.  Y.  41  ;  Ingraham  v.  Dis- 
borough,  supra ;  Reeves  v.  Kimball,  40 
N.  Y.  299  ;  Mason  v.  Lord,  40  N.  Y. 
476 ;  Bush  v.  Lathrop,  22  N.  Y.  .535 ; 
Mickles  v.  Townsend.  18  N.  Y.  575; 
Richards  v.  Warring,  1  Kcycs,  576 ;  Ely 
V.  McNiglit,  30  How.  I'r.  97  ;  Wcstfall 
V.  Jones,  23  Barb.  9.  Maryland :  Har- 
desty  V.  Jones,  10  G.  &J.404,  420;  Cum- 
berland Coal  &  Iron  Co.  i'.  Parish,  42  Md. 
598. 

■•   D.ivics  /'.  Austen,  I  Ves.  .Inn.  247. 

7-17 


§  842.]  ASSIGNMENT    OF   MORTGAGES. 

beneficial  interest  he  possesses.  His  capacity  to  transfer  to  an- 
other is  exactly  measured  by  his  own  rights.  Except  as  the 
codes  of  practice  and  special  statutes  in  some  states  have  changed 
the  rule,  an  action  by  the  assignee  to  enforce  his  rights  must  be 
in  the  name  of  the  assignor.  Therefore  "  every  assignment  of 
a  chose  in  action  is  considered  in  equity  as  in  its  nature  amount- 
ing to  a  declaration  of  trust,  and  to  an  agreement  to  permit  the 
assignee  to  make  use  of  the  name  of  the  assignor  in  order  to  re- 
cover the  debt  or  to  reduce  the  property  into  possession."  ^ 

An  assignee  who  takes  a  mortgage  and  bond  with  actual  or 
constructive  notice  of  the  equities  of  third  persons,  takes  them 
subject  to  such  equities.^ 

In  Pennsylvania  the  right  of  an  obligor  to  defend  against  an 
assignee  of  the  bond  and  mortgage  is  limited  to  matters  affecting 
the  existence  of  the  debt,  to  want  of  consideration,  and  to  claims 
in  set-off.  The  mortgagor  cannot  assert  against  an  assignee  of 
the  mortgage  and  bond  a  secret  equity  ;  or  an  agreement  with  the 
obligee  merely  collateral ;  or  an  agreement  inconsistent  with  the 
purport  or  legal  effect  of  the  instruments.^  Thus,  for  instance, 
the  assignee  is  not  affected  by  a  collateral  agreement  between  the 
mortgagor  and  mortgagee,  made  at  the  time  of  the  execution  of 
the  mortgage,  of  which  he  had  no  notice,  that  the  mortgagee 
should  release  the  lien  of  the  mortgage  from  any  lots  included  in 
the  mortgage  which  the  mortgagor  might  sell  on  receiving  a  rea- 
sonable amount  of  the  purchase  money;*  moreover,  when  a  mort- 
gage and  bond  have  been  made  for  the  purpose  of  enabling  the 
mortgagor  to  raise  money,  the  purchaser  is  not  affected  by  any 
want  of  consideration  or  defence  the  mortgagor  had  against  the 
mortgagee;  for  otherwise  the  mortgagor  would  be  enabled  to  per- 
petrate a  fraud,  and  to  use  that  fraud  to  his  own  advantage.^ 

The  owner  of  an  equity  of  redemption  having  made  a  partial 
payment  upon  a  bond  and  mortgage  gave  to  the  mortgagee  his 
negotiable  note  for  tlie  remainder  due  upon  the  mortgage,  and 
several  times  renewed  it  with  the  understanding  that  the  mort- 
gagee should  continue  to  hold  the  mortgage.     The  latter,  how- 

1  2  Story  Eq.  Jur.  §  1040.  34  Pa.  St.  496,  520;  Pryor  v.  Wood,  31 

2  Hovey  v.  Hill,  3  Lans.  (N.  Y.)   167  ;     Pa.  St.  142. 

Mathews  v.  Heyward,  2    S.  C.  239  ;  Go-  *  McMasters   v.   Wilhelm,   85   Pa.    St. 

deffroy  v.  Caldwell,  2  Cal.  489.  218. 

3  Davis  V.  BaiT,  9  S.   &   R.   137,  141  ;  ^  Per  Strong-,  J.,  in  Commonwealth  r. 
Commonweal th  v.  Councils  of  Pittsburgh,  Councils  of  Pittsburgh,  supra. 

748 


WHETHER   ASSIGNEE   TAKES   SUBJECT   TO   EQUITIES.       [§§  843,  844. 

ever,  assigned  the  note  to  one  person  and  the  bond  and  mortgage 
to  another  who  had  no  knowledge  of  the  mortgagee's  colhiteral 
agreement  about  the  note.  It  was  held  that  the  assignee  should 
be  protected,  and  that  the  loss  should  fall  upon  the  maker  of  the 
note,  who  by  his  negligence  had  put  it  in  the  power  of  the  mort- 
gagee to  cause  the  loss.^ 

843.  Whether  the  rule  is  limited  to  equities  between  the 
original  parties  is  a  question  upon  which  different  courts  are  not 
in  accord.  On  the  one  hand,  the  rule  that  the  assignee  of  a  bond 
and  mortgage,  which  are  merely  choses  in  action,  takes  them  sub- 
ject to  existing  equities,  is  limited  in  its  application  to  such  equi- 
ties only  as  existed  between  the  mortgagor  and  mortgagee,  and 
is  not  extended  to  those  existinc^  between  the  mortgao:ee  and 
third  persons.^  The  reason  for  this  limitation  seems  a  strong  one. 
"The  assignee,"  says  Chancellor  Kent,^  "can  always  go  to  the 
debtor,  and  ascertain  what  claims  he  may  have  against  the  bond, 
or  other  chose  in  action,  which  he  is  about  purchasing  from  the 
obligee ;  but  he  may  not  be  able,  with  the  utmost  diligence,  to 
ascertain  the  latent  equity  of  some  third  person  against  the 
obHgee.  He  has  not  any  object  to  which  he  can  direct  his  inquiries; 
and  for  this  reason  the  claim  of  the  assignee,  without  notice  of  a 
chose  in  action,  was  preferred,  in  the  late  case  of  Redfearn  v.  Fer- 
rier^  to  that  of  a  third  party  setting  up  a  secret  equit}^  against 
the  assignor.  Lord  Eldon  observed  in  that  case  that,  if  it  were 
not  to  be  so,  no  assignments  could  ever  be  taken  with  safety." 

844.  But  the  settled  rule  in  New  York  is  that  the  as- 
signee is  affected  by  equities  in  favor  of  third  persons,  in  the 
same  manner  that  he  is  affected  by  equities  existing  against  him 
in  favor  of  the  mortgagor.  This  question  has  been  frequently 
discussed  in  recent  cases  in  that  state.  In  the  case  of  Bush  v. 
Lathrop,^  Mr.  Justice  Denio,  after  examining  numerous  authori- 

'  Jefrers  v.  Gill,  91  Pa.  St.  290.  •■  Murray  v.  Lylburu,  2  Johns.  (N.  Y.) 

-  New  Jersey:  De  Wilt  v.  Van  Sickle,  Cii.  441. 

29  N.  J.  Eq.  209 ;  Putnam  v.  Clark,  29  N.  ••  1  Dow,  50. 

.J.  Eq.  412;  Starr  v.  Haskins,  26  N.J.  Eq.  •'  22  N.  Y.  5.35.     In  Union  College  v. 

415  ;  Losey  v.  Simpson,  11  N.  J.  Eq.  240;  Wheeler,  61  N.  Y.  88,  104,  Mr.  Commis- 

W^oodrulF  V.    Depii'',   14  N.  J.  Ecj.  108;  sioner  Dwiglit  reviewed  the  sulject :  "Is, 

X'redenburgh  v.  Burnet,  ."31  N.  J.  Eq.  229.  then,  the   plaintiff  in  any  belter  position 

Pennsylvania:  Porter  v.  King  (I).  C.  Pa.  than  Nott,  the  mortgagee/     It  is  well  set- 

1880),  1    Fed.  Pep.  755;  Motl  i'.  Clark,  9  tied  tliat  an  as.>-ignee  of  a  mortgage  must 

Pa.  St.  .599;  Pryor   v.  Wood,  .'11   Pa.   St.  take    it  huhjecl  to  tiie  ecjuiiiea  attending 

142;  Blair    v.  Mathiott,  40   Pa.  St.   202;  the    original    tranHaeiion.       If   the    mort- 

Downey  v.  Tharp,  O.'J  Pa.  St.  322;  Heine-  gageo    cannot  himself  (Miforco  it,   liie  a.s- 

man  v.  liobb,  98  Pa.  St.  474.  749 


§  844  a.] 


ASSIGNMENT    OF   MORTGAGES. 


ties,  came  to  the  conclusion  that  the  supposed  distinction  between 
these  equities  is  without  foundation,  and  that  the  assignee  takes 
the  security  subject  to  all  the  equities  that  third  persons  could 
enforce  jigainst  the  assignor,  as  well  as  subject  to  those  existing 
between  the  parties  to  the  instrument.  In  that  case  the  holder  of 
the  mortgage  and  bond  assigned  them  by  an  absolute  and  uncon- 
ditional bond,  as  security  for  a  debt  for  a  much  smaller  sum  than 
that  due  upon  the  mortgage,  and  his  assignee  transferred  the 
mortgage  for  full  value  to  a  third  person  without  notice  of  this 
fact.  The  rule  above  stated  as  to  the  equities  of  third  persons 
was  applied  to  the  case,  and  it  was  held  that  the  subsequent  as- 
signee took  the  security  subject  to  the  equity  of  the  former  holder 
of  the  mortgage,  to  redeem  it  upon  payment  of  the  amount  of  the 
debt  for  which  he  had  pledged  it. 

844  a.  The  doctrine  of  estoppel  may  come  in  to  qualify  the 
application  of  this  rule.  Thus  in  the  case  last  named  the  ap- 
plication of  this  rule  to  the  facts  presented  was  overruled  by  the 
case  of  3Ioore  v.  Metropolitan  National  Batik  ;  ^  although  the  rule 


signee  has  no  greater  rights.  The  true 
test  is  to  inquire  what  can  the  mortgagee 
do  by  way  of  enforcement  of  it  against 
the  property  mortgaged  :  what  he  can  do 
the  assignee  can  do,  and  no  more.  In 
Clute  V.  Robisou,  2  Johns.  595,  612,  the 
rule,  as  stated  by  Kent,  Ch.  J.,  is,  that  a 
mortgage  is  liable  to  the  same  equity  in 
the  hands  of  the  assignee  that  existed 
against  it  iu  the  hands  of  the  obligee.  2 
Vern.  692,  765  ;  1  Ves.  122.  The  rule  is 
not  simply  that  the  assignee  takes  subject 
to  the  equities  between  the  original  par- 
ties, though  that  is  sound  law.  Ingraham 
V.  Disborough,  47  N.  Y.  421.  It  goes  fur- 
ther than  this,  and  declares  that  the  pur- 
chaser in  a  chose  in  action  must  always 
abide  the  case  of  the  person  from  whom 
he  buys.  Per  Lord  Thurlow,  in  Davies 
V.  Austen,  1  Ves.  Jun.  247.  The  reason 
of  the  lule  is,  that  the  holder  of  a  chose  in 
action  cannot  alienate  anything  but  the 
beneficial  interest  he  possesses.  It  is  a 
question  of  power  or  capacity  to  transfer 
to  another,  and  that  capacity  is  to  be  ex- 
actly measured  by  his  own  rights.  Bebee 
V.  Bank  of  New  York,  1  Johns.  (N.  Y.) 
529,  552,  per  Spencer,  J.,  and  549,  per 
Tompkins,  J.     Kent,  Ch.  J.,  in  a  dissent- 

750 


ing  opinion  in  the  same  case,  would  have 
confined  the  rule  to  the  equities  between 
the  original  parties  to  the  contract.  lb. 
529,  573.  The  opinions  of  Spencer  and 
Tompkins,  JJ.,  were,  however,  recognized 
as  the  correct  exposition  of  the  law  in 
Bush  V.  Lathrop.  A  considerable  num- 
ber of  authorities  are  cited  by  the  plain- 
tiff as  tending  to  show  that  the  assignee  of 
a  chose  in  action  is  only  subject  to  the 
equities  between  the  contractor  (the  as- 
signor) and  the  debtor,  and  not  to  the 
so-called  latent  equities  of  third  persons. 
Such  cases  as  James  v.  Morey,  2  Cow. 
246  ;  Bloomer  v.  Henderson,  8  Mich.  395  ; 
Mott  V.  Clark,  9  Pa.  St.  399,  and  others 
of  the  same  class,  were  reviewed  as  to 
their  principle  or  specifically  in  Bush  v. 
Lathrop,  and  repudiated.  The  doctrine  of 
Lord  Thurlow,  in  England,  and  of  Spen- 
cer and  Tompkins,  JJ.,  already  consid- 
ered, was  thus  adopted,  rather  than  that 
of  Kent,  Ch.  J.  The  law  of  some  of  the 
other  states  undoubtedly  coincides  with 
the  view  of  Kent,  but,  since  the  decision 
of  Bush  I'.  Lathrop,  must  be  regarded  as 
without  author! t}^  here."  See,  also,  Briggs 
V.  Langford,  14  N.  E.  Rep.  502. 
1  55N.  Y.  41. 


WHETHER   ASSIGNEE   TAKES   SUBJECT    TO   EQUITIES.        [§  844  a. 

there  stated  as  to  the  equities  of  third  persons  was  not  questioned. 
The  latter  ease  held  that  where  the  holder  of  a  non-negotiable 
chose  in  action  has  conferred  the  apparent  absolute  ownership  of 
it  upon  another  by  assignment,  one  who  purchases  from  such  as- 
signee in  good  faith  for  value,  relying  upon  the  faith  of  such  ap- 
parent ownership,  obtains  a  valid  title  as  against  the  first  assignor, 
who  is  estopped  from  asserting  a  title  in  hostility  to  such  apparent 
ownership.  The  decision  is  based  altogether  upon  the  doctrine  of 
estoppel.  The  owner  of  the  security,  having  conferred  apparent 
ownership  upon  his  assignee  and  apparent  authority  to  convey,  is 
estopped  as  against  a  bona  fide  purchaser  to  deny  that  ownership 
or  that  authority.  Applying  this  rule  of  estoppel  to  the  facts  of 
the  case  presented  in  Bush  v.  Lathrop,  the  owner  of  the  mortgage 
and  bond  having  assigned  them  absolutely,  and  conferred  upon  his 
assignee  apparent  absolute  authority  over  the  securities,  would  be 
estopped  from  asserting  his  title  to  them  against  one  who  had 
purchased  upon  the  faith  of  the  assignee's  apparent  authority  to 
sell. 

If  a  mortgage  which  purports  upon  its  face  to  be  founded  upon 
a  valuable  consideration  contains  no  reference  to  a  condition  or 
agreement  upon  which  it  was  given,  that  it  should  be  sold  and 
the  proceeds  applied  to  the  payment  of  certain  drafts  accepted 
by  the  mortgagee  for  the  mortgagor's  accommodation,  though  the 
mortgage  secures  a  non-negotiable  bond,  the  mortgagor  is  estopped 
from  disputing  the  title  of  one  who  purchased  the  mortgage  in 
good  faith  without  knowledge  of  such  agreement,  and  the  holder 
of  the  drafts  cannot  insist  that  the  moneys  arising  from  the  sale 
of  the  mortgage  shall  be  applied  to  the  payment  of  the  drafts.^ 

In  a  similar  case  in  New  Jersey,  a  mortgagee,  having  placed 
an  assignment  in  the  hands  of  an  agent  in  such  a  way  as  to 
enable  him  to  dispose  of  the  mortgage  for  his  own  benefit,  was 
held  to  be  estopped  to  claim  the  moitgage  as  against  a  bond  fide 
assignee.^ 

But  aside  from  the  doctrine  of  estoppel,  the  rule  above  stated 
as  to  the  equities  of  tliird  persons  has  been  several  times  approved 
in  recent  castas  before  the  Court  of"  Ajjpeals  of  New  York  ;  and 
the  general  doctrim;  is  there  well  established,  that  one  who  lakes 

'  First  Nat.  Bank  v.  Sliks,  22  llim  (N.  Duuii  v.   Dunn  (N.  J.),  7  All.  llcp.  842. 

Y.),  3.'iy.  liiitent  equities  in  fiivur  of  third  perrtons. 

^  ruinain  c.  Clark,  29  N.  J.  Eq.  412;  are  not,  however,  reeognizcil  in  this  state. 

Grocers'  JJank  v.  Neei,  29  N.  J.  Ivj.  449  ;  §  843. 

7ol 


§§  845,  846.]  ASSIGNMENT    OF   MORTGAGES. 

an  assignment  of  a  bond  and  mortgage  takes  them  subject  not 
only  to  any  latent  equities  that  exist  in  favor  of  the  mortgagor, 
but  also  subject  to  the  latent  equities  in  favor  of  third  persons.^ 

845.  This  doctrine  was  recently  approved  in  Greene  v. 
Warnick^  by  the  Court  of  Appeals  of  New  Yoik.^     It  appeared 

that  two  mortgages  for  equal  sums  were  executed  at  the  same 
time  upon  the  same  real  estate,  to  different  persons,  to  secure  the 
purchase  money  for  the  same.  It  was  understood  and  agreed  be- 
tween the  mortgagees,  at  the  time  of  the  delivery  of  the  mort- 
gages, that  they  should  be  equal  liens  in  all  respects  upon  the 
premises.  They  were  both  recorded  the  same  day,  but  one  fifteen 
minutes  before  the  other.  The  mortgage  first  recorded  was  as- 
signed to  a  bond  fide  purchaser  for  value  without  notice  of  the 
agreement.  It  was  held  that  the  assignee  took  subject  to  the 
equities  between  the  mortgagees,  and  could  claim  no  priority  of 
lien  by  reason  that  his  mortgage  was  first  recorded.  The  rule, 
that  an  assignee  of  a  bond  and  mortgage  takes  them  not  only 
subject  to  all  the  equities  existiug  between  the  parties  to  the 
instrument,  but  to  the  equities  which  third  persons  could  enforce 
against  the  assignor,  was  fully  approved  and  adopted.  The  case 
differed  from  that  of  Moore  v.  Metropolitan  National  Bank  in  the 
fact  that  the  doctrine  of  estoppel  could  not  apply  ;  for  the  holder 
of  the  mortgage  last  recorded  had  done  nothing  to  induce  the 
assignee  to  purchase  the  other  mortgage,  and  had  not  by  any  act 
or  omission  misled  him.  Estoppel  can  only  operate  against  the 
party  whose  act  created  it,  and  cannot  affect  the  rights  or  equi- 
ties of  other  persons. 

846.  A  parol  trust  may  attach  to  a  mortgage,  that  the 
mortgagee  shall  hold  it  in  part  for  his  own  benefit  and  in  part 
for  the  benefit  of  another.  If  such  an  agreement  be  made  at  the 
time  of  giviug  a  mortgage  between  the  parties  to  it  and  another 
to  whom  the  mortgagor  was  indebted,  also  providing  that  upon 
the  payment  of  the  mortgage  it  should  be  transferred  to  this  lat- 
ter creditor  as  security  for  the  debt  owing  him,  the  assignment  to 
him,  after  the  payment  of  the   mortgage  debt  to  the  mortgagee, 

1  Greene   v.   Warnick,  64   N.  Y.  220 ;  says  the  rule  as  stated  by  Judge  Denio, 

Viele  V.  Judson,  82  N.  Y.  32 ;  Bank  for  in  Busli  r.  Lallirop,  "  commends  itself  as 

Savings  in  N.  Y.  v.  Frank,  45  N.  Y.  Su-  a  just  exposition  of  the  law,  as  well  upon 

perior  Ct.  404  ;  Union  College  v.  Wheeler,  principle  as  upon  authority." 

61  N.  Y.  88;  Schafer  v.  licilly,  50  N.  Y.  -  64  N.  Y.  220,  reversing  *S'.  C.  4  Hun, 

61.     Mr.  Justice  Allen,  in  the  latter  case,  70.3. 

752 


WHETHER  ASSIGNEE   TAKES   SUBJECT   TO  EQUITIES.      [§  8-17. 

will  be  valid  and  effectual,  so  as  to  enable  such  assignee  to  fore- 
close the  mortgage.  Such  an  arrangement  is  not  an  attempt  to 
tack  or  graft  upon  a  mortgage  duly  executed  under  the  hand  and 
seal  of  the  mortgagor  a  parol  mortgage  for  a  further  sum.^ 

847.  The  assignee  is  not  affected  by  equities  arising  after 
the  assignment,  and  which  had  no  existence,  and  were  simply 
possibilities,  at  the  time  of  the  assignment.^  Even  a  fraud  com- 
mitted by  the  assignor  after  the  assignment  cannot  affect  the 
rights  of  the  assignee.'^ 

1  Hubbell  V.  Blakeslee,  71  N.  Y.  63,  re-  Cornish  v.  Bryan,  10  N.J.  Eq.  (2  Stock t.) 

versing  8  Hun  (N.  Y.),  603.  146;  Coster  v.  Griswold,  4  Edw.  (N.  Y.) 

-  Elliott  V.   Deason,  64  Ga.  63;  Cole-  364,  374;  Murray  v.  Lylburn,  2   Johns, 

hour  V.  State  Sav.  Inst.  90  111.  152.  (N.  Y.)  Ch.  442. 

3  Bush  V.  Cushman,  27  N.  J.  Eq.  131 ; 
VOL,  I.        48  753 


CHAPTER   XX. 


MEKGER   AND   SUBROGATION. 


PART   I. 

Merger,  848-873. 


PART   I. 


PART    II. 

Subrogation,  874-885. 


MERGER. 

848.  Merger  at  law  and  in  equity.  —  In  law  a  merger  always 
takes  place  when  a  greater  estate  and  a  less  coincide  and  meet  in 
one  and  the  same  person,  in  one  and  the  same  right,  without  any 
intermediate  estate.  The  lesser  estate  is  annihilated  or  merged 
in  the  greater.  But  "  upon  this  subject,"  says  Sir  William 
Grant,^  "a  court  of  equity  is  not  guided  by  the  rules  of  law.  It 
will  sometimes  hold  a  charge  extinguished  where  it  would  sub- 
sist at  law,  and  sometimes  preserve  it  when  at  law  it  would  be 
merged.  The  question  is  upon  the  intention,  actual  or  presumed, 
of  the  person  in  whom  the  interests  are  united."  ^  This  intention 
is  a  question  of  fact,  and  is  to  be  tried  and  determined  in  the 
same  manner  as  are  other  issues.  It  comes  in  to  repel  the  prima 
facie  presumption  of  merger  which  arises  from  the  union  of  the 
legal  and  equitable  estates  in  the  same  person  at  the  same  time. 
His  intention  is  generally  determined  by  his  interest,  though  all 
the  attending  circumstances  are  to  be  considered.'^ 


1  Forbes  v.  Moffatt,  18  Ves.  384. 

2  In  England,  since  November  1,  1875, 
no  merger  takes  place,  by  operation  of 
law  only,  of  any  estate  the  beneficial  in- 
terest in  which  would  not  be  deemed  to 
be  merged  in  equity.  Sup.  Ct.  of  Judi- 
cature, Act  1873,  ch.  66,  §  25;  Act  1874, 
ch.  83,  §  2. 

^  St.  Paul  V.  Viscount  Dudley  and 
Ward,  15  Ves.  167,  173;  Insurance  Co. 
V.  Murphy,  1 1 1  U.  S.  738,  744.  Massa- 
chusetts :  Gibson  v.  Crehore,  3  Pick.  475 ; 

754 


Hunt  V.  Hunt,  14  lb.  374;  Tuttlc  i\ 
Brown,  lb.  514  ;  Loud  v.  Lane,  8  Met. 
517;  Grover  v.  Thatcher,  4  Gray,  526; 
Evans  v.  Kimball,  1  Allen,  240.  Penn- 
sylvania :  Wallace  v.  Blair,  1  Grant  Ca^. 
75  ;  Duncan  v.  Drury,  9  Pa.  St.  332 ;  Wil- 
son V.  Murphy,  1  Phila.  203  ;  Loverin  v. 
Humboldt  Safe,  &c.  Co.  113  Pa.  St.  6. 
Rhode  Island :  Duffy  v.  McGuiness,  13  R. 
I.  595 ;  Knowles  v.  Carpenter,  8  K.  I.  548. 
Vermont :  Marshall  r.  Wood,  5  Vt.  250, 
2.54;    Walker   i-.    Baxter,    26   Vt.    710; 


MERGER. 


[§  848. 


It  is  a  general  rule  that  when  the  legal  title  becomes  united 
with  the  equitable  title,  so  that  the  owner  has  the  whole  title,  the 
mortgage  is  merged  by  the  unity  of  possession.  But  if  the  owner 
has  an  interest  in  keeping  these  titles  distinct,  or  if  there  be  an 
intervening  right  between  the  mortgage  and  the  equity,  there  is 
no  merger.!     Thus,  where  the  purchaser  of  the  equity  of  i-edemp- 


Myers  v.  Brownell,  1  D.  Chip.  448 ;  Slo- 
cum   V.    Catlin,  22   Vt.    137;   Bullard   v. 
Leach,  27  Vt.  491 ;  Downer  v.  Fox,  20 
Vt.  388 ;    Carpenter  v.   Gleason,   58  Vt. 
244.     New  HampsMi'e  :  Robinson  i\  Leav- 
itt,  7  N.  H.  73 ;  Bailey  v.  Willard,  8  N.  H. 
429;  Hutchins  r.  Carleton,  19  N.  H.  487, 
489 ;  Weld  v.  Sabin,  20  N.  H.  533  ;  John- 
son V.  Elliott,  26  N.  H.  67,  69  ;  Heath  v. 
West,  26  N.  H.  191  ;  Bell  v.  Woodward, 
34  N.  H.  90 ;  Drew  v.  Rust,  36  N.  II.  335  ; 
Wilson  1-.  Kimball,  27  N.  H.  300  ;  Moore 
V.  Beasora,  44  N.  H.  215;  Hinds  v.  Ballon, 
44  N.  H.  619,  620;  Stantons  v.  Thomp- 
son, 49  N.  H.  272;  Bacon  t\   Goodnow, 
59  N.  H.  415 ;  Green  v.  Currier,  63  N.  H. 
563.    New  Jersey  :  Hinchman  v.  Emans, 
1  N.  J.  Eq.  (Sax.)  100;  Van  Wagenen  v. 
Brown,  26  N.  J.  L.  196  ;  Den  v.  Vanness, 
10  N.  J.  L.   (5  Halst.)  102  ;  Duncan    v. 
Smith,  31  N.  J.  L.  325;  Thebaud  v.  Hol- 
lister,   37    N.  J.    Eq.   402.     New  York: 
Millspaugh    v.    McBride,    7    Paige,   509 ; 
Skeel   V.   Spraker,   8    lb.  182;  White  v. 
Knapp,   8  lb.    173;   Judd  v.   Seekins,   62 
N.  Y.  266;  Spencer  t-.  Ayrault,  10  N.  Y. 
202;  Ciift  ';.  White,  12  N.  Y.  519;  Bas- 
com  V.  Smith,  34  N.  Y.  320;  Sheldon  v. 
Edwards,  35  N.  Y.  279 ;  Day  v.  Mooney, 
4   Hun,   134;  Angel  v.  Boner,  38   Barb. 
425;  Vanderkemp   v.  Shelton,  11  Paige, 
28  ;  James  v.  Johnson,  6  Johns.  Ch.  417, 
423 ;  Starr  v.  Ellis,   lb.  393  ;  Gardner  v. 
Astor,  3  lb.  53  ;  James  v.  Morey,  2  Cow. 
246,  285 ;  McGivcn  v.  Wheelock,  7  Barb. 
22,  29;  Champney  f.  Coope,  34  lb.  539; 
Kellogg  i;.  Ames,  41   lb.  218;  Loomer  i;. 
Wheelwright,  3  Sandf.  Ch.  135,  157  ;  Han- 
cock V.  Hancock,  22  N.  Y.  568 ;  Franklyn 
V.  Hayward,  61  How.  Pr.  43  ;  Smith  v.  Rob- 
erts, 62  How.  Pr.  190  ;  De  Linle  v.  Herbs, 
25  Hun,  485  ;  Lynch  v.  Pfeiffer,  17  N.  E. 
Rep.   402;   GinK.Tt   r.  Thayer,   10    N.   E. 
Rep.  148;    Smith    v.   RobertK,    91    N.  Y. 


470.  Maine  :  Given  r.  Marr,  27  Me.  212  ; 
Holden  r.  Pike,  24  Me,  427;  Hatch  v. 
Kimball,  14  Me.  9  ;  Simonton  v.  Gray, 
34  Me.  50  ;  Hatch  v.  Kimball,  16  Me.  146. 
Connecticut :  Baldwin  v.  Norton,  2  Conn. 
161  ;  Lockwood  v.  Stnrdevant,  6  Conn. 
373,  387  ;  Mallory  v.  Hitchcock,  29  Conn. 
127;  Bassett  v.  Mason,  18  Conn.  131; 
Hart  V.  Chase,  46  Conn.  207.  Illinois  : 
Edgerton  r.  Young,  43  111.  464 ;  Richard- 
son V.  Hockenhull,  85  111.  124;  Watson 
V.  Gardner,  10  N.  E.  Rep.  192.  Iowa: 
Lyon  V.  Mcllvaine,  24  Iowa,  9  ;  White  v. 
Hampton,  13  Iowa,  239  ;  Shimcr  v.  Ham- 
mond, 51  Iowa,  401 ;  Spurgin  v.  Adam- 
son,  62  Iowa,  661.  Minnesota  :  Davis  v. 
Pierce,  10  Minn.  376.  Michigan  :  Snyder 
V.  Snyder,  6  Mich.  470  ;  Ann  Arbor  Sav. 
Bank  v.  Webb,  56  Mich.  377.  Tennessee : 
Carter  v.  Taylor,  3  Head,  30.  Nevada: 
Grellet  v.  Heilshorn,  4  Nev.  526.  Califor- 
nia :  Brooks  v.  Rice,  56  Cal.  428  ;  Rumpp 
r.  Gerkens,  59  Cal.  496.  Colorado :  Fas- 
sett  V.  Mulock,  5  Colo.  466.  Texas  :  Silli- 
man  v.  Gammage,  55  Tex.  365.  Alabama : 
Gresham  v.  Ware,  79  Ala.  192.  Oregon: 
Watson  V.  Dundee  M.  &  T.  I.  Co.  12 
Oreg.  474.  South  Carolina  :  It  seems  that 
the  interest  of  the  mortgagee  is  not  alone 
sufficient  to  sihow  the  intention  that  the 
mortgage  shall  not  be  extinguished ;  but 
an  express  agreement  will  prevent  a  mer- 
ger. Aguew  V.  Railroad  Co.  24  S.  C. 
18  ;  58  Am.  Rep.  237  ;  Devcreux  v.  Taft, 
20  S.  C.  555.  Maryland  :  Dircks  r.  Logs- 
don,  59  Mil.  173:  Walker  v.  Stone,  20 
Md.  195.  Virginia:  Little  v.  Bowcu,  7«". 
Va.  724. 

'  Hancock  i;.  Hancock,  supra;  Hill  u. 
Pixlcy,  03  Barb.  (N.  Y.)  200;  Lynch  v. 
PCcifier,  «»/<ra ;  Loud  v.  Lnne,  8  Met. 
(Mass.)  517  ;  (Jrellct  r.  J leilshorn,  su/jra  , 
Lyon  V.  Mcllvaine,  su/iru  ;  Wilhelmi  v. 
Leoniini,   13  Iowa,  3;iO;   Warren  v.  War 

75.0 


§  848.]  MERGER   AND   SUBROGATION. 

tion  of  premises  already  subject  to  a  mortgage  makes  a  second 
mortgage,  and  while  this  is  outstanding  takes  an  assignment  of 
the  first  mortgage,  which  he  afterwards  assigns  to  a  third  person, 
the  first  mortgage  is  not  extinguished  ;  the  second  mortgage  out- 
standing prevents  a  merger.^ 

To  effect  a  merger  at  law,  the  right  previously  held,  and  the 
right  subsequently  acquired,  must  coalesce  in  the  same  person 
and  in  the  same  right,  without  any  other  right  intervening.^  "  In 
fact,"  says  Chief  Justice  Bellows  of  New  Hampshire,  in  a  recent 
case,3  "  the  doctrine  of  merger  springs  from  the  fact  that  when 
the  entire  equitable  and  legal  estates  are  united  in  the  same  per- 
son, there  can  be  no  occasion  to  keep'  them  distinct,  for  ordina- 
rily it  could  be  of  no  use  to  the  owner  to  keep  up  a  charge  upon 
an  estate  of  which  he  was  seised  in  fee  simple  ;  but  if  there  is  an 
outstanding,  intervening  title,  the  foundation  for  the  merger  does 
not  exist,  and  as  matter  of  law  it  is  so  declared." 

An  intervening  incumbrance  or  equity  of  any  kind  is  generally 
sufficient  to  prevent  a  merger  of  the  mortgage  with  the  equity 
of  redemption,  provided  the  incumbrance  be  not  one  which  the 
owner  has  assumed  to  pay,  or  one  against  which  he  is  estopped 
from  defending,  whether  such  incumbrance  be  an  attachment,* 
a  levy  of  execution,^  another  mortgage,*'  or  any  other  lien  or 
equity.'' 

No  merger  occurs  when  the  mortgagee  purchases  the  equity  of 
redemption  at  an  execution  sale,  so  long  as  the  debtor's  right  to 
redeem  from  such  sale  continues.^ 

The  owner  of  a  note  and  deed  of  trust  by  which  it  is  secured 
has  no  legal  estate  in  the  land,  this   being  in  the  trustee  ;   and 

ren,    30  Vt.    530;  ^tna  L.  Ins.   Co.    v.  Kanawha  Valley    Bank   v.   Wilson    (W. 

Corn,  89  111.  170;  Campbell  v.  Carter,  14  Va.),  2  S.  E.  Rep.  768. 

111.   286  ;   Jarvis   v.   Frink,    14  111.   396  ;  3  Stantons    v.    Thompson,    49    N.    H. 

Dircks  v.  Logsdon,  59  Md.  173  ;  Bunch  v.  272. 

Grave  (Ind.),  12  N.  E.  Rep.  514;  Birke  *  Grover  v.  Thatcher,  4  Gray  (Mass.), 

V.  Abbott,  103  Ind.  1  ;  1  N.  E.  Rep.  485;  526  ;  Denzler   v.  O'Keefe,  34  N.  J.  Eq. 

Montgomery  i;.  Vickery,  110  Ind.  211  ;  11  361. 

N.  E.  Rep.  38;  Crane  v.  Aultman-Taylor  5  j^g^  England   Jewelry  Co.   v.    Mer- 

Co.  61  Wis.  110.  riam,  2  Allen  (Mass.),  390;    Denzler  v. 

1  Evans  v.   Kimball,  1   Allen  (Mass.),  O'Keefe,  supra. 

240.     See,  however,  Byington  v.  Fountain,  6  BgH  ^  Woodward,  34  N.  H.  90  ;  Dut- 

61  Iowa,  512.  ton  v.  Ives,  5  Mich.  515  ;  Hooper  r.Henry, 

-  Hunt  V.  Hunt,  14  Pick.  (Mass.)  384,  31  Minn.  264. 

per  Shaw,  C.  J.  ;  Lockwood   v.   Sturde-  ''  Bunch  v.  Grave,  supra. 

vant,  6  Conn.  373,  387,  per  Hosmer,  C.  J. ;  s  Southworth  v.  Scofield,  51  N.  Y.  513. 
756 


MERGER.  [§§  849,  850. 

therefore,  if  such  owner  of  the  note  and  deed  of  trust  acquires  the 
equity  of  redemption,  there  is  no  merger.^ 

849.  An  assignment  of  a  mortgage  to  one  of  two  tenants 
in  common  of  the  equit}'  of  redemption  does  not  discharge  it. 
His  own  interest  in  the  equity  does  not  prevent  his  holding  under 
the  higher  title.  The  co-tenant  is  not  prejudiced,  for  he  may  re- 
deem by  payment  of  his  proportion  of  the  debt.^ 

Where  one  who  has  purchased  part  of  the  premises  subject  to 
a  mortgage  takes  an  assignment  of  the  mortgage,  although  it  may 
operate  as  a  merger  in  respect  to  the  part  of  the  premises  bought 
by  him,  it  will  not  have  this  operation  in  I'espect  to  the  part  not 
bought.'^  Nor  is  there  any  merger  when  a  mortgagee  becomes  a 
devisee  of  an  undivided  half  of  the  premises.* 

When  the  owner  of  an  equity  of  redemption  by  will  or  other- 
wise takes  an  undivided  interest  in  the  mortgage  debt,  as  a  ten- 
ant in  common  with  others,  no  merger  of  his  interest  takes  place. 
The  owner  of  any  part  of  a  mortgage  has  the  whole  premises  for 
his  security.  His  mortgage  cannot  be  extinguished  as  to  any 
part  or  interest  in  the  land,  whether  divided  or  undivided,  with- 
out his  assent.  The  fact  that  some  one  else  has  a  legal  interest 
or  share  in  the  security  prevents  the  blending  of  the  interests  in 
such  case.^  And  so,  on  the  other  hand,  there  is  no  merger  when 
a  mortgagee  of  the  entire  premises  becomes  a  devisee  of  an  undi- 
vided part  of  the  equity  of  redemption.  He  is  entitled  to  be 
protected  by  holding  his  entire  mortgage  against  the  entire  prem- 
ises.^ 

850.  The  assignment  of  a  mortgage  to  the  wife  of  the 
mortgagor  operated  at  common  law  as  a  discharge  of  it.  But 
under  the  statutes  now  in  force  in  all  or  nearly  all  our  states,  au- 
thorizing married  women  to  buy  and  sell  real  estate,  such  an  as- 
signment would  not  operate  as  a  discharge." 

But  where  a  })ri(jr  mortgage  has  been  foreclos(!d,  but  before  the 
time  of  redemption  has  expired  the  owner  pays  the  mortgage 
and  has  a  conveyance   made   by  tin;  mortgagee  to  his  wife,  hei- 

1  Ilospes  V.  Aliiistedt,  13  Mo.  Apji.  <  Kiihler  v.  Si^'ner,  41  I5:iil).  (N.  V  ) 
270.  COf). 

2  Barker  i;.  Flood,  103  Miiss.  474.  '>  Clark  v.  Clark,  .OC.  N.  H.  lo'). 
'■'•  Williclmi  V.  Leonard,  13  lowii,  330;         o  Siililcr  r.  Sit,'iiL'r,  .vM/inj. 

KiiiK  V.  McV'ickar,  3  Sandf    (N.  Y.)  Cli.         7  n,.;i„  f.  Bootlil)y,  ■'i7  Mo.  '2'j:>  ;  Bcmi.s 

192;  Casey  f.  Huitolpli,  12  Burl).  (N.  Y.)  i,.   Cn\]^    lo   Allen    (Mums.),   :>\'2  ;    Model 

037  ;  I'ikc  v.  Goodnow,  i'2  Allin  (Mas?.),  Lod^in;^  Ilonsc  Ahso.  i:  Boston,  114  Ma.ss. 

472  ;  Trimmicr  v.  Vise,  17  S.  C.  4'J'J.  i;j3. 

707 


§§  851-853.]  MERGER   AND   SUBROGATION. 

name  being  used  as  a  cover  and  the  husband  being  the  real  party 
in  interest,  the  transaction  may  properly  be  regarded  by  a  junior 
mortgagee  as  a  redemption  by  the  owner,  and  the  wife  cannot 
claim  to  hold  the  property  in  her  own  right  under  a  foreclosure 
from  which  the  property  had  not  been  redeemed.^ 

A  husband  may  purchase  and  hold  a  mortgage  given  bv  his 
wife  upon  her  property  in  which  he  has  also  joined.  It  is  not 
merged  by  an  assignment  to  him.2  Much  less  is  it  satisfied  in  the 
hands  of  another  person  to  whom  it  is  assigned  upon  the  payment 
of  the  consideration  b}^  the  husband." 

851.  The  marriage  of  a  single  woman,  who  holds  a  mort- 
gage, with  the  mortgagor,  does  not  extinguish  the  mortgage  lien 
or  the  debt,  under  the  statutes  in  regard  to  the  rights  of  married 
women  in  their  separate  property  now  generally  in  force.* 

Neither  does  the  execution  by  the  husband  and  wife,  after  mar- 
riage, of  a  mortgage  upon  the  same  premises  to  a  third  person, 
discharge  the  lien  of  the  wife's  mortgage  against  her  husband,  if 
she  uses  no  words  of  release  to  operate  upon  her  mortgage,  and 
it  is  apparent  from  the  instrument  that  she  joined  merely  to  re- 
lease her  inchoate  right  of  dower.^ 

852.  In  case  the  equitable  estate  has  been  in  any  way  ex- 
tinguished the  doctrine  of  merger  has  no  application.  Thus, 
where  a  mortgagee  allowed  the  mortgaged  premises  to  be  sold 
under  a  prior  judgment,  and  failed  to  redeem  within  the  time 
allowed,  but  afterwards  obtained  a  conveyance  of  the  premises 
from  the  purchaser  under  execution  sale,  his  mortgage  title  was 
wholly  gone,  and  there  was  nothing  to  merge  in  the  legal  es- 
tate. Neither  could  his  purchase  have  the  effect  in  any  way  to 
revive  his  mortgage  as  a  lien,  and  enable  him  to  transfer  it  to 
another.*' 

853.  After  the  owner  of  lands  has  taken  an  assignment  of 
the  mortgage  to  himself,  and  then  assigned  it  to  another  as  a 
valid  security,  he  is  estopped  from  insisting,  as  against  the  as- 
signee or  any  one  claiming  under  him,  that  it  had  merged  in  the 
equity  of  redemption.'     It  is  immaterial  in  such  case  that  the 

1  Wright  V.  Patterson,  45  Mich.  261.  How.  Pr.  413  ;  Gillig  v.  Maass,  28  N.  Y. 

-  Butler  V.Ives,   139  Mass.  202 ;  Mar-  191. 
tin    V.   Martin    (Mass.),    16   N.   E.    Rep.         e  Hill  v.  Pixley,  63  Barb.  (N.  Y.)  200. 
413.  7  Powell  V.  Smith,  30  Mich.  451 ;  Kel- 

3  Faulks  V.  Dimock,  27  N.  J.  Eq.  65.  logg  v.  Ames,  41   N.  Y.  259,  reversing  41 

«  Power  V.  Lester,  23  N.  Y.  527.  Barb.  218  ;  Skeel  v.  Spraker,  8  Paige  (N. 

s  Power   v.   Lester,   supra;    S.    C.    17  Y.),  182. 
758 


MERGER.  [§§  854,  855. 

remedy  at  law  upon  the  note  which  accompanied  the  mortgage 
was  barred :  that  does  not  affect  the  validity  of  the  mortgage  or 
the  remedy  upon  it.  It  is  immaterial,  too,  that  the  person  who 
claims  the  benefits  of  a  merger  is  a  purchaser  from  the  former 
owner  by  a  deed  made  after  the  assignment  of  the  mortgage  by 
his  grantor  was  recorded  ;  for  then  the  same  record  which  in- 
formed him  of  the  facts,  which  at  common  law  would  constitute  a 
merger,  also  notified  him  of  the  assignment  which  created  the 
estoppel.!  If  he  has  purchased  by  deed  of  warranty  he  may  have 
a  remedy  upon  the  covenants,  but  he  cannot  resist  the  foreclosure 
of  the  mortgage.- 

854.  By  selling  the  estate  free  from  incumbrances,  he  may 
be  estopped  on  the  other  hand,  as  against  the  purchaser  at  least, 
from  saying  that  there  was  no  merger.^  A  mortgagee  having 
purchased  the  equity  of  redemption  while  it  was  subject  to  a 
second  mortgage,  afterwards  sold  the  land  to  a  third  person  for  a 
price  sufficient  to  pay  both  mortgages,  as  well  as  the  sum  paid 
for  the  equity  of  redemption.  Although  his  prior  lien  was  not 
merged  by  his  purchase,  it  was  regarded  as  satisfied  by  his  sale, 
so  that  on  a  subsequent  foreclosure  of  the  second  mortgage  the 
proceeds  were  first  applied  to  the  payment  of  the  second  mort- 
gage.-i 

855.  The  intention  at  the  time  of  the  payment  of  the  mort- 
gage has  sometimes  been  said  to  determine  the  effect  of  such 
payment.  If  there  was  then  no  intention  on  the  part  of  the 
person  making  the  payment,  either  actual  or  to  be  implied  from 
the  condition  of  things  then  existing,  to  keep  the  mortgage 
alive,  it  cannot  afterwards,  it  is  said,  upon  his  forming  an  in- 
tention, or  upon  a  change  in  the  surrounding  circumstances,  be 
regarded  as  a  subsisting  security.''^     Thus,  where  a  mortgage  was 

1  Powell  V.  Smitii,  30  Mich.  451.  ^  Webb  v.  Meloy,  32  Wis.  319. 

-  Kello-g  V.  Ames,  41  N.  Y.  259.  Tiie  '"  Champney  v.  Coojje,  34  Barb.  (N.  Y.) 
<ourt,  Murray,  J.,  deliverinf,'  the  opinion,  539 ;  Loomer  i'.  Wheelwriglit,  3  Saudf. 
-aysthat  the  purchaser  takes  tlic  deed  with  (N.  Y.)  Ch.  135,  157;  Gardner  v.  Astor, 
(  onstruciive  notice  of  tlic  existence  of  the  3  Johns.  (N.  Y.)  Ch.  53  ;  Lynch  v.  Pfeif- 
iriortgagc.  It  is  upon  record.  He  then  fer  (N.  Y.),  17  N.  E.  Kep.  402;  Colo  v. 
.steps  into  the  former  owner's  place;  he  Ed^eily,  48  Me.  108 ;  Aiken  v.  Milwaukee 
takes  his  interest  and  his  rights  in  the  &  St.  P.  U.  li.  Co.  37  Wis.  4G9;  Hunt  v. 
land,  and  no  more;  the  estoppel  which  Hunt,  14  Pick.  (Mass.)  374,  383;  (Jaylo  i^. 
was  controlling  the  former  owner  is  also  Wilson,  30  Gralt.  (Va.)  IGC;  S.  V.  5  lie- 
controlling  him.  porter,  <;()7. 

■■■  Uulkeley  v.   H-.pc,   I    Kay  &.  J.  4H2  ; 
1  Jur.  N.  S.  804. 

759 


§  856.]  MERGER   AND   SUBROGATION. 

paid  without  an  assignment  or  discharge  of  it  being  then  made, 
or  any  agreement  being  made  for  any  future  assignment  of  it,  and 
the  owner  of  the  estate  eighteen  years  afterwards  conveyed  the 
land  by  warranty,  and  his  grantee  obtained  an  assignment  of  the 
mortgage  to  the  first  purchaser,  it  was  held  that  nothing  passed, 
because  the  mortgage  had  already  been  discharged  by  the  pay- 
ment.i 

It  is  clear,  however,  that  the  intention  may  be  gathered,  not 
only  from  the  acts  and  declarations  of  the  parties,  but  from  a  view 
of  the  situation  as  affecting  the  interests  of  the  party  making  the 
payment,  and  it  may  happen  that  the  intention  as  to  merger  may 
remain  subject  to  change,  at  least  until  a  third  person  has  acquired 
some  interest.  Until  such  time,  therefore,  whatever  occurs  be- 
tween the  parties  interested  tending  to  show  the  intention  is  ad- 
missible as  part  of  the  res  gestce? 

856.  The  question,  whether  there  is  a  merger  in  a  partic- 
ular case,  depends  not  so  much  upon  the  kind  or  form  of  in- 
strument by  which  one  estate  is  transfei-red  to  the  holder  of  the 
other  as  upon  the  intention  of  the  parties,  and  if  the  intention  be 
declared  in  such  instrument  it  may  control  the  construction  of  its 
effect.  But  even  as  against  the  expressed  intention,  that  which 
is  inferred  from  the  relation  of  the  parties  to  each  other  and  to 
others,  or  from  their  own  interests,  may  be  sufficient  to  control 
the  construction,  especially  if  the  expressions  of  intention  be  vague 
or  doubtful. 

A  recital  in  a  deed  from  a  mortgagor  to  his  mortgagee  of  the 
mortgaged  land,  that  the  deed  was  made  to  cancel  the  mortgage, 
may  conclude  the  grantee  from  denying  that  fact,  so  far  as  the 
intention  was  concerned  ;  but  the  mortgage  and  the  notes  re- 
maining in  his  possession  by  agreement,  he  may  rely  upon  his 
mortgage  title  as  against  an  intervening  attachment.^  Where 
the  upholding  of  a  separate  mortgage  title  is  essential  to  the 
interests  of  the  owner,  a  reference  in  a  deed  to  the  mortgage 
as  "  having  been  cancelled  by  assignment "  will  not  effect  a 
merger.* 

On  the  other  hand,  when  a  conveyance  to  a  mortgagee  is  made 
expressly  subject  to  a  right  of  dower,  whereby  the  intention  of 
the  parties  is  manifest  that  such  a  right  should  be  preserved,  the 

1  Given  v.  Marr,  27  Me.  212.  '  3  Crosby  v.  Chase,  17  Me.  369. 

-Smith    V.    Roberts,    91    N.    Y.    470;         *  Bean  r.  Boothby,  57  Me.  295. 
James  v.  Morey,  2  Cow.  (N.  Y.)  246. 

760 


MERGER.  [§  857. 

purchaser  will  not  be  allowed  to  set  up  the  mortgage  as  a  sub- 
sisting title  against  this  right.^ 

When  a  person  holding  an  equity  of  redemption,  by  a  convey- 
ance fraudulent  as  against  the  grantor's  creditors,  takes  from  the 
mortgagee  a  quitclaim  deed  of  all  his  interest  in  the  premises, 
containing  this  clause :  '*  Which  said  mortgage  is  hereby  can- 
celled and  discharged,  the  said"  grantor  "having  recently  con- 
veyed his  interest  in  the  premises  to  "  the  grantee,  this  amounts 
to  an  assignment,  and  not  a  merger,  of  the  moitgage,  if  the  cred- 
itors interfere  and  take  the  equity.^ 

When  one  erroneously  supposing  that  he  owned  the  equity  of 
redemption  of  land  subject  to  two  mortgages  paid  to  the  first 
mortgagee  the  amount  due  on  his  mortgage,  and  took  a  deed  in 
which  the  mortgagee  released,  granted,  and  sold  his  interest  in 
the  land,  "  meaning  hereby  to  release  all  the  right  I  have  in  the 
premises  by  virtue  of  said  mortgage,  the  aforesaid  sum  having 
been  this  day  paid  me  in  discharge  of  said  mortgage,"  this  deed 
was  held  to  operate  as  a  grant  of  the  legal  estate,  or  a  satisfied 
mortgage,  and  not  as  an  assignment  of  the  debt.  The  purpose  of 
the  mortgagee  in  making  the  "deed  was  to  be  taken  into  consid- 
eration in  construing  it,  and  this  purpose  was  to  acknowledge  pay- 
ment of  the  debt  and  to  pass  the  legal  estate.  This  explanation 
of  the  intent  of  the  parties  avoids  the  inference  that  might  be 
made  from  the  other  parts  of  the  deed,  that  the  debt  was  thereby 
assigned.  Without  this  evidence  of  payment,  the  fact  that  it  was 
paid  and  not  assigned  might  be  proved  by  parol.^ 

If  the  owner  of  land  subject  to  two  mortgages  duly  recorded, 
who  is  under  no  obligation  to  pay  either  of  them,  in  ignorance  of 
the  second  mortgage  makes  a  part  payment  on  the  first  mort- 
gage for  the  purpose  of  perfecting  his  title,  and  afterwards,  on 
being  informed  of  the  second  mortgage,  pays  the  balance  due  on 
the  first,  and  causes  that  mortgage  to  be  assigned  to  a  third  per- 
son in  trust  for  himself,  the  holder  of  the  second  mortgage  is  not 
entitled  to  redeem  the  first  except  by  paying  the  full  amount 
thereof.* 

857.  Merger  may  be  prevented  by  an  expressed  intention 
to  the  contrary,  contained   in  a  deed  of  release  from  the  owner 

1  Campbell  v.  Kni;,'hts,  24  ^^f■.  .•»32.  *  Hycr   v.  C.iuss,   \:W  Mass.    227.     Sec. 

■^  Crosby  »'.  Taylor,  I.")  (Jiiiy  (Mass.),  C4.  also,  Krniiklyn   r.  Hay  ward,  til    Mow.  (N. 

3  Wade    V.    Howard,    11    I'ick.   (Mass.)  Y.)  I'r.  43. 
289;  S.  C.  6  II).  4'J2. 

701 


§  858.]  MERGER   AND   SUBROGATION. 

of  the  equity  of  redemption  to  the  holder  of  the  mortgage,^  that 
the  deed  shall  not  operate  as  a  merger  of  title,  except  at  the 
election  of  the  grantee  ;  in  which  case  there  will  be  no  merger, 
unless  evidence  tending  to  show  such  election  on  his  part  be 
given.^  An  assignment  of  the  mortgage  paid  off  might  be  taken 
to  a  trustee  with  an  express  declaration  that  the  object  was  to 
preserve  the  priority  of  the  lien  ;  ^  but  the  conveyance  alone  with- 
out the  declaration  is  not  regarded  as  conclusive.^ 

When  there  is  no  evidence  of  the  intention  of  the  owner  in 
uniting  the  legal  and  equitable  estates  in  himself,  it  is  proper  to 
presume  that  he  intended  that  effect  which  is  the  most  beneficial 
to  himself.  Therefore,  if  the  estate  be  subject  to  other  incum- 
brances, which  he  is  under  no  obligation  to  pay,  and  it  is  better 
for  him  to  preserve  the  lien  of  the  prior  mortgage  rather  than  to 
extinguish  it,  and  let  the  next  subsequent  incumbi*ance  into  its 
place  of  priority,  these  facts  may  be  taken  as  sufficient  ground  for 
inferring  that  his  intention  was  to  preserve  the  mortgage  rather 
than  to  extinguish  it.^ 

858.  "Whether  the  release  of  a  mortgage  constitutes  a  dis- 
charge or  an  assignment  depends  not  so  much  upon  the  form 
of  the  instrument  as  upon  the  relations  of  the  parties  to  the  es- 
tate, and  their  presumed  intent  derived  from  the  circumstances 
under  which  the  conveyance  is  made.^  If  the  release  is  to  a  party 
whose  duty  it  is  to  extinguish  the  mortgage  for  the  benefit  of 
another,  it  will  be  held  to  operate  as  a  discharge."  If  the  money 
be  paid  by  one  who  has  assumed  the  duty  of  paying  the  debt, 
either  by  contract  with  the  mortgagor  or  with  those  who  may 
have  succeeded  to  his  rights,  this  must  be  taken,  as  regards  other 
subsequent  interests,  as  a  payment ;  consequently,  when  one  has 
purchased  land  by  a  deed  containing  an  express  stipulation  that 
he  shall  assume  and  pay  an  existing  mortgage  debt  upon  it,  his 
payment  of  it  operates  as  a  discharge  of  the  mortgage,  whether 

1  Bailey  v.  Richardson,   9  Hare,  734  ;  ^  Clarendon  v.  Barham,  1  Y.  &  C.  C. 

and  see  Tyrwhitt  v.  Tyrwhitt,  32  Beav.  C.  688;  Davis  v.  Barrett,  14  Beav.  542; 

244 ;  Wilkes  v.  Collin,  L.  R.  8  Eq.  338 ;  Hatch  v.  Skelton,  20  Beav.  453 ;  Denzler 

^tna  Life  Ins.  Co.  v.  Corn,  89  111.  170 ;  v.  O'Keefe.  34  N.  J.  Eq.  361. 

11  Chicago  L.  N.  38;  Agnew  v.  Railroads  6  Ryer    v.   Gass,    130    Mass.   227,   per 

24  S.  C.  18;  58  Am.  Rep.  237.  Ames,  J.;  Lewis  v.  Hinman  (Conn.),  13 

-  Spencer  v.  Ayrault,  10  N.  Y.  202.  Atl.  Rep.   143  ;  Duffy  v.  McGuiness,  13 

'^  Bailey  v.  Richardson,  supra.  R.  I.  595. 

*  Hood  f.  Phillips,  3  Beav.  613;  Parry  "  Wadsworth   v.  Williams,    100   Mass. 

V.  Wright,  1  Sim.  &  St.  369  ;  and  see  Gun-  126.     See  Wade  v.  Beldmeir,  40  Mo.  486  ; 

ter  V.  Gunter,  23  Beav.  571.  Burnham  v.  Dorr,  72  Md.  198. 

762 


MERGER.  [§§  859-861. 

he  takes  an  assignment  of  the  mortgage,  an  acknowledgment  of 
payment,  or  a  release.* 

859.  A  deed  of  quitclaim  from  the  mortgagee  to  a  third 
person,  who  pays  the  amount  due  upon  a  mortgage  at  the  re- 
quest or  with  the  consent  of  the  mortgagor,  operates  generally 
as  an  assignment,  and  not  as  an  extinguishment,  of  the  mortgage,^ 
unless  the  latter  effect  be  intended.  But  a  quitclaim  deed  by 
the  holder  of  the  mortgage,  whether  the  original  mortgagee  or 
his  assignee,  to  the  owner  of  the  equitj'  of  redemption,  generally 
operates  to  discharge  the  mortgage,  unless  there  be  a  good  reason 
why  it  should  not  have  this  effect.^ 

860.  A  bequest  of  the  mortgage  to  the  mortgagor  would 
generally  merge  the  lien.  But  if  the  interest  of  the  mortgage  be 
given  to  another  for  life,  and  the  principal  of  it  to  the  mortgagor 
afterwards,  the  mortgage  is  kept  alive  and  may  be  foreclosed  dur- 
ing the  lifetime  of  the  person  entitled  to  the  interest.'*  But  where 
a  mortgagee  conveyed  the  mortgaged  premises  to  the  mortgagor 
in  trust  for  the  separate  use  of  his  wife  during  her  life,  remainder 
over  to  her  children,  and  the  mortgagor  expressly  covenanted  that 
he  would  accept  the  trust  and  carry  it  into  effect,  it  was  held  tliat 
upon  the  death  of  the  mortgagor  the  trust  terminated,  and  the 
entire  legal  and  equitable  estate  devolved  upon  the  remainder- 
men, the  equitable  estate  of  the  mortgagor  having  merged  in  the 
legal  estate  conve^'ed  to  him.'' 

861.  Parol  evidence  that  an  assignment  of  a  mortgage  was 
intended  to  be  a  discharge  is  admissible  only  for  the  purpose 
of  proving  fraud.*'  The  legal  effect  of  a  conveyance  cannot  be 
changed  by  parol  evidence.^  Yet  such  evidence  is  admissible  to 
show  the  consideration  upon  which  the  conveyance  was  made,  and 
to  show  the  whole  transaction  where  the  conveyance  constitutes 

1  Kilborn  v.  Robbius,  8  Allen  (Mass.),  claim,  and  demand,  both  at  law  and  in 

466.     See,  however,  Young  v.  Morgan,  89  equity,   whether   by  deed,   mortgage,   or 

111.  199.  otherwise,  and  as  well  in  possession  as  in 

-  Freeman  v.  M'Gaw,  15  Pick.  (Mass.)  expectancy,"  and  it  was  regarded  as  an 

82  ;  Hunt  v.  Hunt,  14  II).  374  ;  Wolcott  v.  undoubted  discharge. 

Winchester,  l.")  Gray  (Mass.),  461  ;  Hinds  *  Hancock  i-.  Hancock,  22  N.  Y.  .')68. 

(;.  Ballon,  44  N.  H.  619.     Contra,  Johnson  »  Welsh  v.  riiillii)s,  54  Ala.  309. 

V.  Lewis,  13  Minn.  364.  «  Asticy   v.   Millcs,    1    Sim.    29S.  345  ; 

^Jerome    v.    Seymour,    Harr.    (Mich.)  Howard  i'.   Howanl,  3   .Met.  ( Muss.)  548; 

357;    IJassett    v.   Hathaway,  9  Mich.  28.  Wado  v.  Howard.  11    Pick.   (Mass.)  289; 

In  this  case  the  holder  of   the  mortgage  .S".  (J.  6  lb.  492. 

conveyed  to  a  purciiasir  of  the  cfpiity  of  ^  McC'abe  v.  Swap,   14  Allen   (Mass.), 

redemption  all  his  "  rigiit,  title,  interest,  188. 

768 


§§  862,  863.]       MERGER  AND  SUBROGATION. 

only  n,  part  of  it  ;  and  in  this  way  it  may  appear  that  tlie  pur- 
chaser is  under  obligation  to  pay  the  mortgage  debt,  so  that  an 
assignment  of  the  mortgage  to  him  constitutes  a  merger.^ 

862,  Merger  in  new  security  or  judgment.  —  It  is  else- 
where noticed  that  a  mortgage  is  not  necessarily  or  even  usually 
merged  by  taking  a  new  mortgage  upon  the  same  property  for  the 
old  debt  and  further  advances,  or  for  the  old  debt  and  interest 
accrued  upon  it,  or  assessments  paid  upon  the  property ;  if  the 
original  mortgage  has  not  been  released,^  the  debt  is  not  merged 
so  as  to  affect  the  security  by  obtaining  a  judgment  upon  it,  un- 
less it  is  satisfied  in  whole  or  in  part,  when  the  debt  is  of  course 
extinguished  to  the  extent  of  the  sum  realized  by  the  execution.^ 

When  additional  security  is  taken  for  a  mortgage  debt  by  a 
new  mortgage  upon  the  same  or  other  property,  a  merger  of  the 
original  security  may  be  very  readily  prevented  by  a  recital  in 
the  instrument  creating  the  new  security  that  it  is  given  by  way 
of  further  securit}^,  or  as  collateral  to  the  old.'*  Of  course,  in 
most  cases,  the  nature  of  the  transaction  and  the  relations  of  the 
parties  will  be  sufficient  to  show  the  intention  without  any  such 
declaration. 

863.  A  mortgage  will  not  be  kept  alive  in  aid  of  a  fraud 
or  wrong.  Although  in  equity  a  mortgage  substantially  satisfied 
may  be  kept  alive  when  this  is  requisite  to  the  advancement  of 
justice,  this  is  never  allowed  when  the  result  will  be,  through  the 
forms  of  law,  to  aid  in  perpetrating  a  fraud  or  an  injury.^ 

Generally,  an  assignment  of  the  mortgage  cannot  be  enforced. 
It  is  the  mortgagee's  duty  to  discharge  merely.*^  But  whenever 
a  decree  is  made  that  the  mortgage  upon  payment  or  redemption 
be  assigned,  the  decree  should  be  limited  so  as  not  to  prejudice 
the  mortgagee  in  respect  to  any  other  liens  he  may  have  acquired 
upon  the  property,  whether  by  attachment  or  otherwise."  In  New 
York,  however,  it  is  held  that  an   assignment  may  be  enforced 

1  Frey   v.   Vanderhoof,   15   Wis.   397;  Ex  par/e  Whitbread,  2   M.,  D.  &  De  G. 

Fiske  V.  McGregory,  34  N.  H.  414  ;  and  415. 

see  Miller  v.  Fichthorn,  31   Pa.  St.  252,  ^  McGiven  v.   Wheelock,  7  Barb.   (N. 

259  ;  Burnham  v.  Dorr,  72  Me.  198.  Y.)  22  ;  First  Nat.  Bank  v.  Essex,  84  Ind. 

-  Tenison   v.    Sweeny,    1    Jones    &   L.  144;   Worthington   v.   Morgan,    16    Sim. 

710.  547. 

3  See  Bell  v.  Banks,  3  Man.  &  G.  258 ;  *>  See  §  1086 ;  also,  James  v.   Biou,  3 

S.  C.  3  Scott  N.  R.  497  ;  Ex  parte  Higgins,  Swans.  234  ;  Colyer  v.  Colyer,  9  L.  T.  N. 

3  De  G.  &  J.  33.  S.  214;  Dunstan  v.  Patterson,  2  Ph.  341 ; 

*  Twopenny  v.  Young,  3  B.  &  C.  208  ;  Anon.  2  Molloy,  505. 

Ex  parte  Pennell,  2  M.,  D.  &  De  G.  273  ;  "  Cilley  v.  Huse,  40  N.  H.  358. 

764 


MERGER.  [§  864. 

when  the  mortgage  is  paid  by  one  who  is  under  no  obligation  to 
pay  it.i  A  mortgagor  who  has  sold  the  mortgaged  property  sub- 
ject to  the  mortgage,  upon  being  compelled  subsequently  to  pay 
the  debt,  is  subrogated  to  the  rights  of  the  moi-tg«gee,  and  may 
require  from  him  an  assignment  of  the  bond  and  mortgage  ;  and 
if  upon  tender  of  the  amount  the  mortgagee  refuses  to  assign,  he 
may  be  compelled  to  do  so  by  action.- 

Neither  will  a  mortgage  be  kept  alive  after  payment,  in  the 
hands  of  one  who  occupies  a  fiduciary  relation  to  the  owners  of 
the  equity  of  redemption,  so  as  to  enable  such  holder  to  use  it  for 
his  individual  advantage  ;  and  although  he  has  himself  an  interest 
in  the  land,  he  will  not  be  allowed,  in  violation  of  a  trust  relation 
to  the  other,  to  cut  off  their  interests  by  foreclosure.^ 

864.  "When  a  mortgage  debt  is  paid  by  one  -who  is  bound 
by  contract  to  pay  it,  an  assignment  of  it  to  him  upon  payment 
operates  as  a  discharge ;  *  and  lie  will  not  be  allowed  to  hold  it 
as  a  subsisting  incumbrance,  as  the  payment  was  in  pursuance  of 
his  agreement,  and  may  be  regarded  as  made  with  the  mortgagor's 
money .^  Under  this  rule  a  mortgagor  is  not  allowed,  after  having 
obtained  a  transfer  of  a  first  mortgage  made  by  himself,  to  set  it 
up  against  another  mortgage  of  later  date,  which  he  has  also 
made  ;  and  the  rule  applies  equally  in  case  he  has  obtained  the 
first  mortgage  title  by  purchasing  at  a  sale  under  the  power.** 

And  so,  if  one  who  has  conveyed  land  by  a  deed  containing 
covenants  of  warranty  afterwards  purchases  a  mortgage  upon  the 
property  which  existed  at  the  time  of  his  conveyance,  there  is  a 
merger  of  it.' 

If  the  owner  of  lands  acquires  a  tax  title  to  the  same  under  a 
sale  made  when  he  was  the  owner  of  the  property,  his  purchase 
of  the  tax  title  is  a  redemption  from  the  tax  sale,  and  a  deed  to 
him  of  the  tax  title  transfers  no  new  title  to  him,  but  this  title 
merges  in  his  title  to  the  lands.^ 

Where  by  the  terms  of  an  ante-nujjtial  contract  a  wife  took  an 

1  §  1087.  worth  v.  Williams,  100  Mass.  126;  ]{iirii- 

-  Johnson  v.  Zinlc,  51  N.  Y.  333.  ham  r.  Dorr,  72  Mo.  198  ;  Smith  r.  Lowry 

■<  Knolls  )•.  Barnliurt,  71  N.  Y.  474.  (Ind.),  15  N.  E.  liep.  17. 

*  Lappeu  V.  Gill,  I2'J  Mass.  34 'J ;  Kycr  «  Otter  v.  Vaiix,  2  K.  &  J.  650;  6'.  C. 

r.  Gass,    130    Masi.    227;    Androscoggin  f,  Do  G.,  M.  &  G.  C;J8  ;  Johnson  r.  Web- 

Sav.  Bank  v.  McKenney,  78  Me.  442.  nur,  4  l)e  G  ,  M.  &  G.  474. 

(i  Brown    v.  Lapham,  3  Gush.  (Mass.)  ^  Micklos  v.   Dillaye,  15  Hun  (N    Y.), 

551,   5.54;    Strong   '•.   Converse,  8    Allen  29C. 

(Mass.),  557,  55'J;  Butler  v.  Seward,   10  »  Gould  <•.  Day,  04  U.  S.  405. 

lb.  460;  Bcmis  v.  Call,  10  IIj.  .'^.12;  Wads- 

706 


§  865.]  MERGER   AND   SUBROGATION. 

estate  in  fee  in  part  of  her  husband's  land,  in  lieu  of  dower,  and, 
after  marriage,  he  satisfied  a  mortgage  upon  such  lands  which 
was  in  existence  at  the  time  of  the  ante-nuptial  contract,  with 
money  raised  by  a  new  mortgage,  the  wife's  estate  was  held  to 
be  discharged  from  the  first  mortgage,  and  to  be  superior  to  the 
second.^ 

865.  The  purchaser  of  land  subject  to  a  mortgage  which 
he  has  assumed  and  agreed  to  pay,  upon  taking  an  assignment 
of  it,  thereby  pays  and  satisfies  it  so  far  as  his  grantor  is  con- 
cerned ;  2  and  as  to  his  grantor,  the  mortgage  is  paid  and  sat- 
isfied when  such  purchaser  has  paid  the  mortgage  and  had  an 
assignment  of  it  made  to  a  third  person.  Not  only  is  the  mort- 
gage extinguished  when  it  is  paid  by  a  purchaser  who  has  as- 
sumed the  payment  of  it,  but  also  when  it  is  paid  by  his  grantee, 
or  by  any  grantee  after  successive  conveyances.^  The  premises 
in  such  case  become  the  primary  fund  for  the  payment  of  the 
mortgage,  and  whoever  acquires  that  fund  and  the  mortgage  also 
must  be  regarded  as  having  applied  the  fund  to  the  payment  of 
the  mortgage.^  If  one  purchases  land  subject  to  a  mortgage 
"which  he  assumes  and  afterwards  pays,  he  is  not  entitled  to  sub- 
rogation to  the  rights  of  the  mortgagee  as  against  a  judgment 
creditor  of  the  mortgagor  whose  judgment  had  been  rendered  at 
the  time  the  land  was  purchased.^ 

If  the  owner  of  the  equity  of  redemption  of  land,  who  has  as- 
sumed the  pajanent  of  an  existing  mortgage,  purchases  at  a  sale 
made  in  pursuance  of  a  power,  and  the  sale  is  invalid  on  ac- 
count of  the  fraud  of  the  mortgagee  participated  in  by  the  pur- 
chaser, he  cannot  as  against  a  subsequent  mortgagee  set  up  title 
through  the  prior  mortgage,  but  this  will  be  deemed  to  have 
merged.^ 

But  the  taking  of  a  deed  containing  a  recital  that  the  prem- 
ises are  "subject  to  a  mortgage  "  does  not  import  a  promise  on 
the  part  of  the  purchaser  to   pay  the  mortgage ;  and  does  not 

1  Anglade  t'.  St.  Avit,  67  Mo.  434.  400;  Thompson   v.  Heywood,   129  Mass. 

-  Frey   r.   Vanderhoof,    1.5   "Wis.    .397;  401. 

Mickles  v.  Townsend,  18  N,  Y.  57.5;  Rus-  ^  pjich  v.  Cotheal,  2  Sandf.  (N.  Y.)  Ch. 

sell  V.  Pistor,  7  N.   Y.  171  ;  Coles  v.  Ap-  29. 

pleby,  22  Hun  (N.  Y.),    72  ;  Burnham  v.  *  Lilly  v.  Palmer,  51  111.  331. 

Dorr,  72  Me.  198;  Willson  v.  Burton,  .52  5  Goodyear  i-.  Goodyear  (Iowa),  33  N. 

Vt.  394  ;  Winans  v.  Wilkie,  41  Mich.  264  ;  W.   Rep.    142  ;    Traders'    Nat.   Bank  v. 

Hill  V.  Minor,  79  Ind.  48 ;  Bier  v.  Smith,  Lawrence  Manuf.  Co.  (N.  C)  3  S.  E.  Rep. 

25  W.  Va.  830  ;  Putnam  v.  Collamore,  120  363. 

Mass.  454;  Tucker  v.  Crowley,  127  Mass.  ^  Thompson  i;.  Hevwood,  su/jra. 

766 


MERGER.  [§  866. 

prevent  bis  holding  the  mortgage  as  a  subsisting  title  upon  a  sub- 
sequent assignment  of  it  to  him.^  For  stronger  reasons  one  who 
has  bought  subject  to  a  mortgage  may  properly  induce  a  friend 
to  purchase  the  mortgage.  It  makes  no  difference  to  the  mort- 
gagor whether  one  person  or  another  owns  it,  and  it  does  not 
change  his  relations  to  the  purchaser  or  the  mortgage  creditor.^ 

But  in  Pennsylvania  it  is  held  that  if  one  buys  land  at  an  ex- 
ecution sale  subject  to  a  mortgage,  and  subsequently  pays  off 
the  mortgage,  the  mortgage  debt  is  thereby  extinguished,  and  he 
cannot  take  an  assignment  of  the  mortgage  and  enforce  it  against 
the  mortgagor.^ 

866.  This  principle  is  of  frequent  application  in  determin- 
ing the  right  of  the  mortgagor's  widow  to  dower.  The  widow 
is  clearly  dowable  in  an  equity  of  redemption  ;  but  if  she  has  re- 
linquished her  right  of  dower  in  the  mortgage,  she  cannot  recover 
it  against  the  mortgagee  or  his  assignee  in  possession,  unless  the 
mortgage  has  been  assigned  to  one  who  is  under  obligation  to 
pay  and  discharge  the  mortgage.'*  Her  dower  is  subject  to  the 
mortgage,  and  if  this  be  redeemed  by  the  heir  or  purchaser,  or 
by  any  one  interested  in  the  estate  who  is  not  bound  to  pay  the 
debt,  to  avail  herself  of  this  right,  she  must  contribute  her  pro- 
portion of  the  charge,  according  to  the  value  of  her  interest.^ 

If,  however,  the  purchaser  of  the  equity  of  redemption  from 
the  original  mortgagor  has  assumed  and  agreed  to  pay  the  mort- 
gage, and  the  wife  of  the  mortgagor  lias  released  her  dower  in 
the  mortgage  but  not  in  the  deed  to  the  purchaser,  he  cannot, 
upon  taking  an  assignment  of  the  mortgage,  set  it  up  against  the 
claim  of  the  widow  of  the  mortgagor  for  her  dower,  but  the  as- 
signment will  be  held  to  operate  as  a  discharge,  and  the  widow 
will  be  entitled  to  her  dower  in  the  whole  estate.^ 

Where  a  mortgagee  who  has  entered  for  foreclosure  conveys 
his  interest  by  quitclaim  deed  to  one  who  has  purchased  the 
equity  of  redemption  from  the  mortgagor's  assignee  in  insol- 
vency, the  mortgage  is  not  extinguished  so  as  to  let  in  a  right  of 

1  Strong  »;.  Converse,  8  Allen  (Mass.),  *  Furwell  r.  Cutting,  8  AlKii  (Muss.)- 
557  ;  Pike  v.  Goodnow,  12  II).  472  ;  Camp-     211. 

bell  V.  Kniglits,  24  Me.  332;  Tucker  i-.  ^  Norris  v.  Morrison,  45  N.  II.  490; 
Crowley,  127  Mass.  400  ;  Mat/.en  r.  Shaef-  Ilartshorno  v.  Ilart.sliornc,  2  N.  J.  Kq.  (I 
fer,  65  Cal.  81.     See  §  748.  Or.)  349  ;  Uusflcll  v.  Austin,  1    I'aigo  (N 

■^  Hall  t'.  Harrington,  11  .Midi.  HO.  Y.),   192;   McMalion  v.    Uusscll.  17   Fla. 

3  Dollar  Savings  Bank  i-.  Hums,  87  I'a.     098;  Co.x  v.  Garst,  105  111.  342. 
St,  491.  «  McCabc  v.   Swap,   14    Allen  (Mass.), 

188. 

707 


§  866.]  MERGER   AND   SUBROGATION. 

dower  in  the  mortgagor's  widow  who  released  dower  in  the  mort- 
gage.i 

This  rule  is  fully  approved  in  a  recent  case  in  Missouri,  where 
a  purchaser  of  an  equity  of  redemption  from  an  assignee  in  in- 
solvency of  the  mortgagor,  without  taking  an  assignment  of  the 
mortgage,  or  making  any  attempt  to  keep  it  alive,  paid  it  off. 
Although  the  wife  of  the  mortgagor  relinquished  dower  in  the 
mortgage,  yet,  the  mortgage  having  been  cancelled  and  dis- 
charged without  any  mistake  on  the  part  of  purchaser  in  doing 
so,  the  wife,  upon  the  death  of  her  husband,  was  held  to  be  enti- 
tled to  dower  in  the  whole  estate.^ 

But  where  the  assignee  in  insolvency  of  the  mortgagor  pays 
the  mortgage,  in  which  the  wife  had  released  dower,  out  of  the 
assets  of  the  estate,  and  takes  an  assignment  of  the  mortgage  to 
himself,  it  remains  an  outstanding  title  against  Avhich  the  widow 
of  the  insolvent  cannot  have  dower.-^  So  if  the  mortgage  be  dis- 
charged by  the  heir  or  other  person  claiming  under  the  husband, 
with  no  obligation  imposed  upon  him  to  pay  the  mortgage,  the 
widow  takes  her  dower  subject  to  the  incumbrance  of  the  mort- 
gage debt.  And  even  where  the  purchaser  of  an  equity  of  re- 
demption from  the  administrator  of  an  insolvent  estate  gave  a 
bond  obligating  himself  to  pay  the  mortgage  debt,  it  was  held  that 
he  might  set  up  the  mortgage  title  against  the  widow,  because 
the  obligation  to  pay  the  debt  is  in  such  case  to  be  regarded 
merely  as  a  personal  contract  of  indemnity,  in  which  the  widow 
had  no  interest."^ 

But  if  an  heir,  for  the  purpose  of  preventing  a  sale  of  the  real 
estate  of  the  deceased  for  the  payment  of  debts,  gives  a  bond  for 
their  payment  and  takes  an  assignment  of  a  mortgage  upon  part 
of  the  real  estate  to  himself,  the  bond  may  be  regarded  as  supply- 
ing the  place  of  assets,  which  would  otherwise  Jiave  been  derived 
from  a  sale  of  the  lands,  and  would  have  left  the  rights  of  dower 
and  homestead  unaffected  ;  and  it  is  suggested  that  in  such  case 
the  assignee  should  not  be  allowed  to  defeat  these  rights  by  hold- 
ing the  mortgage  as  an  outstanding  title  and  foreclosing  it ;  and 
it  is  held  that  at  any  rate  the  heir  could  not  do  this  after  the 
estates  of  dower  and  homestead  had  in  fact  been  set  out  to  the 
widow,  before  the  payment  of  the  mortgage  debt,  with  his  assent.^ 

1  Savage  v.  Hall,  12  Gray  (Mass.),  See,  however,  Atkinson  v.  Stewart,  46 
363.  Mo.  510  ;  Jones  v.  Bragg,  33  Mo.  337. 

2  Atkinson  v.  Angert,  46  Mo.  515.  •*  Gibson   v.   Creliore,  3    Pick.  (Mass.) 

3  Sargeant   v.  Fuller,  105    Mass.    119  475;  S.  C.  5  lb.  146. 

768  '  King  V-  King,  100  Mass.  224. 


MERGER.  [§§  867,  868. 

867.  Payment  by  one  who  has  warranted  against  incum- 
brances. —  One  who  has  executed  two  mortcra^es  to  different 
persons  upon  the  same  land,  with  covenants  of  warrantj^  upon  re- 
deeming the  first  mortgage,  in  fact  pays  his  own  debt,  and  thereby 
discharges  the  mortgage,  and  cannot  set  it  up  as  the  ground  of  a 
chiim  to  redeem  tiie  second  after  that  has  been  foreclosed.  The 
payment  of  the  mortgage  when  it  was  his  duty  to  pay  it  gives  him 
no  right  to  be  regarded  as  an  equitable  assignee  of  it,  and  to  be 
subrogated  to  the  rights  of  the  first  mortgagee.  The  covenants 
of  warranty  in  the  second  mortgage  also  estop  him  from  setting 
up  the  first  moitgage  against  the  second  mortgagee.^ 

Upon  this  principle,  also,  when  one  who  has  conveyed  land 
with  warranty,  which  is  subject  to  a  mortgage,  whether  made  by 
him  or  by  another,  afterwards  takes  an  assignment  of  such  mort- 
gage, he  holds  it  for  the  benefit  of  the  person  to  whom  he  has 
granted  the  land,  and  the  mortgage  is  in  fact  discharged  by  com- 
ing into  his  hands.  Even  if  he  should  assign  it  to  one  who  in 
good  faith  pays  full  consideration  for  it,  the  purchaser  would  ac- 
quire no  lien  upon  the  land.^ 

When  one  sells  land  by  warranty  a  mortgage  held  by  him  upon 
the  land  at  that  time  is  extinguished,  unless  it  was  understood  by 
the  grantee  that  it  should  be  continued  in  force  for  his  benefit ;  ^ 
but  this  rule,  of  course,  does  not  apply  to  a  mortgage  taken  for 
the  purchase  money  of  a  sale,  although  the  mortgage  bear  an 
earlier  date  than  the  deed  of  sqile.*  In  like  manner,  if  the  owner 
mortgage  the  estate  without  noticing  the  mortgage  title  held  by 
him,  it  is  regarded  as  merged.^ 

868.  An  assignment  to  the  owner  of  the  equity  of  redemp- 
tion w^ho  is  not  the  original  mortgagor,  but  a  subsequent  pur- 
chaser, will  not  generally  operate  as  a  discharge  or  merger  of  the 
mortgage,  because  it  is  his  manifest  interest  to  hold  the  two  dif- 
ferent titles  distinct,  if  he  has  any  occasion  for  protection  against- 
any  other  intervening  interest  or  title.^     In  such  case  it  is  imuia- 

'  Butler   V.    Seward,  10  Allen  (Masp.),  ■''  Tyler  v.  Lake,  4  Sim.  ."J.'il. 

4fi6.     Otherwise  under  a  quitclaim   deed.  "  Savage  r.  Hall,  12  Ciray  (Mass  ),  ."{G.} ; 

C'omstock  V.  Smith,  1.3  Pick.  (.Mass.)  IIG  ;  Grovor  i-.  Thatcher,  4  Ih.  520;   Wuuiiii  r. 

Trull  V.  Kn.stman,  H  Mit.  (.Ma.ss.)  121.  Iloojicr,  2   III.   141,   14.0  ;   Loud  r.  Lane,  8 

-  Mickles  v.  Townsend,   18  N.  Y.  57.');  Met.    (.\Ia.ss.)    517;    I'iits  v.    Aldrich,    11 

Collins  »;.  Torry,  7  Johns.  (N.  Y.)  278.  Allen    (.Mass.),    ai» ;     Kycr    v.    (Jass,    130 

^  Stoddard  r.  Kotton,  5   Hosw.  (N.  Y.)  Mahh.  227;  Duffy  v.  Mc(Juino^«,  I.J  K.  \. 

■'178.  5'J5;l)e  Lisle  v.  Herbs  (N.  Y.J,  25  llun, 

*  FiHh  r.  Gordon,  10  Vt.  2S8.  485. 

VOL.  I.                         4!i  'JQQ 


§  869.]  MERGER   AND   SUBROGATION. 

terial  whether  the  transfer  be  effected  by  an  assignment  in  th<^ 
usual  form,  or  by  a  deed  of  release  or  quitclaim.  If  such  pur- 
chaser of  the  equity  of  redemption  obtains  an  assignment  of  the 
mortgage  pending  a  bill  against  the  mortgagor  for  a  foreclosure, 
he  may,  with  the  consent  of  the  mortgagee,  prosecute  the  suit  to 
a  decree  of  foreclosure  and  sale,  for  the  purpose  of  more  effectu- 
ally securing  his  title. ^  The  rule  in  regard  to  merger  is  the  same 
whether  the  owner  of  the  equity  of  redemption  obtains  an  assign- 
ment or  release  of  the  whole  mortgage  lien,  or  a  release  of  the 
mortgagor's  interest  in  a  part  of  the  mortgaged  property  belong- 
ing to  such  ownei'.^  Still  less  is  there  a  merger  where  a  mortgage 
is  purchased  by  one  partner  and  the  equity  of  redemption  by  the 
other,  both  purchases  being  made  out  of  the  partnership  funds  and 
for  their  joint  benefit ;  for  the  taking  of  the  estates  in  different 
names  showed  an  intention  to  keep  them  distinct.^ 

Some  of  the  earlier  cases  in  England  seemed  to  incline  strongly 
against  allowing  a  purchaser  of  the  equity  of  redemption  to  keep 
up  a  mortgage  charge  upon  the  property  for  his  own  benefit,  and 
to  defeat  subsequent  incumbrances  ;  but  the  later  cases  hold  that 
such  purchaser,  having  paid  off  a  first  mortgage,  may,  when  he 
has  shown  an  intention  of  doing  so,  stand  in  the  first  mortgagee's 
place  against  the  next  incumbrancer.* 

869.  The  rule  that  payment  by  a  mortgagor  extinguishes 
the  mortgage  is  founded  upon  the  reason  that  there  could  gen- 
erally be  no  advantage  to  him  in  keeping  on  foot  his  own  mort- 
gage against  his  own  estate.  But  no  such  reason  exists  when  a 
purchaser  pays  an  incumbrance  existing  before  the  time  of  his 
purchase.  Frequently  there  is  an  advantage  in  keeping  the  mort- 
gage on  foot  as  a  security  ;  and  whenever  there  is  such  advantage 
the  purchaser  is  entitled  to  hold  it  as  a  separate  title.° 

If  a  mortgage  be  paid  by  a  person  not  personally  liable,  for  the 
purpose  of  protecting  his  estate,  he  may  have  the  benefit  of  it  in 
aid  of  his  title,  without  any  assignment  to  him,  or  express  proof 
of  an  intention  on  his  part  to  keep  it  alive.^     And  even  if  the 

1  Branch  Bank  at  Mobile  v.   Hunt,  8  Millspaugh  v.  McBride,  7  Paige  (N.  Y.), 

Ala.  876.  509  ;  Skeel  v.  Spraker,  8  Paige  (N.  Y.), 

-  Duffy  V.  McGuiness,  13  R.  I.  595.  182  ;  Pool  v.  Hathaway,  22  Me.  85  ;  Hatch 

3  Scott  y.  Webster,  44  Wis.  185;  ,6'.  C.  v.   Kimball,    16   Me.    146;  Thompson   ;■. 

6  Reporter,  287 ;  50  Wis.  53.  Chandler,   7  Me.  377;  Carll  v.  Butman, 

*  Watts  V.  Symes,  1   De  G.,  M.  &  G.  lb.  102;  Duffy  v.  McGuiness,  supra. 
240,  reviewing  the  earlier  cases.  ^  Walker  v.  King,  44  Vt.  601  ;  S.  C.  45 

5  Abbott  V.    Kasson,   72   Pa.   St.   183;  Vt.  525 ;  Wheeler  y.  Willard,  44  Vt.  640  ; 
770 


MERGER.  [§  870. 

mortgage  be  discharged  of  record  without  consideration,  but  for 
the  sole  benefit  of  the  ovvr>er  of  the  equity,  the  mortgage  is  not 
extinguished  as  to  a  subsequent  mortgagee  ;  but  he  must  redeem 
this  mortgage  from  such  owner  before  he  will  be  allowed  to  fore- 
close his  own  mortgage.^  If,  however,  there  be  any  obligation  on 
his  part  to  pay  the  debt,  he  cannot  stand  upon  the  mortgage  paid 
to  help  his  title  as  against  the  party  whom  he  is  bound  to  protect 
against  the  mortgage.'^ 

If  the  incumbrance  be  paid  by  a  mere  volunteer  or  stranger  to 
the  title,  having  no  interest  to  make  the  payment  for  his  own  pro- 
tection, the  payment  is  not  compulsory,  and  the  party  paying  can- 
not be  treated  as  an  equitable  assignee  of  the  mortgage.^ 

870.  The  acquisition  of  the  equity  of  redemption  by  the 
mortgagee  is  looked  upon  with  suspicion  by  the  courts,  as  else- 
where explained,  because  he  has,  by  reason  of  his  position  as  cred- 
itor, a  certain  advantage  over  the  mortgagor  which  may  be  abased, 
yet  if  the  purchase  be  free  from  fraud,  and  for  an  adequate  price, 
it  is  sustained. 4  This  objection,  however,  does  not  apply  witli 
equal  force  when  he  purchases  the  equity  of  redemption  from  one 
who  has  purchased  it  of  the  mortgagor,  or  when  he  purchases  at 
an  execution  sale  had  at  the  instance  of  a  stranger.  The  mort- 
gagee, while  he  is  not  generally  permitted  to  sell  the  equity  of  re_ 
demption  under  an  execution  obtained  upon  the  mortgage  debt, 
may  generally  do  so  under  an  execution  for  any  other  debt  to  him, 
and  may  purchase  at  the  sale.  But  the  result  of  his  acquiring 
the  equity  of  redemption  in  either  way  is  generally  to  merge  his 
mortgage  title  in  it,  unless  there  be  some  reason  why  he  should 
keep  the  titles  separate.^ 

Where  a  purchaser  has  assumed  the  payment  of  a  mortgage, 
and  has  subsequently  conveyed  the  land  to  the  mortgagee  by  a 
deed  reciting  that  the  conveyance  is  subject  to  the  mortgage, 
"  which  mortgage  forms  part  of  the  above  consideration,"  the 
mortgage  will  be  regarded  as  paid  and  discharged,  so  that  the 
mortgagee  cannot  maintain  an  action  against  the  mortgagor  upon 

Warren    v.    Wiirren,    .30    Vt.    .030  ;    Mc-  Co.  22  Vt.  274  ;  Munwaring  »'■  Powell,  40 

Mfthon   i;.   liiisscll,  17  Fla.  698;  Hyer  v.  Midi.  371. 

Gass,  1.30  MasB.  227  ;  IlindH  v.  Ballou,  44  "  Downer  v.  Wilson,  .'!3  Vt.  1. 

N.  II.  fil9.  *  Sec,  also,  Barnes  r.  Hrown,  71    N.  C 

I  Spauldint;    >:    Crane,    40     Vt.    202  ;  507  ;  West  i-.  Ueed,  .'i.'i  III.  242  ;  §  1042. 

youn(,' w.  Hill,  31  N.  .1.  Ivj.  42'J.  ''  HarneH  v.   Hrown,  si//<;fi;  Wciner  v. 

•2  McUaniels  v.  Flower  Brook  Manuf.  lleini/,,  17  111.  a.'i'.t. 

771 


§  870.]  MERGER  AND  SUBROGATION. 

the  mortgage  note,  although  the  value  of  the  land  at  the  time  of 
the  conveyance  be  less  than  the  debt  secured. ^ 

When  a  mortgagor  pays  his  mortgage  debt,  his  object  is  gen- 
erally to  fulfil  the  personal  obligation  of  payment,  and  relieve  his 
estate  of  the  incumbrance. 

When  a  mortgagee  acquires  the  equity  of  redemption  it  is  gen- 
erally because  he  wants  a  settlement,  and  can  get  nothing  more 
than  the  full  control  of  the  property,  or  else  because  he  has  use  for 
the  mortgaged  land,  and  wants  an  absolute  title  to  it.  In  either 
case  his  primary  object  is  to  perfect  the  title  in  himself.  It  must 
follow  therefore  that  while,  as  a  general  rule,  the  mortgagor's  in- 
tention is  to  extinguish  the  mortgage,  the  mortgagee  on  the  other 
hand  almost  always  desires  to  hold  the  title  he  has,  and  simply  to 
acquire  the  title  which  he  has  not.  Hence  it  will  be  noticed,  in 
examining  these  two  classes  of  cases,  that  a  merger  of  the  estates 
occurs  much  more  frequently  in  the  mortgagor  than  in  the  mort- 
gagee, and  that  the  expressions  against  a  merger  are  much  more 
decided  when  the  estates  unite  in  the  latter  than  when  they  unite 
in  the  former ;  the  different  relations  in  which  the  two  persons 
stand  to  the  debt  and  to  the  property  account  for  this  ;  their  in- 
tentions are  generally  different. 

There  is,  generally,  an  advantage  to  the  mortgagee  in  preserv- 
ing his  mortgage  title  ;  and  when  there  is,  no  merger  takes  place. 
It  is  a  general  rule,  therefore,  that  the  mortgagee's  acquisition  of 
the  equity  of  redemption  does  not  merge  his  legal  estate  as  mort- 
gagee so  as  to  prevent  his  setting  up  his  mortgage  to  defeat  an 
intermediate  title,  unless  such  appears  to  have  been  the  intention 
of  the  parties  and  justice  requires  it;^  and  such  intention  will  not 

1  Dictason  v.  Williams,  129  Mass.  182.  Me.  260.  Connecticut:  Mallory  v.  Hitch- 
This  case,  though  treated  in  the  decision  cock,  29  Conn.  127 ;  Delaware  &  Hudson 
as  one  chiefly  of  merger,  presents  more  Canal  Co.  i;.  Bonnell,  46  Conn.  9;  Good- 
strongly  the  issues  of  estoppel  and  pay-  win  v.  Kcney,  47  Conn.  486.  California : 
meut.  See,  also,  Kneeland  r.  Moore,  138  Brooks  v.  Rice,  56  Cal.  428.  Iowa:  Lin- 
Mass.  198.  scott  V.  Lamart,  46  Iowa,  312;  Wicker- 

2  Forbes  v.  Moffatt,  18  Ves.  384  a.  sham  v.  Reeves,  1  Iowa,  413.  Georgia: 
New  Jersey:  New  Jersey  Ins.  Co.  v.  Knowles  v.  Lawton,  18  Ga.  476.  Ohio: 
Meeker,  40  N.  J.  L.  18 ;  Mulford  v.  Peter-  Fithian  v.  Corwin,  17  Ohio  St.  118.  Ver- 
son,  35  N.  J.  L.  127;  Duncan  v.  Smith,  mont :  Walker  v.  Baxter,  26  Vt.  710; 
31  N.  J.  L.  325;  Thompson  v.  Boyd,  21  Carpenter  v.  Gleason,  58  Vt.  244;  Slo- 
N.  J.  L.  58 ;  *S.  C.  22  lb.  543  ;  Woodhull  cum  v.  Catlin,  22  Vt.  137.  Illinois  :  Ed- 
t;.  Eeid,  16  N.  J.  L.  128 ;  Andrus  v.  Vree-  gerton  v.  Young,  43  111.  464 ;  Dunphy  v. 
land,  29  N.  J.  Eq.  394;  Clos  v.  Boppe,  23  Riddle,  86  111.  22 ;  Huebscii  v.  Scheel,  81 
N.  J.  Eq.  270;  Hoppock  v.  Ramsey,  28  111.  281;  Richardson  v.  Hockenhiill,  85 
N.  J.  Eq.  13.     Maine:  Freeman  r.  Paul,  3  111.    124;    Lowman    v.   Lowman,    19   III. 

772 


MERGER.  [§  870  a. 

be  presumed  where  the  mortgagee's  interest  requires  that  the  mort- 
gage should  remain  in  force. ^    The  intention  is  a  question  of  fact.'^ 

The  fact  that  the  consideration  expressed  in  the  deed  of  the 
equity  of  redemption  is  greater  than  the  amount  of  the  grantee's 
mortgage  affords  no  evidence  of  an  intent  to  merge  the  mortgage.'^ 
The  fact  that  the  mortgage  remains  uncancelled  of  record,  on  the 
other  hand,  affords  a  presumption  that  such  was  not  the  intent  of 
the  mortgage.*  A  statement  in  a  deed  of  the  equity  of  redemp- 
tion that  the  premises  are  subject  to  tlie  mortgage  shows  an  in- 
tention not  to  extinguish  this.^ 

If  the  mortgagee  has  already  transferred  his  mortgage  as  col- 
lateral security  for  the  payment  of  a  debt  at  the  time  he  pur- 
chased the  equity  of  redemption,  there  can  be  no  pretence  that  a 
merger  takes  place,  for  the  different  estates  in  such  case  do  not 
vest  in  the  same  person.^  Nor  can  there  reasonably  be  any  such 
pretence  when  the  deed  itself  to  the  mortgagee  refers  to  the  mort- 
gage as  a  subsisting  lien,  and  is  expressly  made  subject  to  it.'' 

That  the  mortgagee  afterwards  assigns  the  mortgage  to  another 
is  evidence  of  his  intent  to  keep  the  interests  separate ;  and  it 
does  not  matter  that  this  intent  was  not  declared,  and  did  not 
exist  at  the  time  the  two  interests  became  vested  in  the  mort- 
gagee.^ 

870  a.  There  is  no  merger  as  against  a  pledgor  of  a  mort- 
gage -when  the  pledgee  becomes  the  purchaser  under  a  fore- 
closure sale.  Thus,  if  an  assignee  of  a  mortgage,  holding  the 
assignment  as  collateral  security  for  a  debt  of  the  mortgagee,  fore- 
closes the  mortgage,  and  becomes  the  purchaser  at  the  foreclosure 

App.  481  ;  Rogers  v.  Herron,  92  111.  583;  i  First  Nat.  Bank  v.  Elmore,  52  Iowa, 

JEtna   L.   Ins.  Co.   v.  Corn,  89    111.  170.  541;  iEtna  L.   Ins.   Co.  v.  Corn,  supra; 

Michigan :    Tower   v.    Divine,   37    Mich.  Ilospes  v.  Almstedt,  supra. 

44'} ;  Ann  Arbor  Sav.  Bank  v.  Webb,  56  -  Ann  Arbor   S:iv.  Bank  v.  Webb,  su- 

Mlch.  377.     West  Virginia  :  MeClaskey  t'.  pra. 

O'Brien,  16  \V.  Va.  791,  793.     Alabama:  =i  Iloppock  v.  Ramsey,  28  N.J.  Eq.  41.?. 

Fouche  V.  Swain,  80  Ala.  151.     Missouri :  *   Iloppock  v.  Ramsey,  supra. 

Ilospes    V.  Almstedt,    83  Mo.  473.     Indi-  ■•  A<lin:i  Life   In.s.    Co.  v.  Corn,  89  111. 

ana:  Thomas  »•.  Simmons,  103  Itul.  538  ;  170;  S.  C.   7    Rej.orter,   260;    First   Naf. 

Hat:;;crty  v.  Byrne,  75  Iiid.   499.    South  Bank  v.  Essex,  84  Ind.  144. 

Carolina  :  Trimmier  v.  Vise,  17  S.  C.  499.  »  Campbell  i-.  Veddcr,  1   Abb.  (N.  Y.) 

A    m<irt;,Mgee  lakin;;  a   conveyance  of  App.  l)(!c.  295  ;  Kello^j^  r.   Ames,  41  N. 

the  ecjuity  of  redemption  is  entitled  to  bo  \ .  259,  rcvcr-'^inf^  41    Marb.  218  ;  Wliii(>  r. 

re;;arded  as  a  piircha.ser  for  valtio  wiibin  Hampton,  1.3  Iowa,  259. 

the  meanint;  of  a  statute  rclatin(^  to  the  '  Canipbell  i;.  Vodder,  supni  ,•   Slicldon 

docketing   of  judgments.      McCluskey  c  v.  Edwards,  35  N.  Y.  279. 

O'Brien,  su/>ra.  *  Goodwin  i'.  Kcney,  47  Conn.  48G. 

773 


§  871.]  MERGER   AND   SUBROGATION. 

sale,  lie  will  hold  the  property,  as  he  held  the  mortgage,  subject 
to  reclamation  by  the  assignor  upon  payment  of  his  debt.  The 
doctrine  of  merger  does  not  apply  in  such  case.  The  assignee 
holds  the  mortgage  as  a  pledge.  The  foreclosure  sale  cuts  off  the 
rights  of  the  mortgagor,  but  the  right  of  the  pledgor  survives 
the  foreclosure.  By  the  foreclosure  the  land  is  substituted  for  the 
mortgage ;  and  the  pledgor  has  the  right,  upon  payment  of  the 
debt  which  he  secured  by  the  assignment,  to  reclaim  and  hold 
the  land  as  his  own  property. ^ 

871.  If  a  mortgagee  purchases  the  equity  of  redemption 
and  gives  up  the  mortgage  note,  without  intending  this  to 
operate  as  a  payment,  the  mortgage  not  being  discharged,  there  is 
no  merger  or  extinguishment  of  the  mortgage,  as  against  an  inter- 
vening title,  as,  for  instance,  by  levy,  judgment,  or  conveyance.^ 
The  assignee  of  a  mortgage  covering  two  separate  parcels  of  land, 
having  purchased  one  of  them,  can  collect  only  the  ratable  pro- 
portion from  the  other  ;  ^  and  so  if  the  assignee  of  a  mortgage 
take  a  conveyance  of  the  equity  of  redemption  of  one  half  of  the 
mortgaged  premises  described  as  one  lot,  this  operates  to  extin- 
guish only  a  part  of  the  mortgage  debt,  leaving  the  assignee  at 
liberty  to  foreclose  for  the  residue.*  The  intention  of  the  holder 
of  the  mortgage  at  the  time  of  taking  the  deed  of  the  equity  of 
redemption  is  considered  as  the  controlling  consideration.^  This 
intention  and  the  rights  of  the  parties  may  be  controlled  by  an 
agreement  between  them.*" 

The  fact  that  the  mortgagee  has  assigned  the  notes  secured  by 
the  mortgage,  or  some  of  the  notes,  is  a  sufficient  reason  for  keep- 

1  Jones   on   Pledges,   §  660.      Slee   v.  line  of  decisions,   that  a  mortgagee  who 

Manhattan  Co.  1  Paige  (N.  Y.),  48;  Hoyt  buys  the  mortgaged   property,  otherwise 

V.   Martense,    16   N.  Y.    231  ;   Dalton   v.  than  under  process  of  foreclosure,  extin- 

8mith,  86  N.  Y.  176  ;  Gilbert  v.  Thayer  guishes  the  mortgage   by  merger,  in  the 

(N.  Y.),  10  N.  E.  Rep.  148.  absence  of  satisfactory  proof  that  the  par- 

'^  New  England  Jewelry  Co.  v.  Merriam,  ties  intended  to  keep  the  mortgage  alive. 

2  Allen  (Mass.),  390;  Mulford  v.  Peter-  Bleckley  v.  Branyan,  2  S.  E.  Rep.  319; 

son,  35  N.  J.  L.  127  ;  Walker  v.  Baxter,  Trimmier  v.  Vise,  17  S.  C.  499,  503  ;  Deve- 

26  Vt.  710;  Day  v.   Mooney,  4  Hun  (N.  reux  v.  Taft,  20  S.  C.  555  ;  Agnew  v.  Rail- 

Y.),  134;  Dawson  v.  Thorpe  (La.),  1  So.  road  Co.  24  S.  C.  18  ;  58  Am.  Rep.  237. 
Rep.  686;  Hanlou  v.  Doherty  (Ind.),  9  N.         ^  Colton  v.  Colton,  3   Phil.   (Pa.)  24; 

E.  Kep.  782;  Lowinan  v.  Lowman  (111.),  Trimmier  i;.  Vise,  supra. 
9  N.  E.    Rep.   245;  Temple   v.   Whittier         *  Klock  v.  Cronkhite,   1   Hill  (N.   Y.), 

(111.),  7  N.  E.   Rep.  642;  Smith  v.  Swan  107;  Trimmier  r.  Vise,  Si//)ra. 
(Iowa),  29  N.  W.  Rep.  402 ;  Pike  v.  Glea-         ^  shaver  v.  Williams,  87  111.  469. 
son,  GO  Iowa,  150.  c  Savings  Bank  v.  Grant,  41  Mich.  101. 

In  South  Carolina  it  is  settled  by  a  long 

774 


MERGER.  [§§  872,  873. 

iiig  the  mortgage  alive  after  the  mortgagee  lias  acquired  the 
equity  of  redemption.  In  such  case  there  is  no  such  coalescing 
of  the  two  titles  in  the  same  person  as  will  operate  as  a  merger, 
for  the  mortgagee  holds  the  mortfjage  after  the  assignment  of  the 
notes,  not  in  his  own  right,  but  in  trust  for  the  assignees.^ 

872.  Purchasers  cannot  rely  upon  the  record,  as  showing 
merger,  inasmuch  as  merger  generally  takes  place  or  not  ac- 
cording to  the  actual  or  presumed  intention  of  the  mortgagee. 
They  must  go  beyond  this,  and  ascertain  whether  there  has  been 
a  merger  in  fact ;  and  they  act  at  their  own  peril  if  they  do  not 
require  their  grantor  to  pioduoe  the  mortgage  and  note  supposed 
to  be  merged,  and  discharge  the  mortgage  of  record,  or  show 
that  it  constitutes  a  part  of  the  title  to  the  estate.^  If  there  has 
been  no  merger,  and  the  mortgage  title  remains  as  a  separate  in- 
terest, it  is,  of  course,  essential  for  the  purchaser  to  purchase  this 
title  as  well  as  the  equity  of  redemption  ;  but,  as  has  elsewhere 
been  shown,  one  who  bilys  a  mortgage  without  requiring  the  de- 
livery of  the  mortgage  note  or  bond  is  chargeable  with  notice  that 
it  has  been  assigned  to  some  one  else  ;  he  is  not  a  purchaser  in 
good  faith,  but  is  chargeable  with  knowledge  of  fraud.  There- 
fore, although  he  may  purchase  from  one  who  by  the  records  ap- 
pears to  be  the  owner  of  the  entire  estate,  holding  the  equity  of 
redemption  from  one  source  and  the  mortgage  from  another,  and 
although  he  takes  a  conveyance  with  full  covenants  of  warranty, 
it  may  turn  out  that  some  other  person  has  a  valid  title  to  the 
mortgage." 

873.  Such  acquisition  may  be  regarded  as  an  extinguish- 
ment of  the  equity  rather  than  a  merger  of  the  mortgage. 
This  was  the  view  taken  by  Mr.  Justice  Story  in  a  case  before  him 
in  the  United  States  Circuit  Court.*  "As  to  the  merger,"  he 
said,  "  it  is  clear  that  there  can  be  no  such  operation  as  the  argu- 
ment supposes.  At  law,  by  the  mortgage,  a  conditional  estate  in 
fee  simple  passed  to  the  mortgagee  ;  and  the  only  operation  of 
the  conveyance  of  the  owner  would  be  to  extinguish  the  equity  of 

'   Iiitcriiatioiiiil    Hank    r.   Wilshire,    108  Saw^cT,  .'l.'JC,  qiioiint;  iin>l   appiovin;;  llie 

111.  143.  above;  S.  V.  O  lb.  52.     Sec  §  474. 

-  Aiken  v.  Milwaukee  &  St.  Paul  K.  R.         •'  §§  474,  961 ;    I'lirdy   v.   llmitington, 

Co.  37  Wi.s.  4G'J  ;  .Moit^aii  v.  Ilamirictt,  34  supra;  Miller  v.  I.iiidMy,  I'.l  lliiii  (N.  V.), 

Wis.  512;    Worcester  Nat.  Hank  v.  (Jlicc.  207. 

iiey,  87  III.  002;  I'linly  v.  lliimiii;;lori,  42         ■''  Dexter  v.  Iliirri.s,  2   Mason,  5.11  ;  and 

N.  Y.  334  ;  Oregon  Trust  Co.  v.  Sliaw,  0  hee  Staiitmis  v.  'riioni|)M)n,  4'J  N.  II.  272  ; 

Colin  V.  Huffman,  45  Ark.  37G. 

775 


§  873.]  MERGER   AND   SUBROGATION. 

redemption,  and  thus  to  remove  the  condition.  If  that  convey- 
ance was  good,  it  had  the  effect  not  to  enlarge  the  estate,  but  to 
extinguish  a  right.  It  was  not  the  drowning  of  a  lesser  in  a 
greater  estate,  for  the  estate  was  already  a  fee  simple  ;  but  it  was 
an  extinguishment  of  the  condition  or  equity." 

Of  course  this  doctrine  would  not  be  held  where  a  mortgage  is 
regarded,  not  as  an  estate  in  fee,  but  merely  as  a  lien,  the  fee  and 
general  ownership  remaining  in  the  mortgagor  ;  but  the  lesser 
interest  would  merge  in  the  greater.  Thus,  in  South  Carolina, 
where  a  mortgage  is  simply  a  lien  and  not  a  conveyance  of  any 
estate  whatever,  a  release  of  the  equity  of  redemption  to  the 
mortgagee  does  not,  in  the  absence  of  satisfactory  proof  of  an 
intention  to  keep  the  mortgage  open,  operate  to  put  the  title  in 
the  mortgagee  as  of  the  date  of  the  mortgage,  so  as  to  cut  out  an 
intervening  judgment  against  the  mortgagor.  If  the  mortgagee 
accepts  a  conveyance  of  the  mortgaged  land  from  the  mortgagor 
as  payment  of  the  mortgage  debt,  the  mortgage  is  extinguished, 
and  is  no  longer  a  lien  upon  the  land.  The  fact  that  the  convey- 
ance proves  to  be  valueless  does  not  affect  its  operation.  The 
conveyance  operating  as  payment  of  the  mortgage  debt,  the  sub- 
sequent judgment  becomes  the  prior  lien.^  The  only  way  in 
which  a  mortgagee,  who  has  purchased  the  mortgaged  property 
from  the  mortgagor,  can  preserve  his  mortgage  as  a  subsisting  lien 
to  protect  him  against  intervening  liens,  incumbrances,  or  claims 
of  dower,  or  the  like,  is  to  expressly  provide  in  the  instrument  of 
purchase  that  the  conveyance  shall  not  operate  to  let  in  such  in- 
tervening claims. 2 

Even  when  the  parties  have  undertaken  to  discharge  the  mort- 
gage upon  the  uniting  of  the  estates  of  the  mortgagor  and  mort- 
gagee in  the  latter,  it  will  still  be  upheld  as  a  source  of  title  when- 
ever it  is  for  his  interest,  by  reason  of  some  intervening  title  or 
other  cause,  that  it  should  not  be  regarded  as  merged.  It  is  pre- 
sumed, as  matter  of  law,  that  the  party  must  have  intended  to 
keep  on  foot  his  mortgage  title,  when  it  was  essential  to  his  secu- 
rity against  an  intervening  title,  or  for  other  purposes  of  secu- 
rity ;  and  this  presumption  applies  although  the  parties,  through 
ignorance  of  such  intervening  title,  or  thi'ough  inadvertence,  have 
actually  discharged  the    mortgage   and  cancelled  the  notes,  and 

1  Navassa  Guano  Co.  v.  Richardson  (S.  "^  Agnew  v.  Railroad  Co.  24  S.  C.  18  ; 
C),  2  S.  E.  Rep.  307  ;  Agnew  v.  Ren-  Bleckley  v.  Branyan,  2  S.  E.  Rep.  319  ; 
wick  (S.  C),  4  S.  E.  Rep.  223,  Agnew  v.  Renwick,  supra. 

776 


MERGER.  [§  873. 

really  intended  to  extinguish  theni.^  The  circumstances  of  the 
case  must,  however,  be  such  that  no  injustice  will  be  done  to  any 
one  else,  as  where  the  mortgagee  has  taken  a  conversance  of  the 
property  in  satisfaction  of  the  debt,  and  though  he  has  discharged 
his  mortgage,  he  has  done  nothing  else  to  preclude  the  supposi- 
tion that  he  intended  to  take  the  property  in  satisfaction  of  the 
debt.2 

It  may,  therefore,  be  deduced  from  the  authorities  as  a  general 
rule,  that  when  the  mortgagee  acquires  the  equity  of  redemption 
in  whatever  "way,  and  vrliatever  he  does  with  his  mortgage,  he 
will  be  regarded  as  holding  the  legal  and  equitable  titles  sepa- 
rately, if  his  interest  requires  this  severance.'^  The  law  presumes 
the  intention  to  be  in  accordance  with  his  real  interest,  whatever 
he  may  at  the  time  have  seemed  to  intend.* 

Even  if  a  mortgagee,  in  taking  a  conveyance  of  the  mortgaged 
property  in  satisfaction  of  the  mortgage  debt,  stipulates  that  he 
will  procure  the  release  of  the  property  from  a  certain  lien  junior 
to  his  mortgage,  he  is  held  not  to  bind  himself  to  pay  such  junior 
lien,  nor  to  render  such  lien  superior  to  his  mortgage,  but  simply 
to  release  the  grantor  from  any  obligation  to  remove  it.^ 

Where  a  purchaser  of  the  equity  of  redemption  conveyed  the 
land  by  warranty  deed  to  the  mortgagee,  but  did  not  take  up  the 
original  notes  or  procure  a  discharge,  but  on  the  other  hand  took 
a  bond  for  a  conveyance  of  the  land  upon  the  payment  of  the 
original  notes  within  a  limited  time,  it  was  held  that  the  mort- 
gage was  not  discharged,  nor  was  an  absolute  title  vested  in  the 
mortgagee  subject  only  to  the  stipulations  of  the  bond  ;  but  that 
the  transaction  was  merely  a  reaflfirming  of  the  mortgage,  with  an 
extension  of  the  time  of  payment.^ 

1  §  971  ;  Young  v.   Hill,  31  N.  J.  Kq.  Davis,  53  Iowa,  CM;  First  Nat.  Bank  c 

429  ;  Stantons  v.  Thompson,  49  N.  II.  27L',  Es.sex,  84  Ind.  144. 

per  Bellows,  C.  J. ;  Buchanan  i'.  Balkuni,  *  Temple  v.  Whitticr  (111.),  7  N.  E.  Uo]). 

60  N.    II.  406;  Ilanlon   r.   Doherty,  109  642;  Sniitii  t>.  Swan,  69  Iowa,  412,  414  ;  2'.t 

Ind.  37  ;  9  N.  E.  Uep.  782,  quotintj  text ;  N.  W.  Kep.  402 ;    Ilanlon  v.  Doherty,  su- 

Lowman  v.  Lowman,  118  111.  582;  9  N.  E.  pra  ;  Sillinian  v.  Gaiiinia;,'e,  5.')  Tex.  365, 

Kep.  245,  fiuotiii},' text.  quoting'  text;   Hoardniaii  v.  Liirrahee,  51 

•^  Stantons    v.  Thomjison,   su/im  ;    and  Conn.. '19;   l)irck»  i-.  Lof;sdoii,59  Md.  173  ; 

Bee  Wa.sliintjton  Co.  i;.  SlaUKhter,  54  Iowa,  Kump|)  v.  Cerkens,  59  C^ai.  496  ;  Lowniiin 

265,    268;   Stitiipsou    v.   I'taw,   5.1    Iowa,  i*.  Lowman,  su/»i7i ;  PatlerHon  i'.  MillH,  tl'.t 

572.  lowu,    755.       See,    however,    Weiduer   r. 

^  Stantons  u.  Tlioini)son,  s«/>ra  ;  BfrHser  Thofnpson,  69  Iowa,  36. 

r.  Hawthorn,  3  Oreg.  129;  Woodward  v,  '  Woodwiinl  r.  DaviH,  53  lowu,  Ii94, 

«  Bailey  r.  My  rick,  50  Mo.  171. 
777 


§  874.]  MERGER   AND   SUBROGATION. 


PART  II. 
SUBROGATION. 

874.  Subrogation  arises  by  operation  of  law  whenever  the 
mortgage  debt  has  been  extinguished  by  one  other  than  the  debtor 
entitled  to  redeem.  An  assignment  implies  a  continued  existence 
of  the  debt,  and  the  equitable  right  does  not  then  arise. ^  The 
doctrine  of  subrogation  is  said  to  rest  on  the  basis  of  mere  equity 
or  benevolence.  It  is  resorted  to  for  the  purpose  of  doing  justice 
between  tlie  parties.^  "  The  subrogation  or  substitution,  by  opera- 
tion of  law,  to  the  rights  and  interests  of  the  mortgagee  in  the 
land,  is  on  and  by  redemption  ;  and  redemption  is  payment  of  the 
mortgage  debt,  after  forfeiture,  by  the  terms  of  the  mortgage  con- 
tract ;  so  that  really  the  subrogation  or  substitution,  by  operation 
of  law,  arises  or  proceeds  on  the  theory  that  the  mortgage  debt  is 
paid.  If  the  holder  of  a  bond  and  mortgage  assign  them  to  a 
party  claiming  a  right  to  redeem,  the  latter  is  subrogated,  by  the 
assignment,  to  the  mortgage  debt  and  mortgage  security,  and  to 
the  instruments  evidencing  such  debt  and  security,  and  there  is 
no  room  or  occasion  for  subrogation  by  operation  of  law."  ^ 

Under  the  equitable  principle  of  subrogation,  one  who  pays  a 
mortgage  debt  under  an  agreement  for  an  assignment  or  for  a  new 
mortgage,  for  his  own  protection  or  for  the  benefit  of  another, 
acquires  a  right  to  the  security  held  by  the  other ;  *  and  upon  the 
same  ground  a  principal  creditor  succeeds  to  the  security  held  by 

1  Per   Mr.   Justice   Colt,    in   Lamb   v.  some   peculiar  equitable   relation   in   the 

Montague,   112  Mass.  352;  Gatewood  v.  transaction,  and  never  to  mere  meddlers. 

Gatewood,  75  Va.  407.  But  while  this  is  the  rule  generally,  we 

^  Cheesebrough  v.  Millard,  1  Johns.  Ch.  think  that  a  person  who  has  paid  a  debt 

(N.  y.)  409  ;  Gans  v.  Thieme,  93  N.  Y.  under  a  colorable  obligation  to  do  so,  that 

225.  he   may   protect   his   own   claim,   should 

^  Per  Mr.  Justice  Sutherland,  in  Ells-  be  subrogated  to  the  rights  of  the  cred- 

worth  V.  Lockwood,  42  N.  Y.  89,  97.    Chief  itor." 

Justice  Biddle,  in  Muir  v.  Berkshire,  52         *  Homoeopathic    Mut.   L.   Ins.    Co.   v. 

Ind.   149,  said:   "Subrogation   generally  Marshall,  32   N.  J.  Eq.    103;  Denton   v. 

takes  place  between  co-creditors,  where  the  Cole,  30  N.  J.  Eq.  244;  Laylin  v  Knox, 

junior  pays  the  debt  due  to  the  senior,  to  41  Mich.  40  ;  Levy  v.  Martin,  48  Wis.  198  ; 

secure  his  own  claim  ;  or  it  arises  from  the  Barnes  v.  Mott,  64  N.  Y.  397,  per  Allen, 

transactionsof  principals  and  sureties,  and  J.;   Sessions   v.  Kent   (Iowa),  39  N.  W. 

sometimes  between  co-sureties  or  co-guar-  Rep.  914,  916  ;  Robertson  v.  Mowell  (Md.), 

antors.     It   is   not   .allowed    to  volunteer  8  Atl.  Rep.  273  ;  Gans  v.  Thieme,  supra. 
purchasers   or  strangers,  unless  there   is 

778 


SUBROGATION.  [§  874  a. 

a  surety  whose  liability  lias  become  fixed.  If  a  mortgage  on  part- 
nership real  estate  be  discharged  by  one  partner,  when  as  between 
the  partners  it  was  the  duty  of  the  other  to  pay  it,  an  equity  arises 
in  favor  of  the  partner  so  paying  the  mortgage  entitling  him  to 
indemnity  through  it.^ 

A  purchaser  at  a  foreclosure  sale,  supposing  that  he  had  ob- 
tained a  good  title  by  his  purchase,  sold  the  land  to  another  by 
warrant}^  deed.  The  mortgagor  having  recovered  the  land  on  ac- 
count of  irregularities  in  the  foreclosure  sale,  the  purchaser  was 
sued  upon  his  covenant  of  warranty  in  his  deed  of  the  property, 
and  was  obliged  to  pay  the  value  of  it.  But  it  was  held  that  he 
was  entitled  to  be  subrogated  to  the  rights  of  the  mortgagee,  as 
an  equitable  assignee.'^ 

In  general  it  may  be  said  that  to  entitle  one  to  invoke  the 
equitable  right  of  subrogation  he  must  either  occupy  the  position 
of  a  surety  of  the  debt,  or  must  have  made  the  payment  under  an 
agreement  with  the  debtor  or  the  creditor  that  he  should  receive 
and  hold  an  assignment  of  the  debt  as  security.^ 

The  riglit  of  subi'ogation  applies  in  general  in  favor  of  any  per- 
son having  an  interest  in  the  property  wiio,  not  being  under  any 
obligation  to  pay  tlie  mortgage  debt,  does  so  for  the  benefit  of  the 
debtor ;  *  as  by  furnishing  mone}^  to  the  mortgagor  to  take  up  the 
mortgage  under  an  agreement  to  execute  a  new  one  ;^  or  by  a 
purchaser's  paying  a  judgment  in  scire  facias  against  the  niort- 
gagor.6  So,  also,  a  junior  incumbrancer  who  pays  a  prior  incum- 
brance upon  the  property  is  thereby  subrogated  to  the  security." 

874  a.  A  stranger  may  be  subrogated,  to  the  interest  of  a 
mortgagee,  as  against  a  subsequent  mortgagee  or  purchaser,  by 
force  of  an  agreement  made  with  the  mortgagor  at  the  time  of 
paying  the  mortgage  debt  or  any  part  of  it  to  the  mortgag(;e.  Tliis 
may  be  called  a  conventional  subrogation.^    A  mere  stranger,  how- 

'   Laylin  I'.  Knox,4l  Midi.  40;  Natiuiiiil  •*  Miittcson  i'.  Tliomas,  41  111.  110. 

I'.ank  of  Koyalton  y.  Cu-sliiiif,',  5.3  Vt.  321.  "  l)iii;;.s    v.    rarsliall,  7    Hun    (N.  Y.), 

-  Muir  V.  Berkshire,  52  Iiid.  149.  5'22 ;  Ellsworth  v.  Lotkwood,  42  N.  Y.  8'J, 

'■'•  §  874  «  ;  Gatewood  v.  Galewood,  7.j  96;  Hraiiiard  c.  Cooi)fr,  ID  X.  Y.  350; 

Va.  407.  Cobh  v.  Dyer,  09  Me.  494,  498. 

■•  Carter  r.  Taylor,  3  Head  (Teiiii.),  30;  «  Shrovo  v.   Hawkinson,  34   N.  J.  Kq. 

Noddy's  Appeal,  72  Pa.  St.  98 ;  Troxall  v.  76;  Caudlo  v.  Murphy,  89  HI.  352;  Mor- 

Silverlhoriie  (N.  J.),   11    All.   Kep.   084;  fjan   v.  Hamiiiett,  23  Wis    30;  Fuller  v. 

I'cars  V.  Alhea  (Tex.),  0  S.  W.  liep.  286,  H()llirt,57  Ala.  435  ;  Owen  v.  Cook. 3  'iVnn. 

289;  Gatewood  r.  fiatewood,  «i//>ra.  Ch.    78;  Mitehell    v.    lUitt,    45    Ga.    102; 

'^  Loekwood  i-.  MarHli,3  Nev.  138;  Di-ii-  Kievel  v.  Zul.cr  (Tex.),  3  S.  W.  Hop.  273. 

ton,  V.  Cole,  30  N.  J.  Ivj.  244.  Otherwiwe  in  Louisiana  :   llarri.son  v.  His- 

779 


§  874  b.']  MERGER   AND   SUBROGATION. 

ever,  is  not  subrogated  to  the  security  by  paying  it  for  the  benefit 
of  the  mortgage  debtor  except  by  express  agreement.  It  is  only 
in  cases  where  the  person  paying  the  debt  stands  in  tlie  situation 
of  a  surety,  or  is  compelled  to  pay  in  order  to  protect  his  own  in- 
terests, or  in  virtue  of  legal  process,  that  equity  substitutes  him  in 
place  of  the  creditor,  as  a  matter  of  course,  without  any  special 
agreement.^  One  who  loans  money  to  another  with  which  to  pay 
off  a  mortgage  is  not  subrogated  to  the  mortgage  security  unless 
by  agreement  with  the  borrower.^  But  a  mortgagee  who  loaned 
money  at  the  request  of  executors,  to  pay  a  prior  mortgage  of 
lands  of  the  estate,  and  also  accrued  taxes  on  the  lands,  and  took 
as  security  for  such  advances  a  mortgage  of  the  same  lands  made 
by  the  executors  in  pursuance  of  a  license  of  the  county  court, 
which  was,  however,  invalid,  is  not  to  be  treated  as  a  volunteer 
in  the  legal  sense  of  that  terra,  but  is  entitled  to  be  subrogated 
to  the  rights  of  the  prior  mortgagee.^ 

874  b.  Subrogation  may  arise  by  agreement  between  a 
mortgage  debtor  and  a  third  person,  whereby  the  latter,  upon 
paying  the  mortgage  debt,  is  substituted  in  place  of  the  mortgage 
creditor  in  respect  to  the  security.'* 

Upon  this  principle,  even  the  owner  of  the  equity  of  redemp- 
tion, who,  upon  paying  one  of  several  mortgage  notes,  agrees  with 
the  mortgagee  that  he  shall  hold  the  note  in  the  same  manner 
that  the  mortgagee  held  it,  is  entitled  to  the  same  security  and 
the  same  priority  under  the  mortgage  that  a  stranger  would  have 
under  an  assignment.^ 

In  such  case  the  mortgagee  cannot  defeat  the  substitution  by 

land,  5  Rob.  204  ;  Brice  v.  Watkins,  30  Hotchkiss,  97  N.  Y.  395  ;  Gans  v.  Thieme, 

La.  Ann.  21.  93  N.  Y.  22.5,  232  ;  Sandford  v.  McLean,  3 

1  Deering    v.    Winchelsea,    1     Smith's  Paige  (N.  Y.),  117, 122;  Wilkes  i;.  Harper, 

Lead.  Cas.  inEq.  1.54  ;  Crippent;.  Chappel,  1  N.  Y.  586  ;  2  Barb.  Ch.  338;  Clevinger 

35  Ivans.  495;  Richmond  v.  Marston,  15  v.  Miller,  27  Gratt.  (Va.)  740;  Gatewood 

Ind.  134;  Spray  v.  Rodman,  43  Ind.  225;  v.  Gatewood,  75  Va.  407. 

McClure  u.  Andrews,  68  Ind.  97;  Faurot  ^  Owens  v.   Johnson,   8  Bax.    (Tenu.) 

?;.  Neff,  32  Ohio  St.  44;  National  Bank  of  265;    Smith  v.  Neilson,   13  Lea  (Tenn.), 

Royalton  v.  Gushing,  53  Vt.  321  ;  Beaver  461  ;  Van  Winkle  v.  Williams,  38  N.  J. 

V.  Slanker,  94  III.   175;  Hough  v.  Mtna.  Eq.   105;  Gaskill  v.  Wales,  36  N.  J.  Eq. 

L.  Ins.  Co.  57  III.  318,  319  ;  Fievel  v.  Zu-  527. 

ber  (Tex.),  3  S.  W.   Rep.   273;  Bissell  v.  3  Levy  v.  Martin,  48  Wis.  198;  Chaffe 

Lewi.s,  56   Iowa,  231  ;    McNeil  v.    Miller  r.  Oliver,  39  Ark.  531. 

(W.  Va.),  2  S.  E.  Rep.  335  ;  Binford  v.  *  Citizens'  Nat.  Bank  v.  Wert,  26  Fed. 

Adams  (Ind.),  3  N.  E.  Rep.  753;  Fay  v.  Rep.  294. 

Fay  (N.  J.),  11  Atl.Rep.  122;  Fears  i;.  Al-  5  Morrow   v.   U.    S.    Mortgage   Co.  96 

bea(Tex.),  6  S.  W.  Rep.  286,289;  Acer  i;.  Ind.  21. 
780 


SUBROGATION.  [§  874  <?. 

executing  a  release  of  the  mortgage  instead  of  an  assignment  with- 
out consent.^ 

874  c.  One  who  loans  money  on  a  defective  mortgage  for 
the  purpose  of  discharging  a  prior  valid  mortgage  upon  tiie 
same  property,  and  the  money  is  used  for  that  purpose,  is  ordina- 
rily subrogated  to  the  rights  of  the  prior  mortgagee.-  Thus,  where 
a  third  person  advanced  money  to  paj'  a  mortgage  upon  tlie  land 
of  a  married  woman,  and  took  a  mortgage  from  her  and  her  hus- 
band upon  the  same  property  for  his  security,  although  this  latter 
mortgage  was  fatall}^  defective  as  against  the  husband's  creditors, 
for  the  reason  that  the  husband  had  conveyed  the  property  to  his 
wife  without  other  consideration  than  love  and  ailection,  the 
mortgagee  so  advancing  tlie  money  was  subrogated  to  the  mort- 
gage which  his  money  paid  off,  there  being  no  intervening  incum- 
brance.3  Where  the  proceeds  of  a  third  mortgage  were  used  in 
payment  of  a  first  mortgage  so  far  as  they  would  go,  and  the  first 
mortgagee  then  agreed  with  the  third  mortgagee  that  the  third 
mortgage  should  have  preference  over  the  unpaid  balance  of  the 
first,  upon  a  sale  of  the  land  it  was  held  that  the  proceeds  should 
be  applied,  first,  to  the  payment  of  the  amount  remaining  due  on 
the  first  mortgage,  the  third  mortgagee  being  subrogated  thereto  ; 
second,  to  the  payment  of  the  second  mortgage ;  and  third,  to  the 
payment  of  the  balance  due  on  the  third  mortgage.* 

But  the  mere  fact  that  the  proceeds  of  a  second  mortgage  are 
used  to  pay  off  a  prior  mortgage  does  not  always  entitle  the  second 
mortgagee  to  be  subrogated  to  the  rights  of  the  prior  mortgagee.^ 
The  principle  of  substitution  in  such  cases  will  not  be  applied 
to  the  injury  of  any  one  who  has  acquired  interests  in  the  prop- 
erty relying  upon  an  apparent  discharge  of  the  mortgage  upon 
the  records.'^  If  a  valid  mortgage  is  discharged,  autl  a  new  mort- 
gage is  taken  in  its  place  which  is  adjudged  void  iov  usury,  the 
mortgagee  cannot  be  subrogated  to  the  mortgage  discharged  be- 
cause his  right  is  based  upon  a  usurious  mortgage.' 

1  Citizens' Nat.  Bunk  v.  Wert,  2G  Fed.  see  Levy  i;.  Martin,  48  Wis.   IDS;  Cilliort 

Kcp.  294.  V.  Gilbert,  39  Iowa,  057,  G5'J ;  Snelling  r. 

'■!  §  966  ;  Scriveti  v.  llursli   (Midi.),  'M  Mclntviv,  G  Aljb.  N.  C.  (N.  Y.)  4r.".». 

N.  W.K..]).  .')4  ;  ICvuri.son  y.  Cenlial  IJunk,  *   Hmk   r.   Moore,   94  N.   C.  7.(4;  and 

.•J3   Kans.  3.'i2  ;   llaniinond  v.    IJarker,  (il  wee 'lavlor  i-.  VVinj,',  84  N.  Y.  471. 

N.  H.  5.3;  U>erly  v.  llunii»lirey,  95  N.  C.  '^  Jeffries  v.  Allen    (S.  C.),  7  S.  K.  Hep. 

151  ;  Kdinburi^li  Am.  I>nnd   M(jrt.  Co.   v.  828. 

Latham,  88  Ind.  88;    Sidener  v.    I'uvey,  ''  Cawkill  r.  W'nleH,  .16  N.J.  K(|.  527. 

77  Ind.  241.  ^  IVrkins  v.  Hall  (N.  Y.),  12  N.  10.  Kep. 

3  Milholland   i-.   Tiffany,   04    Md.   455.  48;  IJaldwin  r.  Moffett,  94  N.  Y.  82. 

For  other  cases  bup|)ortirig  the   |)rinei|»li',  781 


§§  875,  876.]  MERGER   AND   SUBROGATION. 

875.  The  rule  as  to  marshalling  assets  applies,  as  between 
different  creditors,  so  that  where  one  has  two  funds  and  the 
other  only  one  of  them,  the  former  is  required  to  satisfy  his  claim 
out  of  the  fund  upon  which  the  other  has  no  lien.  It  is  not  ap- 
plicable as  between  a  debtor  and  creditor  ;  and  the  mortgagor 
cannot  compel  a  mortgagee  to  resort  to  the  land,  the  equity  of 
redemption  of  which  has  been  sold  on  execution,  instead  of  pro- 
ceeding on  the  mortgage  note  to  collect  the  debt.i  The  purpose 
of  the  doctrine  of  marshalling  assets  is  the  protection  so  far  as 
possible  of  subsequent  interests ;  and  it  must  not  be  applied  to 
the  mortgagee's  injury.^  Thus  a  mortgagee  having  two  mort- 
gages upon  land  and  the  crops  upon  it  cannot  be  required  bv  a 
subsequent  mortgagee  of  the  crops  only  to  apply  a  portion  of  the 
proceeds  of  a  sale  under  his  first  mortgage  to  the  payment  of  his 
second  mortgage,  so  as  to  leave  the  proceeds  of  the  crops  for  the 
mortgagee  having  security  upon  them,  when  the  entire  proceeds 
of  the  sale  are  insufficient  to  satisfy  the  first  mortgage.^  It  must 
always  appear  that  the  securities  belong  to  a  common  creditor.* 

The  owner  of  two  tracts  of  land  mortgaged  one  of  them,  and 
some  time  afterwards  mortgaged  the  other  to  another  person.  A 
judgment  had  in  the  mean  time  become  a  lien  upon  all  the  mort- 
gagor's land.  It  was  held  that  the  first  mortgagee  could  insist 
upon  having  the  judgment  satisfied  out  of  the  tract  not  covered 
by  his  mortgage  ;  and  as  the  second  mortgagee  took  his  mortgage 
with  constructive  notice  of  the  prior  mortgage,  and  of  the  prior 
judgment,  the  first  mortgagee  was  entitled  to  the  same  equity 
against  the  second  mortgagee.^ 

Where  there  is  a  prior  mortgage  upon  two  parcels  of  land  and 
a  subsequent  mortgage  upon  one  of  them,  the  fact  that  the  owner 
afterwards  declares  a  homestead  in  respect  of  the  land  not  em- 
braced in  the  second  mortgage  does  not  interfere  with  the  equita- 
ble right  of  the  junior  mortgagee  to  compel  the  first  mortgagee 
to  resort  in  the  first  instance  to  the  parcel  upon  which  the  home- 
stead is  declared.'' 

876.  The  test  of  the  right  of  subrogation  is  found  in  answer 
to  the  inquiry  whether  the  person  who  paid  the  mortgage  debt  is 

1  Eogers  v.  Meyers,  68  111.  92.     See  §§         ^  Rogers  v.  Blum,  56  Tex.  1. 

728,  1628.  5  Robeson's  App.  (Pa.),  12  Atl.  Rep. 

2  Detroit    Sav.  Bank  v.  Truesdill,  38     .'il. 

Mich.  430.  6  Abbott  v.  Powell,  6  Sawyer,  91. 

3  Knight  1-.  Rountree   (N.  C),  6   S.   E. 
Rep.  762. 

782 


SUBROGATION.  [§  877: 

the  one  whose  duty  it  was  to  pay  it  first  of  all ;  it  the  debt  was 
not  primarily  his,  and  he  only  occupied  the  position  of  a  surety  to 
the  mortgagor,  he  is  entitled  to  be  subrogated  to  the  position  of 
the  mortgagee  when  he  has  paid  the  debt.^ 

A  mortgage  discharged  of  record  may  be  reinstated  when  it  has 
been  paid  by  one  who  had  bought  the  preuiises  subject  to  the 
mortgage,  and  in  iguorance  of  the  existence  of  a  judgment  lien 
subsequent  to  the  mortgage.  Upon  payment  he  is  entitled  to 
all  the  rights  of  the  mortgagee,  and,  according  to  the  law  in  New 
York,  to  an  assignment  of  the  mortgage ;  and  having  caused  it 
to  be  satisfied  under  circumstances  authorizing  an  inference  of  a 
mistake  of  fact,  equity  will  presume  such  mistake  and  give  him 
the  benefit  of  the  equitable  right  of  subrogation.^ 

877.  When  a  mortgage  is  paid  by  one  entitled  to  redeem 
who  is  under  no  obligation  to  pay  it,  although  he  does  not  take 
a  formal  assignment  of  it,  he  is  subrogated  to  the  rights  of  the 
mortgagee  in  the  mortgaged  property,  and  holds  the  title  so  ac- 
quired as  against  subsequent  incumbrances,  although  he  had  also 
acquired  the  equity  of  redemption.  In  such  case  no  proof  of  in- 
tention on  his  part  to  keep  the  mortgage  alive  is  necessary  to  give 
him  the  benefit  of  it.  His  payment  of  the  mortgage  and  his  re- 
lation to  the  estate  are  in  aid  of  his  title  to  strengthen  and  up- 
hold it.3 

A  purchaser  of  mortgaged  land  for  full  value  under  a  convey- 
ance  with  full  covenants  of  warranty,  is   entitled,   upon  paying 

1  Russell  V.  Pistor,  7  N.  Y.  171 ;  Kiock  Hun  (N.  Y.),  398  ;  Robinson  v.  Urquhait, 
V.  Cronkhitc,  1  Hill  (N.  Y.),  107  ;  Tice  v.  12  N.  J.  Eq.  (1  Beas.)  515;  Tradesmen's 
Annin,  2  Johns.  (N.  Y.)  Ch.  125;  Mc-  Buildinj^  Association  y.  Thompson,  32  N. 
Given  v.  Wlieelock,  7  Barb.  (N.  Y.)  22;  J.  Eq.  133;  Coc  y.  N.  J.  Midland  R.  R. 
Rogers  v.  Traders'  Ins.  Co.  6  Paige  (N.  Co.  31  N.  J.  Eq.  105,  135  ;  Ward  v.  Sey- 
Y.  583;  Miller  v.  Winehell,  70  N.  Y.  mour,  51  Vt.  320;  White  ?;.  Hampton,  13 
437;  Pickett  u.  Merchants' Nat.  Bank  of  Iowa,  259;  Holtcn  j;.  Board  of  ('timm'rs 
Memphis,  32  Ark.  346,  375;  Young  t'.  of  Lake  County,  55  Iiid.  194;  Warren  r. 
Morgan,  89  111.  199  ;  S.  C.  11  Chicago  L.  Hayzlett,  45  Iowa,  235;  Cobb  v.  Dyer,  69 
N.  46;  Flagg  I?.  Geltmacher,  98  111.  293;  Me.  494;  Rappaiiierw.  Bannon  (.Md.),  13 
Bank  of  U.  S.  v.  Peter,  13  Pet.  123;  Han-  Atl.  Kep.  627;  Watson  v.  Gardner  (III.), 
Ion  V.  Doherty  (Ind.),  9  N.  E.  Rep.  782.  10  N.  E.  Rep.  192;  Braden  v.  Graves,  85 

2  Barnes  i-.  Mott.  64  N.  Y.  397  ;  and  Ind.  92,  quoting  text ;  Carithcrs  v.  Stu- 
see  Young  i-.  Morgan,  89  HI.  199;  Mc-  art,  K7  Ind.  424  ;  Fears  v.  Albeu  (Tex.), 
Neil  V.  Miller  ( W.  Va.),  2  S.  E.  Rep.  335.  6  S.  W.  IJep.  280,  289,  ciuoting  text ;  Ba- 

3  Walker  v.  King,  45  Vt.  525  ;  6'.  C.  44  con  v.  Goodnow,  59  N.  H.  415  ;  Guekian 
lb.  f.Ol,  and  8cc  cases  cited  ;  Wheeler  r.  r.  Piley,  135  Mass.  71  ;  Kelly  v.  Duff,  61 
Willard,  44  Vt.  640;  Tichout  y.  Harmon,  N.  H.  435;  Gatowood  v.  Galcwood,  75 
2  Aik.  (Vt.)  37;  Johnson  v.  Parmely,   14  Va.  407. 

78a 


§  877.]  MERGER   AND   SUBROGATION. 

the  mortgage  debt,  to  enforce  it  against  the  mortgagor,  although 
he  has  released  the  covenants,  unless  it  be  shown  that  the  grantee 
assumed  the  mortgage  debt,  or  the  mortgagor  paid  to  the  pur- 
chaser the  amount  of  the  outstanding  mortgage. ^ 

When  a  third  person,  at  the  instance  of  the  mortgagor,  paj's 
part  of  the  mortgage  debt,  but  takes  no  assignment  of  the  mort- 
gage, and  no  agreement  for  any,  he  is  not  thereby  subrogated  to 
the  right  of  the  mortgagee  as  against  a  subsequent  incumbrance  :  to 
effect  this  there  must  be  something  more  than  mere  payment,  and 
silent  receipt  of  the  money  by  the  mortgagee.^  It  is  only  when 
the  right  of  subrogation  is  expressly  stipulated  for  that  a  partial 
payment  can  be  regarded  as  effecting  ajoro  rata  assignment.^  But 
if  a  third  person  pays  the  whole  of  the  mortgage  debt  at  the  request 
of  the  mortgagor,  and  receives  the  note  and  mortgage  as  a  secu- 
rity for  the  money  advanced,  he  is  in  equity  subrogated  to  the 
rights  of  the  mortgagor.'*  It  is  sufficient  to  entitle  the  third  per- 
son making  the  advance  for  the  mortgagor,  or  other  person  inter- 
ested in  the  property  for  the  payment  of  a  mortgage  upon  it,  that 
the  advance  was  made  upon  the  promise  or  reasonable  expectation 
that  the  mortgage  would  be  assigned  as  security  for  the  ad- 
vances.'"' 

Even  if  a  person  advarcing  money  to  pay  a  mortgage,  under  an 
agreement  with  the  owner  of  the  equity  of  redemption  that  it 
should  be  assigned  to  him  as  security  for  the  money  advanced,  or 
that  other  valid  security  upon  the  property  should  be  given,  takes 
a  discharge  of  the  mortgage,  he  is  entitled  to  be  subrogated  to  the 
rights  of  the  mortgagee  and  have  the  discharge  vacated.*^ 

1  Murray  v.  Fox  (N.  Y.),  10  N.  E.  Rep.  trial  Sav.  Bank.    v.   Clute,  33  Hun   (N. 

S64.  Y.),  82. 

-  Virginia  v.   Ches.  &  Ohio  Canal  Co.  5  Gans  v.  Thieme,  93  N.  Y.  225 ;  Fievel 

.32   Md.  501,  546;  Swan  i-.  Patterson,  7  v.  Zuber,  67  Tex.  275;  Norton  v.  High- 

Md.  164;  Collins  v.  Adams,  53  Vt.  433;  leyman,  88  Mo.  621  ;  Yaple  v.  Stephens, 

Troxall  v.  Silverthome    (N.  J.),   11    Atl.  36  Ivans.  680. 

Rep.  684;  Richardson  r.Traver,  112  U.  S.  In  Louisiana,  when  the  person  making 

423;  Rice  v.  Morris,  82  Ind.  204.  the  payment  has  no  interest  in  discharg- 

When   subrogated    to   rights  of    mort-  ing  the  debt,  he  is  not  entitled  to  subroga- 

gagee  upon    paying    part    of    mortgage,  tion  unless  he  can  show  an  agreement  for 

Smith  V.  Dinstnoor,  119  III.  656;  Young  it  made  at  the  time  of  payment,  formally 

V.  Morgan,  89  111.  199.  executed   before  a  notary  and  witnesses. 

^  Loeb  V.  Fleming,  15  III.  App.  503.  Harrison  v.  Bisland,  5  Rob.  204  ;  Hoyle 

*  Caudle  v.  Murphy,  89  111.  352 ;  Focke  v.  Cazabat,  25  La.   Ann.   438 ;    Brice  v. 

r.  Weishuhu,    55   Tex.   33;    Johnson    v.  Watkins,  30  La  Ann.  21, 

Moore,  33  Kans.  90;  Loewenthal  v.  Mc-  «  Morgan    v.   Hammett,   23    Wis.    30; 

Cormick,   101  111.  143;  Emigrant  Indus-  Crippen    v.   Chappei,  35  Kans.  495;  Bol- 

784  man  v.  Lohman,  74  Ala.  507. 


SUBROGATION. 


[§  878. 


But  if  a  third  person  furnishes  money  to  enable  a  mortgagor 
to  pay  off  a  mortgage  upon  the  promise  of  the  hitter  to  give  the 
lender  a  first  mortgage  upon  the  premises,  and  the  first  mortgage 
is  discharged,  and  after  some  delay  a  new  mortgage  is  given  to 
the  lender,  this  does  not  take  precedence  of  a  second  mortgage 
which  was  outstanding  upon  the  property,  and  duly  recorded,  but 
of  which  the  lender  had  no  actual  notice ;  especially  as  against  an 
assignee  of  such  mortgage  who  in  good  faith,  and  without  knowl- 
edge of  the  agreement  under  which  the  money  was  borrowed  for 
the  payment  of  the  first  mortgage,  took  his  assignment  after  the 
discharge  of  the  first  of  record.^ 

878.  Where  a  mortgagee  has  been  compelled,  for  his  own 
protection,  to  pay  the  amount  of  a  prior  mortgage  upon  the 
property,  and  instead  of  taking  an  assignment  of  the  mortgage  so 
paid,  this  is  discharged  of  record,  he  is  nevertheless  entitled  to  in- 
demnify himself  for  this  payment  out  of  the  mortgaged  estate."^ 
But  if,  in  the  mean  time,  a  bond  fide  purchaser,  relying  upon  the 
record,  has  bought  the  estate  subject  only  to  the  second  mortgage, 
the  amount  of  the  first  mortgage  so  paid  cannot  be  claimed  out  of 
the  estate  as  against  him.  Where,  however,  the  whole  amount 
claimed  by  the  junior  mortgagee  upon  his  own  mortgage,  ami  that 
paid  off  by  him,  was  less  than  the  amount  of  his  own  mortgage 
and  interest  as  it  stood  upon  record,  he  was  allowed,  in  a  suit 
against  him  for  redemption,  to  reimburse  himself  for  the  sum  so 
})aid.^ 


1  Fears  v.  Albea  (Tex.),  6  S.  W.  Rep. 
286,  289,  quoting  text ;  Holt  v.  Baker,  58 
N.  II.  276,  278.  "The  plaintiff  does  not 
bring  his  ca.se  witliin  the  principle  of  the 
cases  cited.  He  did  not  own  and  was  not 
'  purchasing  the  equity  of  redemption  in 
tiie  land,  and  then  paying  the  prior  mort- 
gage without  notice  of  tlie  subsequent  one. 
lie  did  not  own  a  subsequent  mortgage 
and  pay  the  prior  one,  with  the  defend- 
ants' mortgage  intervening.  Ho  had  no 
interest  in  or  security  on  the  estate  to  pro- 
tect, but  made  a  loan  of  money  to  the 
mortgagor,  on  hi.s  htalcment  that  he  was 
liorrowing  the  money  to  jiay  the  lirst 
mortgage,  and  that  the  plaintiff  should 
have  a  first  mortgage  on  the  land  as  hccii- 
rity.  IJy  loanint;  the  money  to  mortgagor, 
and  trusting  him  to  furni-.h  ^cl•urity  a.s 
VOL.   I.  00 


good  as  the  first  mortgage,  liceuabli'd  liim 
to  make  a  record  of  tlie  discharge  of  that 
mortgage,  and  postpone  liis  security  to  the 
defendants'  mortgage.  The  defendants 
purchased  their  mortgage  on  tlie  faitli  of 
a  record  showing  the  discharge  of  the  first 
mortgage  and  no  ])rior  incumbrnnce,  and 
neither  they  nor  their  a.»(signor  had  any 
notice  of  the  jilaiiitifi's  transaction  with 
mortgagor.  If  the  parties  arc  cipiaily  in- 
nocent, and  one  must  suffer  from  the  con- 
duct of  the  mortgagor,  tiie  plainiilV,  who 
enabled  him  to  occasion  the  loss,  should 
sustain  it." 

-  Happanicr  v.  Dannoii  (Md.),  8  All. 
Uep.  .'ir..');  Kl)ert  i-.  (Jording,  116  111.  210; 
Tyrrell  v.  War.l.  102  III.  216;  Smith  v. 
Dinsniore,  16  HI.  App.  I  l.'i. 

■•'   Davis  r.  Winn,  2  Allen  (Mass.),  111. 

78o 


§  879.]  MERGER    AND    SUBROGATION. 

When  Ji  junior  incumbrancer  redeems  from  a  prior  Hen,  inter- 
mediate or  subsequent  incumbrancers,  in  equity,  must  refund  the 
redemption  money,  or  pay  all  liens  anterior  to  theirs,  before  they 
can  enforce  their  claims  upon  the  property.  The  junior  mort- 
gagee, by  redeeming  from  the  prior  mortgage,  is  subrogated  to  the 
rights  of  the  first  mortgagee.^  If  it  were  otherwise,  it  would  be 
impossible,  in  a  large  number  of  cases,  for  a  junior  mortgagee  to 
secure  his  debt,  as  the  first  mortgagee  is  not  obliged  to  assign  his 
mortgage  on  payment.^ 

A  second  mortgagee  who  has  paid  taxes  or  other  assessments 
upon  the  mortgaged  property  is  entitled  by  equitable  subrogation 
to  hold  the  lien  of  such  taxes  or  assessments  even  as  against  the 
first  mortgagee.^ 

But  a  voluntary  payment  by  a  mortgagee  of  claims  against  the 
mortgaged  property,  which  it  was  not  necessary  for  his  own  pro- 
tection that  he  should  pay,  does  not  entitle  him  to  be  subrogated 
to  the  rights  of  the  creditors  whose  liens  he  has  discharged.^ 

The  same  rule  prevails  when  the  mortgagor  sells  and  conveys  a 
portion  of  the  mortgaged  premises,  subject  to  the  mortgage,  and 
the  purchaser  retains  enough  of  the  purchase  money  to  satisfy  the 
mortgage  and  agrees  to  pay  it ;  the  mortgagor  and  purchaser  stand 
in  the  relation  of  principal  and  surety  as  to  the  mortgage  debt, 
and  the  premises  sold  are  primarily  chargeable  with  the  payment 
of  it.^  If  the  mortgagor  be  compelled  to  pay  the  debt  he  is  sub- 
rogated to  the  rights  of  the  mortgagee  against  the  land.*^ 

If  one  joint  mortgagor,  or  one  partner,  in  order  to  protect  his 
interest,  pays  the  joint  debt,  he  is  subrogated  to  the  interest  of 
his  joint  mortgagor  until  he  is  repaid." 

879.  If  a  mortgagor  pays  or  purchases  his  own  mortgage 
on  land  that  he  has  sold  subject  to  a  mortgage,  which  the 
purchaser  has  agreed  to  pay  as  part  of  the  consideration  of  the 
sale,  the  bond  or  note  is,  of  course,  rendered  unavailing  ;  but  the 

1  Milligan's  App.  104  Ta.  St.  50.3 ;  Clark  '  Russell  v.  Pistor,  7  N.  Y.  171 ;  Halsey 

V.  Mackin,  95  N.  Y.  346.  r.  Reed,  9  Paige  (N.  Y.),  446. 

-  Flachs  V.  Kelly,  30  111.462;  Downer  «  Josselyn  v.    Edwards,    57    Ind.    212; 

V.  Fox,  20  Vt.  388;  Wood  v.  Hubbard,  Hoffman  v.  Risk,  58  Ind.  113;  Smith  >: 

50  Vt.  82;  Ward  «.  Seymour,  51  Vt.  320;  Ostermeyer,  68  Ind.  432,  435;  Orrick  r. 

Shimer  v.  Hammond,  51  Iowa,  401.     See  Durham,  79  Mo.  174. 

§  1086.  "  Fisher  v.  Dillon,  62  111.  379 ;  Simpson 

3  Fiacre  v.  Chapman,  32  N.  J.  Eq.  463.  ?•.  Gardiner,  97  111.  237  ;  Stebbins  v.  Wil- 

*  Bayard   v.   McGraw,  1    Bradw.  (III.)  lard,  53  Vt.  665. 
134. 

786 


SUBROGATION.  [§  880. 

mortgage  having  become  the  principal  security  for  the  payment 
of  the  debt,  the  mortgagor,  without  taking  an  assignment  of  the 
mortgage,  is  entitled  to  be  subrogated  to  this  securit)',  and  to 
be  repaid  out  of  the  land  what  he  has  paid  upon  the  mortgage 
debt.i 

If  the  mortgagee,  with  knowledge  of  the  mortgagor's  right  to 
have  the  property  applied  to  the  payment  of  the  mortgage  debt, 
does  anything  to  impair  this  right,  as,  for  instance,  if  he  releases 
a  portion  of  the  mortgaged  premises,  he  must  suffer  the  loss  him- 
self, by  being  deprived  to  that  extent  of  his  right  of  recourse 
to  the  mortgagor,  who,  in  such  case,  stands  in  the  position  of  a 
surety.'^ 

The  satisfaction  of  a  judgment  for  a  mortgage  debt,  by  the 
levy  of  an  execution  on  other  property  of  the  mortgagor  than 
that  mortgaged,  is  such  a  payment  of  the  debt  by  him  that  he  is 
subrogated  to  the  securitj'^,  when  justice  requires  that  the  mort- 
gage should  be  assigned  to  him  rather  than  discharged.^ 

But  a  mortgagor  will  not  be  subrogated  to  the  rights  of  a  mort- 
gagee under  a  first  mortgage,  when  the  latter  also  holds  a  second 
mortgage  upon  the  same  property  for  the  payment  of  which  the 
mortgagor  is  liable,  unless  the  latter  pays  both  mortgages.  The 
mortgagee  in  such  case  has  a  right  to  have  the  money  collected  of 
the  mortgagor  on  the  first  mortgage  treated  as  a  payment,  and 
not  as  a  purchase  of  the  mortgage.'* 

880.  When  mortgage  is  enforced  upon  other  property. — 
When  an  equity  of  redemption  has  been  sold  upon  execution  for 
a  debt  other  than  that  secured  by  mortgage  on  the  premises,  the 
purchaser  acquires  only  an  estate  subject  to  the  mortgage  debt, 
and  if  this  be  subsequently  enforced  upon  other  property  of  the 
mortgagor,  the  latter  will  be  subrogated  to  all  the  rights  of  the 
mortgagee  under  this  mortgage,  and  thus  protected  against  the 
purchaser  under  execution.  The  rule  is  the  same  where  sale  is 
made  of  a  part  of  the  mortgaged   premises  under  execution  ob- 

'  Stillman    i-.    Stillman,   21   N.  J.   Eq.  2  ingaUg  „.  MorBun,  10  N.  Y.  178,  187  ; 

12G;  Kamena  i'.    Iluelbip,  23    N-  J.  Eq.  and  see  Eddy  v.  Traver,  G  l'}iij,'e  (N.  Y.), 

78;  Johnson  v.  Zink,  51  N.  Y.  .333;  Ely  521;  Clicescbroiigli  r.    Milliinl,   I    Johns. 

V.  Stannard,  44  Conn.  528  ;  Hart  v.  Chase,  (N.  Y.)  Ch.  409,  412. 

4G  Conn.  207;  Grecnwell  v.   Ilcritngc,  71  "  Woodbury  r.  Swan,  58  N.  H.  ."JSO. 

Mo.  459;  Wclton    v.   Hull,  .50  Mo.  29G;  *  Knohliiudi  r.  Eogloson;,'  (Minn.).  'M* 

Elagg  V.  Gelimacher,  98  HI.  293  ;  Halscy  N.  W.  Kep.  300. 
r.  Kced,  9  Taigc  (N.  Y.),  440,  4.53  ;  Orrick 
V.  Durham,  79  Mo.  174. 

787 


§  881.]  MERGER   AND   SUBROGATION. 

tained  upon  one  of  several  mortgage  notes.  The  purchaser  takes 
the  property  subject  to  the  payment  of  a  share  of  the  mortgage 
debt  remaining  unsatisfied.^ 

881.  An  indorser  of  a  note  or  surety  of  a  debt,  upon  being 
compelled  to  pay  it,  is  entitled  to  the  benefit  of  any  security, 
as,  for  instance,  a  mortgage  given  by  the  principal  debtor  to  the 
holder  of  the  note,  or  debt  to  secure  it.  Without  any  assignment 
of  it  he  is  by  force  of  law  subrogated  to  the  benefit  of  it.^  Where 
a  partner  has  assumed  the  payment  of  a  note  of  the  firm,  and 
executed  a  mortgage  to  the  payee  to  secure  its  payment,  and  to 
indemnify  liis  copartner,  the  latter  is  subrogated  to  the  rights  of 
the  mortgagee  to  the  extent  of  any  payment  he  may  have  to 
make  upon  the  note.-^  When  a  mortgage  has  been  assigned  by 
a  debtor  to  a  surety  or  indorser,  or  to  a  trustee  for  his  benefit, 
to  secure  him  against  his  liability  upon  the  debt,  the  creditor  is 
entitled  to  the  benefit  of  the  security.*  The  mortgage  creates 
a  trust  and  equitable  lien  in  favor  of  the  creditor,  and  this  lien 
attaches  to  the  property  in  his  favor,  although  the  mortgage  be 
assigned.^ 

A  surety  upon  paying  one  of  several  notes  or  bonds  secured  by 
mortgage,  is  subrogated  to  a  proportionate  part  of  the  mortgage, 
the  mortgagee  becoming  a  trustee  therefor.^ 

If  a  mortgagor  sells  the  premises  subject  to  the  mortgage,  and 
afterwards  either  pays  the  mortgage  debt  voluntarily,  or  it  is  col- 
lected of  him  by  suit,  he  is  subrogated  to  the  rights  of  the  mort- 
gagee, and   may  enforce  the  mortgage  upon  the  land."     In  such 

1  Funk  r.  McReynold,  33  111.  481.  Rooker  v.  Benson,  83  Ind.  250;  Knight 

-  Drew    V.    Lockett,     32    Beav.    499  ;  v.  Eountree  (N.  C),  6  S.  E.  Rep.  762. 

O'Hara  v.  Haas,  46  Miss.  374 ;  Gossin  v.  Contra,  see  Lynn  v.  Richardson,  78  Me. 

Brown,  11   Pa.  St.  527;  MuUer  v.  Wad-  367. 

lington,  5  S.  C.  342;  Ottman  i'.  Moak,  3  3  Conwell   v.   McCowan,   81    111.    285; 

Sandf.  (N.  Y.)  Ch.  431  ;  Fields  v.  Sherrill,  Hardin  v.  Fames,  5  Bradw.  (111.)  153. 

18  Kans.  365  ;  Motley  v.   Harris,  1   Lea  *  Curtis  v.  Tyler,  9  Paige  (N.  Y.),  432; 

(Tenn.),  577 ;  Beaver  v.  Slanker,  94  111.  Cullum  v.   Branch   Bank   at  Mobile,  23 

175;  Richeson  v.   Crawford,  94  111.  165;  Ala.  797.     As  to  the  right  of  a  co-surety 

Darst  V.   Bates,  95   III.  493  :   Murrell  v.  to  the  benefit  of  the  security,  see  Hall  v. 

Scott,  51   Tex.  520;  Lynch  v.  Hancock,  Cushman,  16  N.  H.  462;  Low  r.  Smart, 

14  S.  C.  66  ;  Eddy  v.  Traver,  6  Paige  (N.  5  lb.  353. 

Y.),  521;  Gerber  v.  Sharp,  72  Ind.  553;  ^  Eastman  v.  Foster,  8  Met.  (Mass.)  19; 

Jones   V.  Tincher,  15  Ind.   308  ;  Dick  v.  Graydon  v.  Church,  7  Mich.  36. 

Moon,  26   Minn.  309;  National   Bank  v.  ^  Lynch  v.  Hancock,  14  S.  C.  66. 

Gushing,  53  Vt.  321  ;  Taylor  v.  Farmers'  '^  Baker  v.  Terrell,  8  Minn.  195;  Risk 

Bank  (Ky.),  9  S.  W.  Rep.  240;  Thomas  i'.  Hoffman,  69  Ind.  137. 

V.  Stewart   (Ind.),    18   N.  E.  Rep.    505; 

788 


SUBROGATION.  [§  882. 

case  the  mortgagor,  as  between  himself  and  his  grantee,  is  a  mere 
surety  for  the  payment  of  the  debt,  and  the  premises  are  the 
primary  fund,  and  he  is  entitled  to  the  benefit  of  it.^ 

A  mortgage  given  to  several  guarantors,  to  indemnify  them 
against  a  joint  and  several  liability  upon  it,  when  the  debt  is 
paid  by  one  of  them,  is  held  in  trust  by  the  mortgagees  for  his 
benefit.'-^ 

882.  Whether  surety  is  subrogated  to  the  debt  as  well  as 
the  security.  —  A  distinction  is  taken  in  the  English  cases,  which, 
however,  does  not  generally  hold  good  in  this  country,  to  the 
effect  that  while  the  surety,  upon  paying  the  debt  of  his  princi- 
pal, is  entitled  to  the  full  benefit  of  all  collateral  securities  which 
the  creditor  has  taken  for  the  payment  of  the  debt,  yet  he  is  not 
entitled  to  stand  in  the  creditor's  place  as  to  the  debt  itself.^ 

But  if  the  debt  in  the  above  case  had  been  paid,  not  by  the 
surety  bound  in  the  same  obligation  with  the  principal,  but  by  a 
third  party,  who  had,  by  a  separate  instrument,  made  himself  lia- 
ble for  the  same  debt,  it  is  clear  that  the  reason  upon  which  the 
decision  rested  would  have  failed  altogether;  the  surety  would 
then  be  entitled  to  stand  in  the  shoes  of  the  creditor  in  regard  to 
the  original  debt  as  well  as  in  regard  to  the  security ,"*  for  the 
original  debt  is  not  in  that  case  paid. 

As  already  intimated,  the  distinciion  above  taken  is  not  gen- 
erally maintained  by  the  cases  in  this  country.     The  doctrine  of 

1  .Johnson   v.   Zink,    52   Barb.  (X.  Y.)  surety  paying   the   money  would  be   en- 

396.  titled  to  say,  I  have  lost  the  benefit  of  the 

-  Dye  V.  Mann,  10  Micli.  291 .  bond,  but  the  creditor  has  a  mortgage,  anil 

3  See  Copis  v.  Middleton,  Turn.  &  R.  I  have  a  right  to  the  benefit  of  the  mort- 

224,229.    "It  is  a  general  rule,"  says  Lord  gaged  estate,  which  has  not  got  back  to 

Eldon,"  that  in  equity  a  surety  is  entitled  the   debtor."      See,   also,    1    Story's   Eq. 

to  tlie  benefit  of  all  the  securities  which  §§  499,  499  b  ;  Hodgson  v.  Shaw,  3  Myl. 

the  creditor  has  against  the  principal,  but  &  K.  183,  190  ;  Craythorne  c.  Swinburne, 

then  the  nature  of  tho.se  .securities  must  be  14  Ves.  160. 

coii.sidered  :  when  tliere  is  a  bond  merely.  In   Hodgson   i'.  Shaw,  sn/nii,  the  Chan 

if  an  action  was  brought  upon  the  bond,  ccllor,  Lord   Brougham,  siiid  :  "  The  prin- 

it  would  appear  upon   oyer  of  the  bond  ciples  upon  which  Copis  ;•.  Midillcton  rests 

that  the  debt  was  extinguished  ;  the  gen-  are  sound  and   un(|Ui'Slionulde  ;  and  it  is 

eral  rule,  therefore,  must  lie  qualified   by  only  njion  a  narrow  and  superficial  view 

considering  it  to  apply  to  such  securities  of  the  subject  that  the  decision  has  ever 

as  continue  to  exist,  and  do  not  get  back  been  charged  witii  refinement  or  subtlety, 

upon  payment  to  the  person  of  the  priii-  Tlic   ground   of    the   determination    was 

cipal  debtor;    in   the   ca.se,   for   instance,  clear:  it  wns  foundeil  in  the  known  rules 

•where,  in  addition  to  the  bond,  there  is  a  of  law,  and  d<termined  in  strict  conform 

mortgage,  with  a  covenant  on  the  jiart  of  ity  witii  the  doctrines  of  this  court." 

the  principal  debtor  to  piiy  the  money,  the  *  Hoiigson  v.  Siiaw,  gupra. 

789 


§§  883,  883  a.]         merger  and  subrogation. 

the  cases  here  is,  that  upon  the  payment  of  a  debt  by  the  surety, 
he  is  entitled  not  only  to  the  benefit  of  the  collateral  security,  but 
also  to  the  benefit  of  the  debt  as  represented  by  a  bond  or  note, 
and  to  an  assignment  of  tliat  as  well  as  of  the  mortgage,  if  an  as- 
signment is  necessary  in  order  to  give  him  the  full  benefit  of  the 
same.i 

After  a  purchaser  of  a  portion  of  the  mortgaged  estate  has  as- 
sumed the  payment  of  the  whole  mortgage,  a  purchaser  of  another 
portion,  upon  being  obliged  for  his  own  protection  to  pay  it,  is 
subrogated  not  only  to  the  mortgagee's  right  against  the  land,  but 
also  to  his  right  to  hold  the  purchaser,  who  has  assumed  the  debt, 
personally  liable  for  the  payment  of  it.^ 

883.  The  surety  is  entitled,  upon  paying  the  debt,  to  secu- 
rities given  by  the  debtor  after  the  contract  of  suretyship  as 
well  as  those  given  before  or  at  the  same  time ;  and  whether  the 
sui-ety  knew  of  the  existence  of  the  securities  is  wholly  imma- 
terial.'^ If  he  pays  off  part  of  the  mortgage  debt,  he  is  entitled  as 
against  the  mortgagor  to  chai-ge  upon  the  estate  the  amount  he 
has  so  paid.*  He  is  entitled,  too,  not  only  to  the  equities  which 
the  creditor  holds  against  the  principal  debtor,  but  also  to  those 
he  lias  against  all  persons  claiming  under  hira.^ 

When,  however,  the  mortgage  is  given  to  secure  an  existing 
debt,  as  well  as  to  protect  the  mortgagee  from  liability  as  surety 
for  the  mortgagor,  the  mortgagee  may  assign  the  mortgage,  and 
the  principal  creditor  cannot  be  subrogated  to  the  rights  of  the 
mortgagee  under  the  mortgage,  and  subject  the  property  to  the 
payment  of  his  demand.  The  mortgagee  has  a  right  to  assign  the 
mortgage,  and  the  assignee  will  be  protected  in  his  purchase.'^ 

883  a.  The  principal  creditor  is  also  subrogated  to  the 
benefit  of  any  mortgage  which  the  debtor  has  given  to  a 
surety.  This  right  exists  although  the  mortgage  was  given  to 
the  surety  by  the  debtor  after  both  had  become  bound  to  the 
creditor,  and  although  there  had  been  no  previous  agreement  that 
indemnity  should  be  given,"  and  although  the  mortgage  was  exe- 

i  Ellsworth  V.  Lockwood,  42  N.  Y.  89,         *  Gedye  v.  Matson,  25  Beav.  310. 
98,  and  cases  cited.  5  prew  v.  Lockett,  32  Beav.  499 ;  Ha- 

2  Rardin  v.  Walpole,  38  Ind.  146,  and     vens  v.  Willis,  100  N.  Y.  482. 

cases  cited.  e  §  802  ;  Waller  v.  Oglesby  (Teun.),  3 

3  May  hew  v.  Crickett,  2  Swaust.   185,     S.  W.  Rep.  504. 

191  ;  and  see  Curtis  i;.  Tyler,  9  Paige  (N.  "  Demott  v.  Stockton  Paper  Ware 
Y.),  432.  Manuf.  Co.  32  N.  J.  Eq.  124. 

790 


SUBROGATION.  [§  884. 

cuted  without  the  knowledge  of  the  creditor.^  A  subsequent  pur- 
chase of  the  property  by  the  surety  who  hohls  the  mortgage  does 
not  merge  the  mortgage  as  against  the  principal  creditor,  nor  can 
the  surety  enter  satisfaction  of  the  mortgage.^ 

If  a  surety's  liability  has  never  become  tixed  and  absolute, 
either  by  his  having  been  obliged  to  pay  the  debt  for  which  he  is 
surety  or  b}'^  a  judgment  against  him,  the  principal  creditor  can- 
not claim  the  security  by  subrogation.^ 

The  principal  creditor  cannot,  however,  under  this  principle, 
obtain  subrogation  to  securities  which  several  indorsers  or  sureties 
of  the  principal  debt  have  provided  between  themselves  to  secure 
the  payment  by  each  of  liis  equal  share  of  the  principal  debt,  in 
case  of  the  failure  of  the  principal  debtor  to  pay  it.** 

The  principal  creditor  is  not,  moreover,  subrogated  to  a  mort- 
gage given  to  an  indorser,  purely  as  a  personal  security  to  him, 
and  not  for  the  better  protection  of  the  debt.  Thus,  where  a 
mortgage  was  given  by  a  wife  on  her  property  to  indemnify  an 
indorser  of  her  husband's  draft,  to  which  the  wife  was  not  a  party, 
a  liolder  or  acceptor  of  the  draft  who  did  not  take  it  on  the  faith 
of  such  mortorafje  is  not  sabrojxated  to  the  indorser's  mortgage.^ 

884.  When  the  creditor  has  made  a  further  advance  upon 
the  mortgage.  —  But  a  surety  is  not  entitled  to  an  assignment 
from  the  creditor  of  a  mortgage  upon  which  the  creditor  has,  after 
first  taking  it,  made  a  further  advance,  unless  he  pays  off  such 
advance  in  addition  to  the  original  sum  for  wliich  he  became 
surety;''  and  the  mortgagee  not  being  prevented  from  making  the 
further  advance,  it  is  immaterial  that  the  surety  did  not  know  of 
it,  and  it  was  not  contemplated  at  the  time  of  the  original  loan." 
But  where  there  is  a  special  contract  on  the  part  of  the  creditor 
that  the  securities  given  by  the  principal  debtor  shall  be  [)rin)a- 
rily  liable,  or  that  the  surety  may  redeem  upon  paying  a  certain 
sum,  the  creditor  cannot,  as  against  him,  make  a  further  loan  to 
the  debtor,  but  must  transfer  the  securities  upon  a  tender  from 
the  surety  of  the  amount  of  the  original  loan.^ 

'  M(,-Mullcii  '•.  Xc^iil,  00  Alii.  55'J.  ^  Taylor  v.  Farnicrs'  15iink   (Ky.),9  S. 

-:  Durham  v.  Craif;,  79  Iii.l.  117.  W.  Ki-p.   240;  Madiliii   r.  HaiiK,   S.'J   Ky. 

'  Grant  »'.  Ludlow,  8  Oliio  St.  1  ;  Mv-  .JU  ;  Lifc'Kctt  v.  McClcllaiKl,  .'tO  Ohio  St. 

Collum  V.  Iliiicklfy,  0  Vt.  14.3,  149  ;  I'laiit-  (;24. 

f^rs' Bank  v.  lJou;,'la-.s,  2    lloail   (Tenn.),  "  Willianm  u.  Owm,  l.t  Sim.  .')97. 

r,99.  Mil. 

*  Scwanl  '•.  Iliiniiiit,'ti)n,  '.II    N.  V.   101,  "   Htnvkcr  v.   IJiill,  1    Sim.  29.      In  ihi-, 

reversing  20  Jinn,  217.  cuhl' tlic  (kiilor  niortpin^d  his  own  iiiop 

71)1 


§§  885,  885  a.]         merger  and  subrogation. 

Where  a  loan  of  .£5,000  was  made  in  two  distinct  sums,  one 
for  X2,000  and  one  for  .£3,000,  and  distinct  properties  were 
mortgaged  by  separate  deeds  to  secure  these  sums,  for  the  pay- 
ment of  the  former  of  which  a  third  person  also  became  surety, 
it  was  held  that  the  creditor's  right  to  retain  all  the  securities 
until  both  sums  were  paid  was  superior  to  the  right  of  the  surety 
to  have  the  benefit  of  the  mortgage  for  that  debt  for  which  he 
was  surety. 1 

885.  The  right  of  subrogation  is  not  lost  by  a  renewal  of 
the  mortgage.  When  a  junior  incumbrancer  pays  off  a  prior  in- 
cumbrance his  right  to  be  subrogated  to  the  position  of  the  prior 
mortgagee  is  not  destroyed  by  reason  of  his  taking  from  the  mort- 
gagor a  new  mortgage  for  the  amount  of  both  the  mortgages, 
and  although  the  new  mortgage  be  void  on  account  of  usury. 
The  mortgagee  is  equitably  entitled  to  the  same  benefits  of  re- 
demption that  he  would  have  had  without  such  renewal  of  the 
mortgages  with  the  mortgagor.  By  paying  the  prior  mortgage 
debt  he  becomes  entitled  to  a  cession  of  the  debt  and  a  subro- 
gation to  all  the  rights  of  the  mortgagee  ;  and  the  mortgage,  as 
against  the  mortgagor,  is  to  be  regarded  as  still  existing  and  un- 
cancelled. Only  the  subsequent  mortgage  is  regarded  as  void 
under  the  usury  laws.^ 

885  a.  Subrogation  will  not  be  allowed  in  favor  of  one 
who  has  permitted  his  equity  to  sleep  till  others  have  gained 
rights  which  would  be  injuriously  atfected  by  asserting  the  sub- 
rogation.^ Thus  where  a  mortgage  is  foreclosed  without  making 
a  prior  judgment  creditor  of  the  mortgagor  a  party,  a  surety 
whose  suretyship  does  not  appear  of  record,  having  satisfied  the 
judgment,  and  stood  by  while  an  innocent  purchaser  from  the 
purchaser  at  the  foreclosure  sale  made  valuable  improvements, 
will  not  be  allowed  to  claim  subrogation  to  the  right  of  the  judg- 
ment creditor  to  redeem.* 

erty,  and  his  daughters,  to  secure  his  debt,  S.  C.  6  Hun,  632  ;  "Worcester  Nat.  Bank 

mortgaged  their  own  estate  ;  but  the  deed  v.   Cheeney,  87  111.  602,   615;    S.   C.    11 

contained  a  proviso  that  the  father's  prop-  Chicago  L.  N.  31.     See  Baldwin  v.  Mof- 

erty  should  be  primarily  liable.  fett,  26  Hun  (N.  Y.),  209. 

1  Farebrother   v.  Wodehoiise,  2-3  Beav.  3  Qruig's  App.  89  Pa.  St.  33G. 

18,  23.  4  Thomas  v.  Stewart  (Ind.),  18  N.  E. 

-  Patterson  v.  Birdsall,  64  N.  Y.  294  ;  Eep.  505. 

792 


CHAPTER  XXI. 

PAYMENT  AND   DISCHARGE. 


I.  Tender   before   and   after   default, 
886-903. 
II.  A])propriation   of   payments,   904- 
912. 


VII.  Foreclosure  does  not  constitute  pay- 
ment, 9.'J0-9.55. 
VIII.  Who    may   receive    payment    ami 
make  dischar<^e,  9.56-96,5. 


III.  Presumption  and  evidence  of  pay-  I  IX.  Discharge    by   mistake   or    fraud, 

ment,  913-918.                                   ]  966-971. 

IV.  Payment  by  accounting  as  admin-  X.  Form    and     construction    of     dis- 

istrator,  919-923.  charge,  972-988. 

V.  Changes  in  the  form  of   the  debt,  i  XI.  Entry   of    satisfaction    of    record, 

924-942.                                                 i  989-991. 

VI.  Revivor  of  mortgage,  943-949.          ;  XII.  Statutory   provisions  for   entering 

I  satisfaction  of  record,  992-1037. 

I.    Tender  before  and  after  Default. 

886.  At  common  laAv,  payment  or  tender  of  payment  at 
the  time  mentioned  in  the  condition  of  the  mortgage  wholly  dis- 
charges the  incumbrance.  Payment  before  the  day  named  in  the 
condition,  equally  with  payment  at  the  da^^  saves  the  breach  of 
the  condition  and  defeats  the  estate.  In  such  case  no  written  re- 
lease is  needed  except  as  evidence  of  the  facts,  and  to  remove  the 
apparent  incumbrance  from  the  records.^  If  a  tender  properly 
made  of  the  sum  due  be  refused,  the  mortgagor  may  reenter  and 
the  land  is  freed  from  the  condition  ;  the  debt,  however,  is  not 
discharged,  but  may  be  recovered  by  action.-  Payment  after  the 
day,  as  will  presently  ha  more  fully  noticed,  does  not  produce  the 
same  result.  A  reconveyance  is  then  necessary  in  order  to  re- 
vest the  estate  in  the  mortgagcjr.  A  tender  is  then  of  no  avail 
except  with  reference  to  costs  upon  a  bill  to  r('<l(M'm,  which  is  the 
only  remedy  when  such  tender  is  refused. 

'   Krskine   v.   Towiisend,  2  Mass.   493;  note  to  this  laHO,  18  Am.  Law  lug.  (.N.S.) 

Holman    v.    Bailey,   3    Met.    (Ma.ss.)    .5.5;  182. 

Merrill  v.   C'ha.se,   3  Allen   (.Mhk.s.),  ;{39 ;  -  Co.  l.itt.  209 />  ,•  Marlindale  r.  Smith, 

Doody  V.  Pierc«-,  9   lb.   141  ;   ICichnrdHon  1   Q.  ».  (Ad.  &  E.  N.  S.)  389;   ^•.  C.  \  C.. 

V.  Cambridge,  2  lb.   118;  and  hoc  Joslyn  &  D.   1  ;    and  Heo   Kortright  v.  Cady,  21 

V.  Wyman,  5  lb.  02;  (Jrover  r  Klyo,  5  lb.  N.  V.  343.     See  §  391. 
543;  Crain  v.  McGoon,  80  111.431.      Sec 


§§  887,    888.]  PAYMENT   AND   DISCHARGE. 

Where  a  first  mortgagee,  before  the  time  named  in  the  condi- 
tion, took  from  the  mortgagor  an  absolute  deed  of  the  property 
with  full  covenants  of  warranty,  in  satisfaction  of  the  mortgage 
debt,  but  did  not  formally  discliarge  his  mortgage,  it  was  held 
that  a  second  mortgagee  might  maintain  against  liim  a  writ  of 
entry  to  obtain  possession  and  foreclosure,  but  could  not  maintain 
a  bill  in  equity  to  redeem,  because  the  legal  title  under  the  first 
mortgage  was  effectually  divested.  The  debt  being  paid  before 
it  was  due,  the  condition  was  saved,  the  mortgagee's  estate  de- 
feated, and  as  effectually  divested  as  it  would  have  been  if  there 
had  been  a  release  from  him  to  the  mortgagor. ^  "  The  act  of 
payment  in  the  country  ante  vel  apud  diem  saves  the  forfeiture  of 
an  estate  held  by  a  conveyance  defeasible  on  a  condition  subse- 
quent. No  record  of  such  an  act  is  necessary  to  make  the  estate 
a  fee  simple  estate  in  the  grantor  or  mortgagor,  as  against  all 
persons  claiming  by  a  subsequently  acquired  title."  ^ 

887.  To  revest  the  title  by  performance  of  the  condition 
the  performance  must  be  substantially  and  formally  within  the 
terras  of  the  condition.  The  estate  of  the  mortgagee  is  at  law 
defeasible  only  by  the  performance  of  the  condition  strictly  in  the 
manner  and  at  the  time  stipulated.  When  this  is  done,  the  estate 
reverts  back  to  the  mortgagor  without  any  reconveyance,  by  the 
simple  operation  of  the  condition.  But  after  a  failure  to  comply 
with  the  exact  terms  of  the  condition,  the  estate  is  forfeited  at 
law,  and  a  reconveyance  is  necessary  to  restore  the  estate  to  the 
mortgagor.  Where,  therefore,  the  condition  in  a  mortgage  given 
to  indemnify  a  surety  on  the  mortgagor's  note  was  that  he  should 
pay  the  note  according  to  its  tenor,  and  four  days  before  it  became 
due  a  third  person,  in  pursuance  of  an  arrangement  made  by  the 
surety,  paid  the  note,  and  took  a  release  from  the  surety  of  his 
interest  in  the  mortgage,  it  was  held  that  this  did  not  amount  to 
a  payment  of  the  note  by  the  debtor,  within  the  condition  of  the 
mortgage,  so  as  to  revest  the  title  in  him.-'^ 

The  condition  of  a  mortgage  for  the  support  of  the  mortgagee 
during  life  having  been  faithfully  performed,  the  title  upon  his 
death  revests  in  the  mortgagor  without  a  reconveyance.'^ 

888.  Payment  before  the  day  cannot  be  enforced  by  either 

1  Holman  v.  Bailey,  3  Met.  (Mass.)  55 ;         3  Camp  v.  Smith,  5  Conn.  80. 
and  see  Whitcomb  v.  Simpson,  39  Me.  21.         *  Munson  v.  Munson,  30  Coun.  425. 

-  Per  Chief  Justice  Bigelow,  in  Grover 
V.  Flye,  5  Allen  (Mass.),  543. 

794 


TENDER   BEFORE   AND    AFTER   DEFAULT.  [§  889. 

party.  When  a  mortgage  is  payable  at  a  day  certain,  while  on 
the  one  hand  the  mortgagor  cannot  be  called  upon  before  that 
day  to  make  payment,  on  the  other  the  mortgagee  cannot  be 
called  upon  before  that  day  to  receive  payment  ;^  unless,  perhaps, 
there  be  tendered,  in  addition  to  the  principal  sum,  all  the  inter- 
est that  would  accrue  up  to  the  day  fixed  for  payment.^  A  pay- 
ment before  the  day,  if  accepted  by  the  creditor,  operates  as  a  per- 
formance of  the  condition  equally  with  a  payment  at  the  day.^ 
Of  course  a  third  person  who  has  assumed  the  mortgage,  or  pur- 
chased an  estate  subject  to  it,  has  no  more  right  than  the  mort- 
gagor himself  to  pay  off  the  mortgage  before  it  is  due  ;  and  the 
fact  that  the  mortgagor,  when  he  is  primarily  liable  to  pay  the 
mortgage,  has  become  insolvent,  gives  the  purchaser  of  the  estate, 
or  of  a  portion  of  it,  no  right  to  pay  off  the  mortgage.'' 

An  exception  to  the  rule  that  payment  of  a  mortgage  cannot 
be  enforced  until  it  is  due  by  its  terms  occurs,  also,  when  the  par- 
ties to  it  have  by  subsequent  agreement  changed  the  time  of  pay- 
ment to  an  earlier  date.  A  mortgagor  having  offered  a  sum  of 
money  in  addition  to  the  mortgage  debt  to  induce  the  mortgagee 
to  accept  immediate  payment  when  it  had  several  years  to  run, 
and  having  paid  half  of  the  sum  at  the  time,  and  agreed  to  pay 
the  rest  in  a  few  days,  upon  his  failure  to  do  so  the  mortgagee 
was  allowed,  after  tendering  a  release  of  the  mortgage,  to  main- 
tain an  action  for  the  balance  of  the  amount  agreed  upon.  The 
agreement  having  been  founded  upon  a  valid  consideration,  and 
partly  ])erformed,  may  be  enforced  in  an  equitable  proceeding.'^ 

889.  Payment  after  condition  broken.  —  I>ut  while  payment 
before  condition  broken  revests  the  title  in  the  mortgagor,  with- 
out reconveyance  or  other  discharge,  payment  after  condition 
broken  does  not  divest  the  mortgagee  of  his  legal  title  ;  and  the 
mortgagor,  if  necessary,  must  resort  to  equity  for  a  release  or 
reconveyance.  This  is  the  doctrine  of  the  common  law,  and  gen- 
erally prevails  in  those  states  where  the  common  law  doctrine 
of  the  nature  of  mortgages  has  not  been  changed  by  statute  ;  •* 

'  Brown  r.  Cole,  14  Sim.  427;  Abhc  v.  •'  Connecticut:  I'lielps  r.  Sngo,  2  Hay, 

Goodwin,  7  Conn.  377.  l.'il  ;    Duton    i:   Uusmc-II,    17    Conn.    MC  ; 

2  Iloylc  V.  Caz.'ibat,  2.0  La.  Ann.  438.  Cross  v.  HohinHon,21  Conn.  370.     Maine  : 

3  Burgainc  v.  Spurling,  Cro.  Car.  283.  Smith  i-.   Kclk'v,  27   Mr.  2.17  ;  Srcwart  r. 
*  Iloag  t;.   Rathbun,  1   Clarke  (N.  V.),  Cro.-'liy,  ."■>()  Me.  130.    Massachusetts:  (^iir- 

12.  ricT  J',  (ialt;,  'J  Allen,  r)22  ;   Howard  c.  How- 

^  Scott  V.  Frink,  .V!  i'.arl.    (N    V  )  .').t3  ;      ard,  3   Met.  .'>48.  5.')7  ;   llolmiiii  v.  Hailey, 

affirmed  54  N.  Y.  035.  lb.  .OS;  Maynard  v.   Hunt,  5  Tick.  240  ; 

79.0 


§  889.]  PAYMENT   AND   DISCHARGE, 

but  in  those  states  which  have  departed  from  the  common  law  in 
this  respect,  it  is  held  that  acceptance  of  payment,  after  condition 
broken,  is  a  waiver  of  the  condition,  and  has  the  same  effect  as  a 
performance  of  it.  The  mortgage  being  regarded,  not  as  an  estate 
in  the  land,  but  as  merely  a  lien,  the  life  of  which  depends  alto- 
gether upon  the  debt,  when  this  is  paid  the  lien  is  in  fact  dis- 
charged ;i  although  it  is  important  that  a  discharge  of  the  incum- 
brance be  made  upon  the  record. 

Under  this  view  of  the  nature  of  a  mortgage,  not  only  pay- 
ment, but  any  act  which  amounts  to  payment  and  discharges  the 
debt,  discharges  also  the  mortgage  ;  ^  and  payment  of  a  part  of 
the  debt  is  a  satisfaction  and  release  of  the  mortgage  to  that 
extent.^ 

The  rule  that  a  discharge  of  the  debt  is  a  discharge  of  the 
mortgage  has  no  application  when  the  debt  is  merel}^  discharged 
by  the  statute  of  limitations,  or  by  a  discharge  in  bankruptcy.* 

A  mortgage  of  indemnity  for  a  part  only  of  the  amount  of  the 
mortgagee's  liability  is  not  discharged  by  the  mortgagor's  extin- 
guishing a  part  of  the  liability,  but  still  leaving  a  liability  equal 
to  the  amount  of  the  mortgage ;  but  it  continues  as  an  indemnity 
until  the  whole  debt  is  discharged.'^ 

Under  the  common  law,  where  payment  is  made  after  condi- 

Wade  r.  Howard,  11  lb.  289;  Parsons  v.  r.  Lozear,  34  N.  J.  L.  496,  per  Depue,  J.; 

Welles,  17  Mass.  419;  Howe  v.  Lewis,  14  Osborne  v.  Tunis,  2.5  N.  J.  L.  633,  651. 

Pick.   329  ;  Crosby  v.  Leavitt,   4  Allen,  Missouri :  McNair  v.  Picotte,  33  Mo.  57. 

410.  California  :  McMillan  v.  Richards,  9  Cal. 

1  New  York:  Jackson  v.  Stackhonse,  1  36.5  ;   Johnson  v.  Sherman,  15  Cal.  287. 

Cow.  122;  Hatfield  v.  Reynolds,  34  Barb.  Michigan:    Caruthers   v.   Humphrey,    12 

612;  Cameron  y.  Irwin,  5  Hill,  272 ;  Run-  Mich.  270;  Button  v.  Merritt,  41  Mich, 

van   V.  Mersereau,   11  Johns.   534,   538;  537.      Mississippi:   GrifBn   v.   Lovell,  42 

Jackson  v.  Crafts,  18  lb.  110,  114  ;  Jack-  Miss.  402. 

son  V.  Davis,  18  lb.  7  ;  Rogers  v.  De  For-  -  Kortright  v.  Cady,  supra;  Sherman 
est,  7  Paige,  272  ;  Arnot  v.  Post,  6  Hill,  '•.  Sherman,  3  Ind.  337;  Terrio  v.  Guidry, 
65 ;  Hartley  r.  Tatham,  26  How.Pr.  158;  5  La.  Ann.  589  ;  Le  Beau  v.  Glaze,  8  lb. 
Farmers'  Fire  Ins.  &Loan  Co.  r.  Edwards,  474;  Schinkel  v.  Hanewinkel,  19  lb.  250; 
26  Wend.  541  ;  6'.  C.  21  lb.  467;  Kort-  Shields  v.  Lozear,  supra. 
right  V.  Cady,  21  N.  Y.  343  ;  Stoddard  v.  ^  Champncy  v.  Coope,  32  N.  Y.  543 ; 
Hart,  23  N.  Y.  556 ;  Blodgett  v.  Wadhams,  New  York  Life  Ins.  &  Trust  Co.  v.  How- 
Hill  &  Den.  65;  Remington  Paper  Co.  v.  ard,  2  Sandf.  (N.  Y.)  Ch.  183;  Briggs  v. 
O'Dougherty,  81  N.  Y.  474;  Wanzer  v.  Seymour,  17  Wis.  255;  Howard  i-.  Gresh- 
Cary,  76  N.  Y.  526.     Indiana  :  Ledyard  v.  am,  27  Ga.  347. 

Chapin,    6   Ind.   320.      New  Hampshire  :  *  Chamberlain  f.  Meeder,  16  N.  H.  381  ; 

Southerin  v.  Mendum,  5  N.  H.  431  ;  Rob-  Bush  v.  Cooper,  26  Miss.  599. 

inson  I'.  Leavitt,  7  N.  H.  73,  92 ;  Swett  r.  &  pj^^nnum     v.     Wallace,     4     Humph. 

Horn,  1  N.  H.  332.    New  Jersey  :  Shields  (Tenn.)  143. 
796 


TENDER   BEFORE    AND   AFTER   DEFAULT.  [§  890. 

tion  broken,  and  there  has  been  no  release  to  the  mortgagor,  the 
legal  title  in  the  mortgagee,  though  of  no  value  to  him  and  but  a 
mere  naked  trust  without  interest,  is  sufficient  to  authorize  a  sale 
of  the  mortgagor's  equity  on  execution  under  statutes  providing 
for  a  sale  instead  of  a  levy  of  the  execution  where  tiiere  is  a  mort- 
o-ao-e.i     The  mortgagor  cannot  maintain  trespass  qiiare  elauswn.,^ 
or  a  writ  of  entry,^  against  the  mortgagee  in  possession.     Such 
a  title  in  the  mortgagee  is  also  sufficient  to  enable  him  to  defend 
an  action  of  ejectment.^     But,  on  the  other  hand,  tlie  title  remain- 
ing in  the  mortgagee  is  not  sufficient  to  enable  him  to  maintain  a 
writ  of  entry  against  the  mortgagor,  because  under  the  statutes 
providing  for  such  action  to  effect  a  foreclosure  there  must  be  a 
conditional  judgment,  which  cannot  of  course  be  had  after  pay- 
ment of  the  debt.5     Neither  could  the  mortgagee  by  virtue  of  his 
bare  legal  title  obtain  possession  by  open  and  peaceable  entry, 
because  this  remedy  is  given  only  for  the  purpose  of  foreclosing  a 
mortgage  which  has  not  been  paid.*^     The  legal  title  which  the 
mortgagee  holds  after  receiving  payment  is  a  trust  for  the  sole 
benefit  of  the  mortgagor  and  those  claiming  under  him,  and  can- 
not be  availed  of  to  defeat  their  possession  of  the  premises.     He 
cannot  give  an  effectual  notice  to  a  tenant  of  the  mortgagor  to 
pay  rent  to  himself  so  as  to  enable  the  tenant  to  set  up  the  title 
of  the  mortgagee  in  defence    to  an  action  by  the  mortgagor  to 
recover  possession  from  the  tenant." 

890.  Notice  of  payment.  —  It  is  a  rule  of  practice  in  Eng- 
land, not  supported  by  any  positive  law,  except  so  far  as  custom 
makes  law,  that  a  mortgagee  who  does  not  demand  payment 
when  the  debt  becomes  due,  but  allows  it  to  run  on,  is  after- 
wards entitled  to  notice  from  the  debtor  of  his  intention  to  make 
payment,  six  months  in  advance  of  the  time  of  payment;  or  if 
such  notice  be  not  given,  then  he  is  entitled  to  six  months'  inter- 
est in  lieu  of  the  notice.^  The  reason  of  this  rule  is  said  to  be 
that   the  mortgagor  having  lost  liis  estate  at  law,  and  being  only 

»  Giover  r.  Five,  5  Allen  (Mass.),  543;  271  ;  Wiulo  v.  Howiird,  II    I'ii-k.  (Muss.) 

Bartiettf.  T«rbeil,  12  Allen  (Mass.),  123,  28!»,  207;  (iiny  v.  .Iciiks,  3  Muson,  .'>20 ; 

126;    Forster   v.    Mtllen,    10    Muss.  421;  Howard  i-.   Howard,  3  Met.  (Muss.)  548  ; 

Stewart  r.  Crosby,  hO  Me.  130  ;  rill.sbury  Baktr  i-.  Gavitt,  128  Mass.  93. 

V.  Stnyib,  25  Me.  427.  «  Jiakcr  ■•.  Gavitt,  supra. 

■'■  Howe  f.  I^wit,  14  I'ick.  (Masn  )  329.  "^  Baker  v.  Gavitt,  mpra. 

«  Dyer  I'.  Toothaker,  51  Me.  3H0.  "  Browne  v.  Loikhnrt,  10  Sim.  420,424, 

4  Smiib  V.  Vincent,  15  Conn.  1.  per  Shad  well,  V.  C.  ;  Bartlett  r.  Franklin,. 

''  Slayton  r.  Mclntvre,  11  Gray  (MasH.),  15  W.  U.  1077. 

707 


§  891.]  PAYMENT   AND   DISCHARGE. 

entitled  to  redeem  in  equity,  must  do  equity,  by  allowing  the 
mortgagee  a  reasonable  time  to  reinvest  his  money. ^  The  rule  of 
course  does  not  apply  where  the  mortgagee  himself  demands  pay- 
ment, or  takes  any  proceedings  to  enforce  his  demand.  Neither 
does  it  apply  when  he  comes  in  and  proves  his  debt  in  any  probate 
or  bankruptcy  proceedings;  ^  nor  where  the  security  is  discharged 
in  the  natural  course  of  business  without  the  active  interference 
of  the  debtor,  out  of  other  security  held  for  the  same  debt,  as, 
for  instance,  by  the  payment  of  a  loss  upon  an  insurance  policy. 
When  the  time  of  notice  has  expired,  the  mortgagee  is  bound  to 
know  the  amount  due  him,  and  to  accept  a  proper  tender  of  it.^ 
He  may,  however,  be  justified  in  a  qualified  refusal  of  a  tender, 
although  it  be  of  the  proper  amount,  as,  for  instance,  when  it  is 
accompanied  by  a  deed  of  reassignment  to  be  executed  by  him 
containing  covenants  on  his  part ;  and  he  is  entitled  to  a  reason- 
able time  to  be  advised  whether  it  is  proper  for  him  to  execute 
the  deed,  and  the  draft  of  it  should  have  been  submitted  to  him 
beforehand.  Lord  Hardwicke,  in  such  a  case,  thought,  a  week's 
additional  time  and  interest  should  be  allowed.* 

No  such  rule  of  practice  exists  in  this  country,  though  there 
may  be  local  customs  in  regard  to  such  notice.  Provision  is  some- 
times made  in  the  mortgage  itself,  or  by  a  separate  instrument, 
that  a  certain  notice  shall  be  given  by  the  mortgagor  when  the 
mortgage  is  allowed  to  run  after  its  maturity. 

891.  At  common  law  a  tender  made  at  the  law  day  and 
refused  satisfies  the  condition  of  the  mortgage  as  fully  as  if  pay- 
ment had  been  made,  and  revests  the  estate  in  the  mortgagor, 
who  may  reenter  forthwith.  But  if  the  mortgage  secures  a  debt, 
this  subsists  as  a  personal  duty  after  the  estate  is  divested  by  the 
tender,  and  may  be  recovered  as  a  personal  obligation  by  an  ac- 
tion at  law.  If,  however,  the  mortgage  secures  a  gift  which  is 
not  a  debt,  the  gift  is  lost  with  the  estate.'^     The  discharge  of  this 

1  Fisher  on  Mort.  3d  ed.  §  1272.  Littleton  :  "  And  uote,  that  in  all  cases 

-  Matson  v.  Swift,  5  Jur.  645.  of  a   certain  summe   in  grosse   touching 

8  Harmer  v.   Priestley,   16  Beav.  569;  lands   or   tenements-,    if  lawful  tender  be 

.S".  C.  22  L.  J.  N.  S.  Ch.  1041 ;  Sharpnell  once  refused,  he  which  ought  to  tender 

V.  Blake,  2  Eq.  Cas.  Abr.  604.  tlie  money  is  of  this  quit,  and   fully  dis- 

*  Wiltshire  v.  Smith,  3  Atk.  89  ;  Wil-  charged  for  ever  afterwards."     209  6. 

shaw  V.  Smith,  9  Mod.  441.  Coke,  commenting  :  "  This  is  to  be  un- 

^  Darling  v.   Chapman,  14  Mass.  101,  derstood,  that  he  that  ought  to  tender  the 

104;  Maynard  v.  Hunt,  5  Pick.  (Mass.)  money  is  of  this  discharged  for  ever  to 

240;  Willard   v.  Harvey,   5   N.  H.   252;  make  any  other  tender;  but  if  it  were  a 

Schearff  v.  Dodge,  33  Ark.  340,  345.  dutie  before,  though  the  feoffer  enter  by 

798 


TENDER  BEFORE  AND  AFTER  DEFAULT. 


[§  892. 


is  ail  accidental  consequence  of  the  tender,  there  being  no  debt  or 
duty  remaining  whereon  to  ground  an  action. 

892.  A  tender  of  the  amount  due  on  a  mortgage  after 
breach  of  the  condition  does  not  operate  as  a  discliarge  at  com- 
mon hiw.^  The  tender  must  be  kept  good,  to  avail  anything.^ 
The  appropriate  oflBce  of  a  tender,  then,  is  to  reUeve  the  debtor 
from  subsequently  accruing  interest,  to  preserve  the  right  of  re- 
demption, or  to  protect  him  from  the  costs  of  a  suit  to  redeem. 
''But  a  tender,"  says  Mr.  Justice  Depue  in  a  recent  case  before 
the  Court  of  Errors  of  New  Jersey,"  "  though  it  is  equivalent  to 
performance,  where  the  question  is  wliether  tlie  party  is  in  de- 
fault, is  not  a  satisfaction  or  an  extinguishment  of  a  debt.  Ten- 
der of  the  mortgage  debt  on  the  day  named  is  performance  of  the 
condition,  and,  by  force  of  the  terms  of  the  condition,  determines 
the  estate  of  the  mortgagee,  and  the  condition  being  complied  with, 
the  land  reverts  to  the  mortgagor  by  the  simple  operation  of  the 
condition."  And  yet  in  New  Jersey  payment  operates  as  an  ex- 
force  of  the  condition,  yet  the  debt  or  du-  Caldwell,  61  Ala.  543;  Greer  f.  Turner, 
tie  remaineth.     As  if  A.  borroweth  a  hun-     36  Ark.  17. 

dred  pouud  of  B.  and  after  mortgageth  •'  Shields  v.  Lozear,  supra.  "  Where, 
land  to  B.  upon  condition  for  payment  as  in  this  case,"  he  says,  "  the  mortgage  is 
thereof;  if  A.  tender  the  money  to  B.  and  accom])auied  by  a  bond,  to  hold  that  a  ten- 
he  refuseth  it,  A.  may  enter  into  the  land,  der  after  default  extinguished  the  mort- 
and  the  land  is  freed  for  ever  of  the  con-  gage,  for  the  reason  that  after  such  default 
dition,  but  yet  the  debt  remaineth,  and  it  remains  only  a  security  for  the  debt, 
may  be  recovered  by  action  for  debt.  But  will  lead  to  the  incongruity  of  giving  to 
if  A.  without  any  loane,  debt,  or  dutie  the  tender  an  effect  with  respect  to  the  se- 
preceding,  infeotfe  B.  of  land  upon  condi-  curity  wliich,  by  the  rules  of  pleading  and 
tion  for  the  payment  of  a  iiundred  pound  established  principles  of  law,  the  court 
to  B.  in  nature  of  a  gratuitie  or  gift;  in  must  deny  in  an  action  on  tlie  bond,  which 
that  case,  if  he  tender  the  hundred  pound  is  the  ioimediate  evidence  of  the  debt.  If 
to  him  according  to  the  condition,  and  he  the  form  of  the  instrument  wliich  evi- 
refusetl)  it,  B.  hatii  no  remedie  thereafter,  dences  the  debt  is  overlooked,  and  the 
and  so  is  our  author  in  this  and  in  his  question  is  viewed  in  the  aspect  in  whicii 
other  cases  of  like   nature    to  be  under-     the    indebtedness   immediately  arose,  the 


stood."     Sec,  338. 

1  See  §  9;  Currier  r.  Gale,  9  Alkn 
(Mass.),  522;  Maynard  v.  Hunt,  5  I'ick. 
(Mase.)  240;  Ilolnian  v.  Bayley,  3  Met. 
(Mass.)  55  ;  Erskine  v.  Townsend,  2  Mass. 
403;  I'helps  v.  Sage,  2  Day  (Conn.),  151  ; 
Shields  '•.  Lozear,  34  N.  J.  L.  490 ;  How- 
ell V.  Mitchell,  08  Me.  21  ;  Storey  r.  Krew- 
8on,  55  Iiid.  397. 

-  CraJM  V.  McGoon,  86  111.  431  ;  Scliearff 
V.    Dodge,   33    Ark.   340;    Alexander   i: 


tender  does  not  pay  or  discharge  the  debt ; 
and  though  it  will  avail  to  arrest  the  accru- 
ing ol'  interest,  and  to  free  the  debtor  from 
costs,  it  will  be  ikprived  of  that  cllicacy  by 
a  subsequent  demand  and  refusal.  If  le- 
gal analogy  is  to  he  pursued,  it  could  lead 
no  further  than  to  deprive  the  mortga;;c 
of  ojieratiou  heyonil  tlie  amount  due  when 
the  tender  was  made,  leaving  the  que.-ti(pn 
of  subsequently  accruing  interest  ami  costs 
to  be  raised  by  the  subse(iuent  demiind 
and  refusal." 

I'M) 


§  893.]  PAYMENT    AND   DISCHARGE. 

tinguishment  of  the  mortgage  debt,  this  being  regarded  as  the 
pi'incipal  and  the  security  the  accessory  ;  and  therefore  whatever 
discharges  the  debt  is  held  to  discharge  the  security.  But  no 
reason  founded  on  principle,  declares  the  judge  just  quoted,  can  be 
assigned  for  giving  that  effect  to  a  tender  after  forfeiture. 

893.  The  rule  in  New  York,  Michigan,  and  Missouri,  how- 
ever, is  that  a  tender  of  the  amount  due  on  a  mortgage  after  the 
day  fixed  for  payment  is  a  discharge  of  the  lien  just  as  much  as 
payment  is,  and  in  the  same  way  that  a  tender  at  common  law 
made  upon  the  day  named  in  the  condition  for  payment  has  this 
effect.^  The  lien  of  the  mortgage  is  thereby  ipso  facto  dis- 
charged, and  the  holder  of  the  mortgage  can  only  look  to  the 
personal  responsibility  of  the  person  liable  for  the  mortgage  debt. 
To  have  this  effect  it  is  not  even  necessary  that  the  money  should 
be  brought  into  court,  or  that  it  should  be  shown  that  the  tender 
has  ever  since  been  kept  good.^  This  view  of  the  effect  of  a  ten- 
der made  after  the  law  day  is  founded  upon  the  departure  made 
from  the  common  law  doctrine,  that  the  mortgage  creates  an  es- 
tate in  fee  in  the  mortgagee,  subject  to  be  defeated  by  perform- 
ance of  the  condition  ;  the  mortgage  being  regarded  merely  as  a 
pledge  of  the  land  of  which  the  mortgagor  remains  the  owner, 
the  tender  after  breach  of  the  condition  is  regarded  as  having 
the  same  result  as  a  tender  made  in  case  of  a  pledge  of  personal 
property,  in  respect  to  which  the  rule  is,  that  a  tender  and  re- 
fusal at  any  time  of  the  full  amount  of  the  debt  extinguishes  the 
lien  of  the  pledge.^ 

1  New  York:  Kortright  y.  Cady,  21  N.  Arnot  v.  Post,  6  Hill,  65;  reversed  in  2 
Y.  343,  reversing-  S.  C.  23  Barb.  4-90 ;  S.  Denio,  344.  Michigan  :  Ferguson  v.  Popp, 
C.  5  Abb.  Pr.  358;  Jackson  v.  Crafts,  18  42  Mich.  115;  Potts  v.  Plaisted,  30  Mich. 
Johns.  110;  Edwards  v.  Parmers'  F.  Ins.  149;  Moynahan  v.  Moore,  9  Mich.  9;  Ca- 
fe Loan  Co.  21  Wend.  467;  S.  C.  26  lb.  ruthers  r.  Humphrey,  12  Mich.  270;  Van 
541;  Houbie  v.  Volkening,  49  How.  Pr.  Husan  v.  Kanouse,  13  Mich.  303. 

169;   Hartley  v.  Tatliam,   1  Keyes,  222.         ^  Comyn's  Dig.  tit.  Mort.  A.;    Coggs 

Missouri:    Thornton   v.   Nat.    Exchange  v.  Bernard,  2  Lord   Pay.  909,  per  Holt, 

Bank,  71  Mo.  221  ;  and  see  Olmstead  v.  C.   J.  ;    Kortright   v.    Cady,    supra,    per 

Tarsney,  69  Mo.  396 ;   Cupples  v.  Galli-  Davies,  J. 

gan,  6  Mo.  App.  62.     In  New  Hampshire         The  history  of  this  inequitable  doctrine 

payment  after  the  day  is  provided  for  by  in  New  York  shows  considerable  shifting 

statute.     But  in  making  tender  the  money  back  and  forth   before   it  finally  became 

must  be  brought   into   court.     Bailey  v.  settled  law  by  the  decision  of  Kortright  v. 

Metcalf,  6  N.  H.  156  ;  Robinson  v.  Leav-  Cady.     It  was  first  asserted  in  Jackson  v. 

itt,  7  N.  H.  73,  93;  Swett  v.  Horn,  1  N.  H.  Crafts,  18  Johns.  110;  and  it  is  declared 

332.  the  decision  was  founded  on  a  misappre- 

2  New  York  :  Kortright  v.  Cady,  supra  ;  hension  of  Littleton,  207  a,  209  b.     It  was 

800 


TENDER  BEFORE  AND  AFTER  DEFAULT. 


[§  893. 


To  establish  a  tender  which  will  discharge  the  mortgage  under 
this  rule,  the  proof  must  be  clear  that  the  tender  was  fairly  made 
and  deliberately  refused  by  the  holder  of  the  mortgage,  or  by 
some  one  who  had  authority  from  him  to  refuse  it ;  and  the  proof 
must  also  be  clear  that  the  full  amount  due  was  absolutely  and 
unconditionally  tendered.^ 

But  even  if  a  sufficient  tender  be  made  out,  the  mortgagor  can- 
not come  into  a  court  of  equity  to  have  the  mortgage  decreed  to 
be  surrendered  or  extinguished,  without  paying  the  amount  equi- 
tably due  under  it.^ 

then  denied  by  the  Chancellor  in  Merritt  by  a  tender  of  the  full  amount  due.     It 

)■.  Lambert,  7  Paige,  344,  and  reaffirmed  has  never  occurred  to  any  judge  to  argue 

in    the    Supreme    Court    in    Edwards  v.  that  a  pawnee  was  in  great  peril,  and  in 

Farmers'  Fire  Ins.  &  Loan  Co.  21  Wend,  danger  of  losing  the  benefit  of  his  pawn, 

467,  and  in  the  Court  of  Errors   in    the  by   tlie   enforcement  of    the  well    settled 

same  case,  26  Wend.  541  ;   and  then  by  rule,  that  a  tender  of  the  amount  of  the 

the  Supreme  Court  in  Arnot  v.  Post,  6  loan    and    interest,    and    refusal,    extin- 

Ilill,  63;  and  again  denied  by  the  Court  guished  the  lien  on  the  pawn.     Littleton 

of  Errors,  in  reversing  this  case,  2  Denio,  well   says  (Litt.  207  a)  :  that  it  shall   be 

.344.     It  was  finally  set  at  rest  in  Kort-  accounted  a  man's  folly  that  he  refused 

right  V.  Cady.     The  tendency  since  that  the  money  when  a  lawful  tender  of  it  was 

time  has  been    to  restrict  and   limit   the  made  to  him.     The  only  effect  upon  the 

doctrine  rather  than  to  extend  it.     Harris  rights  of  the  mortgagee  is,  tiiat  (he  land 

V.  Jex,  66  Barb.  232  ;  5.  0.  S.")  N.  Y.  421  ;  or  thing  pledged  is  released  from  the  lieu, 

Graham  v.  Linden,  ."jO  N.  Y.  .547 ;  Frost  v.  but  the  debt  remaiueth."     This  rule,  how- 

Yonkers  Savings  Bank,  8  Hun,  26  ;  S.  C.  ever,  has  given  occasion  to  much  litiga- 

70  N.  Y.  553.  tion,  and   sometimes   to  the  wo  king  of 

As  to  the  embarrassments  which  some  great   injustice.     See  Kortright  v.  Cady, 

judges   have    thought   would    attend   the  supra,  further,  for  a  very  full   and  able 

adoption  of  this  rule,  Mr.  Justice  Davies,  discussion   of   the   whole   subject   of   the 

in  the  Court  of   Appeals  of   New  York  tender  of   a  mortgage   debt.      See,  also, 

(Kortright  v.  Cady,  21  N.  Y.  343,  353),  Merritt    v.   Lambert,    7    Paige    (N.  Y.), 

says  :  "  If  the  mortgagor  does  not  tender  344 ;    Edwards    v.    Farmers'    F.    Ins.    & 

the  full  amount  due,  the  lien  of  the  mort-  Loan  Co.  21  Wend.  (N.  Y.)  407  ;  S.  C.  26 

gage  is  not  extinguished.    The  mortgagee  lb.  541. 

runs  no  risk  in  accepting  the  tender.  If  it  •  Tuthill  v.  Morris,  81  N.  Y.  04  ;  Parks 
is  the  full  amount  due,  his  mortgage  lion  v.  Allen,  42  Mich.  482  ;  Canfiehl  v.  Conk- 
is  extinguished  and  his  debt  is  jiaid.    This  ling,  41  Mich.  371. 

is  all  he  has  a  right  to  deiriand  or  expect,  -  Tuthill  v.  Morris,  supra.  Upon  this 
and  all  he  can  in  any  contingency  ol)tain.  point  l{apalIo,  J.,  in  a  recent  case,  said : 
His  acceptance  of  the  motu'y  tendered,  if  'Although  the  authorities  cited  sustain 
inadequate  and  les.^  than  the  amount  ac-  the  proposition  that,  when  a  ttnder  has 
tually  due,  only  extinguishes  the  lien  pro  been  duly  made  of  the  full  amount  due,  it 
lanlo,  and  the  niort;;agc  remains  intact  for  will  discharge  the  lien,  and  be  a  good  do- 
the  rcsiiluc.  A  much  greater  hardship  fence  against  its  enftincmeut  without  iho 
might  bo  imposed  and  serious  iujury  be  tender  being  kept  good,  yet  we  are  dearly 
produced  by  holding  that  the  mortgagor  of  opinion  that  it  should  be  kejit  ^ood  in 
cannot  cxtingui^^h  the  lien  of  the  mortgage  order  to  entillu  the  nujrigngor  to  tho  af- 
VOL.  I.  ■'il  801 


§  893.]  PAYMENT   AND   DISCHARGE. 

The  same  distinction  is  taken  under  this  rule  that  prevails  at 
common  law,  that  when  the  mortgage  is  given  to  secure  a  debt, 
that  is  not  discharged  by  the  tender,  though  when  it  secures  a 
gift  all  remedy  to  recover  the  sum  secured  is  gone.  It  is  estab- 
lished by  the  authorities  that  when  the  only  effect  of  the  tender 
is  to  extinguish  the  lien,  it  is  not  necessary  to  follow  up  the  ten- 
der with  the  averment  of  tovts  temps  prists  and  with  bringing  the 
money  into  court  ;i  but  that  when  the  tender  operates  to  dis- 
charge the  debt  or  sum  owing,  such  averment  and  payment  of 
money  into  a  court  is  essential  to  a  good  plea  of  tender.^ 

But  this  rule  is  limited  in  its  operation  to  defences  to  the  en- 
forcement of  the  mortgage.  It  does  not  avail  a  mortgagor  who 
seeks  a  discharge  of  his  mortgage  ;  for  when  he  seeks  relief  in  a 
court  of  equity  he  must  do  equity,  and  must  pay  the  mortgage 
debt.  The  tender  then  avails  merely  to  stop  the  interest  and  not 
to  discharge  the  debt.'^  Moreover,  one  designing  to  make  a  ten- 
der with  the  purpose  of  insisting,  in  case  of  refusal,  that  the  mort- 
gage lien  is  discharged,  is  bound  to  act  in  a  straightforward  way 
and  distinctly  and  fairly  make  known  his  true  purpose,  without 
mystery  or  ambiguity,  and  allow  reasonable  opportunity  for  in- 
telligent action  by  the  holder  of  the  mortgage.* 

The  mortgagor  by  his  subsequent  acts  and  dealings  may  waive 
his  tender,  and  he  does  this  by  afterwards  accepting  a  discharge, 
though  saying  at  the  time  that  he  would  take  his  own  time  to 

firmative  relief  which  he  seeks  in  this  ac-  rest  on  strict  legal  rather  than  on  equi- 

tion,  and  which  the  judgment  awards  him,  table  principles." 

namely,  the  extinguishment  of  the  mort-  ^  Kortright  v.  Cad}',  21  N,  Y.  343,  354; 

gage.     A   party   coming  into   equity  for  Hunter  u.  Le  Conte,  6  Cow.  (N.  Y.)  728. 

affirmative  relief  must  himself  do  equity,  -  Giles    v.   Hartis,   1   Lord   Ray.   254  ; 

and  this  would  require  that  he  pay  the  Hume  v.  Peploe,  8  East,  168.     In  the  lat- 

deht  secured  by  the   mortgage,   and  the  ter  case  Lord  Ellenborough,  C.  J.,  stopped 

costs  and  interest,  at  least  up  to  the  time  the  counsel  who  was   to  have  argued  in 

of  the  tender.     There  can  be  no  pretence  support  of    the  tender,  and   asked    if   he 

of  any  equity  in  depriving  the  creditor  of  could  sliow  any  case  where  an  averment 

his  security  for  his  entire  debt,  by  way  of  of  touts  temps  prist  was  holdeu  not  to  be 

penalty  for  having  declined  to  receive  pay-  necessary  in  a  plea  of  tender;   saying  it 

ment  when  offered.     The  most  that  could  was  expressly  decided  to  be  necessary  in 

be  equitably  claimed  would  be  to  relieve  Giles  v.  Hartis,  and  was  one  of  those  land- 

tlie  debtor  from  the  payment  of  interest  marks  in  pleading  that  ought  not  to  bede- 

and  costs  subsequently  accruing,   and  to  parted  from. 

entitle  him  to  this  relief  he  should  have  ^  Cowles  v.  Marble,  37  Mich.  158. 

kept  his  tender  good  from  the  time  it  was  *  Proctor  v.  Robinson,  35    Mich.  284  ; 

made.    If  any  further  advantage  is  gained  Frost  v.  Yonkers  Savings  Bank,  70  N.  Y. 

by  a  tender  of  the  mortgage  debt,  it  must  553. 

802 


TENDER    BEFORE   AND    AFTER    DEFAULT.  [§  894. 

pay  ;  for  he  thereby  recognizes  the  mortgagee's  right  to  demand 
and  receive  the  debt.^ 

894.  Questions  relating  to  the  suflaciency  of  tenders  are 
perhaps  of  less  frequent  occurrence  in  this  country  than  in  Eng- 
land, chiefly  for  the  reason  that  custom  has  there  established  the 
rule,  that  after  the  day  of  payment  has  passed  the  mortgagee  is 
entitled  to  six  months'  notice  of  payment,  or  to  interest  for  that 
period  in  lieu  of  notice  ;  while  here  no  such  general  rule  prevails. 
And  if  there  be  any  doubt  in  regard  to  the  sufficiency  of  a  tender 
that  has  been  made,  there  is  generally  no  difficulty  in  the  way  of 
making  a  new  tender  without  material  loss ;  and  proceedings  for 
redemption  may  generally  be  commenced  at  any  time,  either  with 
or  without  a  previous  tender. 

Questions  of  tender,  however,  assume  great  importance  in  those 
states  where  the  effect  of  the  tender  is  wholly  to  discharge  tiie 
mortgage  lien,  especially  where  the  rule  is  also  established  that  a 
tender  may  have  this  effect  even  when  the  tender  is  not  kept 
good  by  a  payment  into  court,  or  by  constantly  and  at  all  times 
having  the  money  ready  to  pay  over, 

A  tender  is  not  kept  good,  when  after  making  the  tender  the 
party  deposited  the  money  to  his  own  use  in  a  bank,  and  a  part 
of  the  sum  was  afterwards  drawn  out,  and  it  was  not  shown 
that  other  money  was  kept  ready  to  supply  its  place  when  called 
for.2 

The  conduct  of  the  mortgagee  may  be  such  as  to  exonerate  the 
debtor  from  making  a  tender,  as,  for  instance,  when  it  shows  con- 
clusively that  a  proper  tender  would  not  be  accepted.^  But  a 
mere  claim  of  more  than  is  really  due  does  not  have  this  effect; 
because  the  creditor  may,  upun  the  tender  being  actually  made, 
accept  the  amount.* 

A  tender  will  be  without  avail  either  to  discharge  the  lien  or 
to  stop  the  running  of  interest,  or  to  avoid  liability  for  costs,  un- 
less it  be  for  the  whole  amount  of  the  mortgage  debt,  and  not 
merely  that  portion  of  it  which  is  due,-^  and  be  made  uncondition- 
ally.^    This  rule  is  not  affected  by  the  fact  that  only  a  portion  of 

1  Fry  V.  Russell,  35  Mich.  229.  ■♦  Ashmole  r.  \V.unwiiij;ht,  2  Q.  IJ.  ( A.l. 

2  Craiu  V.  McGoon.  86  HI.  4;n.  &  Kl.  N.  S.)  8.37  ;  Alkti  v.  Sinilh,  12  t'.  U. 
a  Scarfc   v.  Morgan,  4  M.  &  W.  270  ;     N.  S.  0;}8. 

Kcrf<.rd  f.  Moiidd,  28  L.  J .  Kx.  W.i ;  At-         ''  Omliam   v.    LiiKlen,    .'.()   X.    Y.   .'•.47; 
kinson    f;.   Morrissy,  ;)    Ort-g.   ;j:i2  ;  Vnu-     Cupi.lcs  i-.  GalliKun,  G  Mo.  App.  02. 
pell   V.  Woo.iwanl,  2  San.lf.  (N.  V.)  Ch.         »  Sager  r.  Tupper,  35  Mich.  134. 
143;  Gorhuin  i;.  Furbou  (HI.),  10  N.  E. 
Ktl).  1. 


§§  895,  896.]  PAYMENT    AND   DISCHARGE. 

the  amount  due  belongs  to  the  hohler  of  tlie  mortgage,  and  the 
bahmce  to  some  other  person,  for  whom  he  holds  the  mortgage 
in  trust,^  or  that  the  mortgagee  has  received  rents  and  profits  for 
which  he  ought  to  account,  but  the  amount  of  which  has  not  been 
adjusted.^ 

A  purchaser  of  a  portion  of  the  mortgaged  premises  cannot 
make  an  effectual  tender  of  that  portion  of  the  mortgage  debt 
which  pertains  to  the  portion  of  the  premises  purchased  by  him, 
unless  the  mortgage  provides  for  a  release  of  such  portion  upon 
the  payment  of  a  certain  j)art  of  the  debt  secured.^ 

A  junior  incumbrancer,  having  the  right  to  redeem,  may  make 
a  tender  with  the  same  effect  that  the  mortgagor  himself  might 
make  it.^ 

895.  Who  may  make  a  tender.  —  The  mortgagor,  not  only 
while  he  remains  the  owner  of  the  mortgaged  estate,  but  as  well 
after  he  has  sold  it,  has  the  right  to  pay  the  mortgage  debt  and 
require  satisfaction  :  ^  and  of  course,  the  debt  being  his,  he  can 
make  a  good  tender  of  payment.  One  who  has  purchased  the 
property  subject  to  the  mortgage,  and  assumed  the  payment  of 
it,  has  of  course  the  same  right,  for  he  has  thus  made  the  debt 
his  own.  But  it  has  been  questioned  whether  a  grantee  who  has 
merely  bought  the  equity  of  redemption  subject  to  the  mortgage, 
without  incurring  any  personal  liability  in  respect  to  it,  has  the 
right  to  discharge  the  lien  by  a  tender.  It  is  claimed  that  he  has 
merely  a  right  to  redeem  the  land.^ 

896.  A  tender  must  be  made  to  a  person  authorized  to  re- 
ceive payment.  It  must  in  general  be  made  to  the  person  who 
has  the  legal  estate  and  the  right  to  reconvey,  or  to  enter  satis- 

1  Graham  v.  Linden,  50  N.  Y.  547.  tion  owes  no  debt.     It  cannot  be  said  in 

■^  Bailey  v.  Metcalf,  6  N.  H.  156.  respect  to  him,  as  it  is  said  in  Kortright  v. 

3  Flake  v.  Nuse,  51  Tex.  98.  Cady,  'the  creditor  by  refusing  to  accept 

*  Dings  V.  Parshall,  7  Hun  (N.  Y.),  522 ;  does  not  forfeit  bis  right  to  the  very  thing 

Frost  V.  Yonkers  Savings  Bank,  8  lb.  26 ;  tendered,  but  he  does  lose  all  collateral 

S.  C.  70  N.  Y.  553  ;  Sager  v.  Tupper,  35  benefits  and  securities.'     For  the  creditor, 

Mich.  134.  if  he  refuses  to  take  the  money  from  the 

5  Blim  V.  Wilson,  5  Phil.  (Pa.)  78.  owner  of  the  equity  of  redemption,  cannot 

6  Harris  y.  Jex,  66  Barb.  (N.  Y.)  232.  recover  it  from  him.  It  is  the  redemption 
"  But  how  is  the  land  to  be  redeemed  from  of  a  lien,  not  the  payment  of  a  debt,  which 
the  lien  of  the  mortgage  f  "  asks  Mr.  Jus-  his  tender  is  to  accomplish.  There  is  no 
tice  Learned.  "  Not,  I  suppose,  by  a  mere  debt,  at  least  from  him,  and  therefore,  as 
tender  which  is  not  kept  good,  but  by  it  seems  to  me,  his  mere  tender  does  not 
actual  payment,  or  by  bringing  the  money  discharge  the  mortgage  lien.  He  has  the 
into  court  for  the  purpose  of  payment,  right  to  redeem,  but  he  must  redeem  by 
The  mere  owner  of  the  equity  of  redemp  actual  payment."    The  Court  of  Appeals, 

804 


TENDER    BEFORE   AND   AFTER    DEFAULT.  [§  897. 

faction  of  the  mortgage.^  If  the  mortgage  has  been  assigned,  and 
the  debtor  has  actual  or  constructive  notice  of  the  assignment,  the 
tender,  to  be  effectual,  must  be  made  to  the  assignee.^  An  agent 
or  attorney  may  have  authority  to  receive  payment,  although  he 
cannot  discharge  the  mortgage  ;  but,  on  the  other  hand,  although 
he  may  be  authorized  to  demand  payment,  he  may  have  no  au- 
thority to  receive  it,  in  which  case  a  tender  to  him  would  not  be 
effectual.  A  mortgagee  having  received  at  his  residence  outside 
the  city  of  New  York  a  check  on  a  bank  in  the  city  for  the 
amount  of  an  instalment  of  interest,  brought  the  check  to  the 
city  and  left  it  with  his  attorney  and  requested  him  to  return  it 
to  the  mortgagor.  The  attorney  returned  it  by  letter,  stating 
that  the  mortgagee  would  not  receive  payment  by  check,  and 
notifying  him  that  unless  the  interest  should  be  paid  in  full  at 
once  he  was  instructed  to  foreclose  the  mortgage.  The  day  after 
the  receipt  of  the  letter  the  mortgagor  tendered  the  amount  of 
the  interest  to  the  attorney,  who  then  stated  that  he  had  no  au- 
thority to  receive  the  interest,  and  that  this  must  be  paid  to  the 
mortgagee  at  his  residence.  The  tender  was  held  to  be  invalid, 
and  the  principal  having  become  due  in  consequence  of  the  non- 
payment of  the  interest  for  a  period  of  thirty  days  after  it  became 
djie,  the  court  refused  to  relieve  him  from  the  forfeiture.^ 

If  the  debtor  has  no  knowledge  that  the  mortgage  has  been 
assigned,  he  may  make  a  tender  to  the  mortgagee ;  and  although 
the  mortgage  has  at  the  time  been  in  fact  assigned,  the  tender, 
according  to  some  authorities,  would  be  effectual  even  to  extin- 
guish the  lien  :*  but  it  would  seem  that  if  a  payment  to  the  mort- 
gagee would  not  be  good,  a  tender  would  not  be  good  ;  and  that 
inasmuch  as  the  debtor,  not  finding  the  bond  or  note  in  the  mort- 
gagee's possession,  is  put  upon  inquiry  as  to  his  authority  to  re- 
ceive payment,  and  is  even  chargeable  witli  knowledge  of  fraud 
if  he  goes  on  and  makes  it,  a  tender  to  him  when  Ik;  had  n(jt  {)os- 
session  of  the  evidence  of  the  debt  would  be  bad. 

897.  Place  of  payment  or  tender.  —  As  a  general  rule,  when 
the  mortgage  or  the  accompanying  security  does  not  appoint  any 

:,',  N.  Y.  421,  ilccidcd   the  ciise  upon  an-  *   IKt/.ell  i-.  Harlxr,  0  llun  (N.  Y.),.VU. 

otlier  point  and  declined  to  pass  upon  this.  In  Uoud  r.  Marl>K',  10  I'nijjc  (N.  Y.),  409, 

'   See  Van  Burcn  v.  OlinHlead,  .'i  Paige  the  inort^ngee  had  possession  of  the  hond 

(N.  Y.),  9.  and    niortgiiije   as  iifj'-nt  of  lii«  a-'signoe, 

'^  Dorkray  i'.  Nohle,  8  Mc.  278.  althou;,'h    the    assi;,'nfe    had    wiiliout   his 

^  Grusny  r.  Schneider,  ."iO  Mow.  (N.  Y.)  knowledge  asHigned  thcni  to  another. 

I'r.  134, 

805 


§  897.] 


PAYMENT   AND   DISCHARGE. 


place  at  which  the  principal  or  interest  is  to  be  paid,  tlie  debtor 
is  bound  to  seek  tiie  creditor  to  make  his  payments.^  A  place  of 
paynaent  named  in  the  deed  relates  in  strictness  to  the  time  of 
payment  there  mentioned,^  and  afterwards  a  personal  tender  is 
generally  necessary. 

A  personal  tender  may  be  excused  when  the  mortgagee  has 
shown  by  his  conduct  or  declarations  that  he  means  to  avoid  a 
tender.-^     In  G-yles  v.  Hall^  reported  by  Peere  Williams,^  it  ap- 


1  Harris  v.  Mulock,  9  How.  (N.  Y.)  Pr. 
402 ;  Smith  v.  Smith,  25  Weud.  (N.  Y.) 
405. 

Littleton,  212  a,  saith :  "  And  there- 
fore it  will  be  a  good  and  sure  thing  for 
him  that  will  make  such  feoffment  in 
mortgage,  to  appoint  an  especiall  place 
where  the  money  shall  be  pajd,  and  the 
more  speciail  that  it  bee  put,  the  better  it 
is  for  the  feoffor.  As  if  A.  infeoffe  B.  to 
have  to  him  and  to  his  heires,  upon  such 
condition  that  if  A.  pay  to  B.  on  the 
Feast  of  Saint  Michael  the  Arch-Angell 
next  coming,  in  the  cathedrall  church  of 
St.  Paul's  in  London  within  foure  houres 
next  before  the  hour  of  noon  of  the  same 
Feast,  at  the  Rood  loft  of  the  Rood  of 
the  North  doore  within  the  same  church, 
or  at  the  tombe  of  saint  Erkenwald,  or  at 
the  doore  of  such  a  chappell,  or  at  such  a 
pillar,  withia  the  same  church,  that  then 
it  shall  be  lawfull  to  the  aforesaid  A.  and 
his  heires  to  enter,  etc. ;  to  this  case  he 
needeth  not  to  seek  the  feoffee  in  another 
place,  nor  to  bee  in  any  other  place,  but 
in  the  place  comprised  in  the  indenture, 
nor  to  bee  there  longer  than  the  time  spe- 
cified in  the  same  indenture,  to  tender  or 
pay  the  money  to  the  feoffee,"  etc.  And 
Coke  thereupon  :  "  Here  is  good  counsell 
and  advice  given,  to  stt  dovvne  in  convey- 
ances everything  in  certaintie  and  partic- 
ularitie,  for  certaintie  is  the  mother  of 
quietnesse  and  repose,  and  incertaintie  the 
cause  of  variance  and  contentions;  and 
for  obtaining  of  the  one,  and  avoiding  of 
the  other,  the  best  meane  is,  in  all  assur- 
ances,   to  take   counsell   of   learned   and 


well  experienced  men,  and  not  to  trust 
onely  without  advice  to  a  precedent.  For 
as  the  rule  is  concerning  the  state  of  a 
man's  bodie.  Nullum  medicamentum  est 
idem  omnibus,  so  in  the  state  and  assur- 
ance of  a  man's  land.  Nullum  exemplum 
est  idem  omnibus." 

-  Sharpnell  v.  Blake,  2  Eq.  Cas.  Abr. 
604. 

3  Manning  v.  Burges,  1  Cas.  in  Ch.  29. 

The  following  is  the  report  of  a  case 
before  the  Master  of  the  Rolls  in  the  15th 
year  of  Charles  II. :  "  A  mortgage  was 
forfeited ;  the  mortgagor  afterwards  meet- 
ing the  mortgagee,  said,  I  have  moneys, 
now  I  will  come  and  redeem  the  mort- 
gage. The  mortgagee  said  to  him,  he 
would  hold  the  mortgaged  premises  as 
long  as  he  could ;  and  then  when  he  could 
hold  them  no  longer,  let  the  devil  take  them 
if  he  would.  And  afterwards  the  mort- 
gagor went  to  the  mortgagee's  house  with 
money  more  than  sufficient  to  redeem  the 
mortgage,  and  tendered  it  there  ;  but  it 
did  not  appear  that  the  mortgagee  was 
within,  or  that  the  tender  was  made  to 
him ;  and  it  was  decreed  a  redemption, 
and  the  defendant  to  have  no  interest 
from  the  time  of  the  tender,  because  of 
his  wilfulness." 

Mr.  Fisher,  referring  to  this  case,  but 
not  quoting  the  language  of  it,  after  say- 
ing that  a  tender  may  be  sufficient  when 
made  at  the  mortgagee's  house  in  his  ab- 
sence, adds :  "  But  this  it  is  presumed  can 
be  only  done  under  particular  circum- 
stances, as  where  the  mortgagee  is  delib- 
erately keeping  out  of  the  way  to  avoid 


*  2  P.  Wms.  378.     The  bill  was  to  com-     £1,000,  and   to  stop  the   payment  of  in- 
pel  a   reassignment    of   a   mortgage   for     terest. 


806 


TENDER   BEFORE   AND    AFTER   DEFAULT.       [§§  898,  899. 

peared  that  on  the  day  before  the  25th  of  March,  1722,  the  mort- 
gagor gave  personal  notice  in  writing  to  the  defendant,  the  mort- 
gagee, that  he  would  tender  the  money  and  interest  between  the 
hours  of  ten  and  twelve  in  the  morning,  at  Lincoln's  Inn  Hall, 
on  the  25th  of  September,  1722,  which  was  accordingly  done. 
"Objection  by  Solicitor  General  Talbot:  Lincoln's  Lin  Mall  is 
not  named  in  the  proviso  in  the  mortgage  deed  as  the  place  for 
the  payment  of  the  money,  and  tlierefore  the  tender  must  be  to 
the  person.  Lord  Chancellor:  The  money  being  lent  in  town, 
and  after  personal  notice  given  for  the  payment  thereof,  and  no 
objection  made  by  the  mortgagee  to  the  place  at  the  time  of  the 
notice,  it  would  be  very  hard  to  make  the  mortgagor  travel  with 
this  great  sum  of  money  to  Oxford,  where  the  mortgagee  lived." 

The  rule  wa^  long  ago  established  in  England,  that  the  debtor 
is  not  bound  to  follow  his  creditor  beyond  the  four  seas  to  make 
a  tender.  The  same  rule  prevails  in  this  country,  the  debtor  not 
being  bound  to  seek  his  creditor  to  make  a  tender  beyond  the 
limits  of  the  state.  When  a  mortgagee  has  removed  from  the 
state,  and  left  no  one  within  it  to  receive  the  interest  and  instal- 
ments as  they  become  due,  the  mortgagor  is  relieved  from  any 
obligation  to  make  a  tender.^ 

A  mortgage  which  provides  no  place  of  payment  is  presumed 
to  be  payable  in  the  state  where  it  was  made,  when  the  parlies 
reside  in  the  state.^ 

898.  The  tender  may  be  made  at  any  time  of  the  day,  un- 
less some  hour  has  been  fixed  upon  by  agreement  of  the  parties 
or  by  notice ;  in  which  case  an  attendance  at  any  time  within 
the  hour  following  the  time  named  continued  to  the  end  of  the 
hour  is  sufficient.'^ 

899.  It  is  a  settled  rule  that  interest  will  cease  to  run 
from  the  time  of  tender,  when  the  money  really  due  upon  the 
mortgage  is  actually  and  properly  tendered  by  a  person  having 
the  right  to  make  tiie  tender,  so  that  the  mortgagee  is  bound  to 

the  tender;  or,  as  it  happened  in  ft  case  gethcr;  and  so  flicnfore  llio  (;riin  liuinor 
where  there  was  evidence  that  the  niort-  of  his  comment  is  iilto};other  latent, 
gagee  liad  expressed  a  determination  to  '  Ilouhio  r.  \%jlkeninp,  4'J  llow.  (N.  Y.) 
Iiold  the  i)roperty  its  lonjj  as  he  could,  and  I'r.  109  ;  and  see  Hale  i:  I'atton,  GO  N.  Y. 
after  that  to  transfer  it  to  a  particiihir  'J.'J'J ;  IIoh}j  v.  I'arr,  l.'J  Ilnn  (\.  V.),  95  ; 
friend  of  liis  own."  Mort.  2d  vol.  .'id  ed.  Conklin  v.  Conkliu,  .^4  Ind.  289. 
790.     The  (jravily  of  Mr.   Kixhcr's   work  -   Houliio  r.  Volkcninc,  siipm. 

mifjiit  have  been    too  miRli  diHtiirtied  liy         ='  Kno.\  v.  SiiiiMions,  4   Bro.  C  C.  433  ; 
placing  the  case  and  his  version  of  it  to-     fiml  see  Hernard  r.  Norton,  10  I,.  'P.  N.  S. 

1 83. 

807 


§  900.] 


PAYMENT    AND   DISCHARGE. 


accept  it.^  If  the  tender  be  refused,  the  person  making  the  ten- 
der must  keep  the  money  continually  ready  to  be  paid  over  in 
case  the  mortgagee  should  subsequently  conclude  to  accept  it. 
Neither  should  he  make  any  profit  out  of  it  afterwards.  "  It 
ought  to  appear,"  said  the  Lord  Chancellor,  as  reported  by  Peere 
Williams  in  an  early  case,^  "that  the  mortgagor  from  that  time 
always  kept  the  money  ready  ;  whereas  the  contrary  thereof 
being  proved,  that  the  mortgagor  was  not  ready  to  pay  it,  there- 
fore the  interest  must  run  on."  Should  the  mortgagee  subse- 
quently demand  the  money,  and  find  that  the  mortgagor  was  not 
ready  with  it  to  make  payment  in  accordance  with  his  previous 
tender,  interest  will  run  on  as  if  no  tender  had  been  made  until 
the  money  is  paid  or  brought  into  court.-^ 

Witiiout  a  complete  and  formal  tender,  an  offer  to  pay  the 
amount  due  will  prevent  the  running  of  interest  at  a  higher  rate 
than  six  per  cent.,  where  this  is  the  legal  rate,  when  a  higher  rate 
is  not  agreed  upon  by  the  parties,  though  the  mortgage  notes  bear 
interest  at  a  higher  rate.* 

900.  The  tender  must  be  absolute  and.  unconditional,  and 
must  be  fairly  made,  with  a  reasonable  opportunity  given  to  the 
mortgagee  to  ascertain  the  amount  due  him.^     It  would  seem  that 


1  Columbian  Building  Asso.  v.  Crump, 
42  Md.  192  ;  Greer  v.  Turner,  36  Ark.  17. 

2  Gyles  V.  Hall,  2  P.  Wins.  378 ;  and 
the  reporter  sa3-s,  that  "  if  the  tender  be 
insisted  on  to  stop  interest,  the  money 
must  be  kept  dead  from  that  time,  because 
the  party  is  to  be  uncore  prist."  The  other 
part  of  the  plea,  tout  temps  prist,  must  be 
understood. 

^  Columbian  Building  Asso.  v.  Crump, 
siipi-a. 

*  Donahue  v.  Chase,  139  Mass.  407. 

5  Potts  V.  Plaisted,  30  Mich.  149.  In 
this  case  Mr.  Justice  Christiancy  forcibly 
expressed  the  principles  upon  which  a 
tender  should  be  made,  saying  :  "  In  view 
of  the  serious  consequences  to  the  holder 
of  a  mortgage,  upon  the  refusal  of  a 
tender,  —  consequences  which  may  often 
amount  to  the  absolute  loss  of  the  entire 
debt,  —  and  in  view  of  the  strong  tempta- 
tion which  must  exist  to  contrive  merely 
colorable  or  sham  tenders,  not  intended  in 
good  faith,  we  think  the  evidence  should 
be  so  full,  clear,  and  satisfactory  as  to 


leave  no  reasonable  doubt  thai  the  tender 
was  so  made,  that  the  holder  must  have 
understood  it  at  the  time  to  be  a  present, 
absolute,  and  unconditional  tender,  in- 
tended to  be  in  full  payment  and  extin- 
guishment of  the  mortgrtge,  and  not  de- 
pendent upon  his  first  executing  a  receipt 
or  discharge,  or  any  other  contingency. 
And  the  holder  must,  in  every  case,  have 
a  reasonable  opportunity  to  look  over  the 
mortgage  and  accompanying  papers,  to 
calculate  and  ascertain  the  amount  due  ; 
and  if  such  papers  are  not  present,  he 
must  be  allowed  a  reasonable  time  to  get 
them  and  make  the  calculation.  He  can- 
not be  bound,  under  the  penalty  or  at  the 
hazard  of  losing  his  entire  debt,  to  carry 
at  all  times  in  his  head  the  precise  amount 
due  on  any  particular  day."  See,  also, 
Roosevelt  v.  N.  Y.  &  Harlem  R.  R.  Co.  45 
Barb.  (N.  Y.)  .554  ;  ^'.  C.  30  How.  Pr.  226, 
230  ;  Roosevelt  v.  Bull's  Head  Bank,  45 
Barb.  (N.  Y.)  579  ;  Storey  v.  Krewsou,  55 
Ind.  397  ;  Harmon  v.  Magee,  57  Miss.  410  ; 
Parks  V.  Allen,  42  Mich.  482. 


TENDER   BEFORE   AND   AFTER   DEFAULT.  [§  901. 

the  demand  for  a  receipt  or  discharge  as  a  condition  of  the  tender 
would  prevent  a  refusal  of  the  tender  from  operating  as  a  dis- 
charge of  the  lien.  Certainly  a  condition  annexed  to  the  tender, 
that  the  holder  of  the  mortgage  should  execute  a  quitclaim  deed, 
or  a  discharge  of  record,  or  an  assignment,  would  have  that  effect.' 
A  requirement  of  a  quitclaim  deed  is  an  inadmissible  condition, 
although  the  holder  of  the  mortgage,  to  whom  the  tender  is  made, 
received  from  the  mortgagee  not  only  an  assignment  of  the  mort- 
gage, but  a  quitclaim  deed  of  the  land  executed  after  the  mort- 
gagee had  himself  purchased  the  premises  at  a  foreclosui-e  sale, 
made  by  him,  which  had  afterwards  been  superseded  and  ren- 
dered abortive  by  his  extending  the  time  of  redemption.- 

The  mortgagee  is  not  required  to  determine  at  the  time  whether 
the  tender  be  sufficient.  He  can  take  the  sum  offered,  and  then 
if  he  finds  it  sufficient  he  can  afterwards  discharge  or  cancel  the 
mortgage  before  rendering  himself  liable  to  penalty  for  not  doing 
so,  or  to  a  suit  to  compel  a  release  ;  and  if  the  tender  prove  in- 
sufficient, he  need  not  fear  either  the  penalty  or  the  suit,  but  may 
himself  proceed  to  collect  the  balance.  He  cannot  justify  his  re- 
fusal of  a  tender  on  the  ground  that  the  debtor  would  not  comply 
with  the  conditions  upon  which  alone  he  would  accept  the  tender, 
as,  for  instance,  that  the  debtor  should  also  pa}'  another  debt  due 
him.  He  has  no  more  right  to  make  conditions  of  acceptance 
than  the  debtor  has  to  make  conditions  of  payment.'^ 

901.  In  what  money  tender  may  be  made.  —  A  mortgage 
made  payable  in  gold  or  silver  coin  of  the  United  States  ma}'  be 
paid  in  United  States  notes,  which  by  law  are  made  legal  tender.* 

The  Supreme  Court  of  the  United  States  first  decided  that  the 
Legal  Tender  Act,  so  called,  was  not  applicable  to  contracts  made 
before  the  passage  of  the  act ;  '  but  this  decision  was  shortly  after- 
wards reversed.'^  In  the  interval  ix^tween  these  decisions,  pay- 
ment of  a  mortgage  executed  previous  to  the  passage  of  this  act 
was  tendered  in  h^gal  tender  notes  of  the   United  States,  whicli 

1  Lorin}^  v.  Cooke,  3  I'ick.  (Mass.)  4S,  *  Hodcs    i'.    Hroiison,    .14    N.  V.    f)4l»  ; 

iind   cases  cited  ;  Fro>t    v.    Vonkers  Sav.  Kini|)toii    r.    Hroiison,  4.')  Hurli.    (N.   Y.) 

I5ank,  8  Hun  (N.  Y.),  26;  .S'.  C.  TO  N.  Y.  (',18  ;   Virscs    v.    (iihoncy,    38    Mo.    4.')8  ; 

').'j.3;  Lindsay  v.  MattliewH,  17  Kla.  .OTf) ;  Stark  c.  CoHiii,  10.")  Mass.  328. 

Eiiixltsv.  Hall  (.Midi.  1880),  7   N.  W.  lUj).  '  Hepijurn    r.    (iriswolil,  8  WalL   CO.l, 

239.  00.').     See  Morrow  )•.  Hainny,  .')8   111.  3.')7  ; 

-  I)odt,'C  I'.  IJrewi-r,  31  .Mi<lj    227.  (;iiiiinl)lin  v.  Hlair,  .')8  III.  38.'). 

'  iiiiriict  V.  Denui.stori,  .0  JohiiH.  (N.  V.)  '•  Knox  r.  Iac,  12  Wall.  4.''>7. 
Ch.  35. 

809 


§  901.]  PAYMENT    AND   DISCHARGE. 

the  holder  of  the  mortgage  refused ;  and  his  refusal  was  justified 
on  the  ground  that  he  could  properly  rely  upon  the  decision  then 
standing  as  the  law  of  the  land  upon  this  matter,  and  according 
to  which  the  tender  was  insufficient.^ 

A  payment  or  tender  in  bills  of  a  specie-paying  bank,  current 
at  the  place  of  payment,  has  been  held  to  be  good.^  A  tender 
of  notes  or  bills  not  a  good  tender  in  themselves  may  be  made 
good  by  an  offer  to  turn  them  forthwith  into  money.^  If  no  ob- 
jection be  made  at  the  time  to  the  quality  of  the  tender,  but 
merely  to  the  amount  of  it,  this  objection  cannot  afterwards  be 
taken.* 

A  tender  of  Confederate  treasury  notes  made  in  payment  of  a 
mortgage  given  in  Alabama,  in  the  time  of  the  Southern  Con- 
federacy, and  by  its  terms  payable  "in  current  paper  funds,"  was 
held  a  good  tender,  inasmuch  as  such  notes  were  current  at  the 
time,  although  greatly  depreciated.^  But  a  tender  in  such  money 
was  held  not  to  be  good  when  the  contract  did  not  specify  in 
what  currency  it  was  payable,  and  the  tender  was  made  several 
months  afterwards,  when  this  money  was  greatly  depreciated.^ 

Where  there  is  a  variance  between  the  recital  in  the  mortgage 
and  the  terms  of  the  bond,  the  mortgage  reciting  a  bond  payable 
in  "  lawful  money  of  the  United  States,"  but  the  bond  calling  for 
"lawful  silver  money  of  the  United  States,"  third  persons  rely- 
ing upon  the  record  are  not  affected  by  the  omission  in  the  mort- 
gage, but  may  discharge  the  mortgage  by  a  payment  in  lawful 
money  of  the  country  of  any  description.  The  question  is  one  of 
lien,  and  this  is  determined  by  the  record  so  far  as  third  persons 
are  concerned. 

The  recital  in  the  mortgage  gives  notice  of  the  character  and 
amount  of  the  debt  secured ;  and  subsequent  purchasers  and 
mortgagees  are  not  required  to  seek  the  bond,  when  there  is 
nothing  vague  or  wanting  in  the  reference  to  render  such  inquiry 
necessar3\  Although  the  bond  is  the  principal  debt  in  law,  and 
governs  the  rights  of  the  parties  as  between  themselves,  it  does 

1  Harris  v.  Jex,  66  Barb.  (N.  Y.)  232;  ^  Austen  i-.  Dodwell ,  1  Eq.  Cas.  Abr. 
aff.  55  N.  Y.  421.  318. 

2  Augur  V.  Winslow,  Clarke  (N.  Y.),  4  Biddu]ph  v.  St.  John,  2  Sch.  &  Lef. 
258.     See  Worthington  v.  Bickuell,  2  Har.  521  ;  Lockyer  v.  Jones,  Peake,  180,  n. 

&  J.  (Md.)  58.  5  Stalworth  v.  Blum,  41  Ala.  319. 

6  Lynch  v.  Hancock,  14  S.  C.  66. 

810 


TENDER   BEFORE   AND   AFTER    DEFAULT.  [§  902. 

not  affect  others  who  have  purchased  in  good  faith  and  without 
notice  of  the  variance.^ 

A  legal  tender  of  interest  or  principal  of  a  mortgage  cannot  be 
made  by  a  bank  check.^ 

If  the  condition  of  the  mortgage  be  for  the  performance  of  any 
other  act  or  duty  than  the  payment  of  money,  as,  for  instance, 
the  support  of  the  mortgagee,  a  tender  of  performance  of  that  act 
or  duty  will  have  the  same  effect  that  a  tender  of  money  has  in 
other  cases. ^ 

The  tender  of  a  larger  sum  than  is  due,  with  a  demand  for 
change,  is  good  if  no  objection  be  made  to  it  on  this  account.* 

The  mortgage  covers  not  merely  the  debt,  but  the  costs  of  a 
suit  at  law  by  the  mortgagee  to  recover  the  debt  or  to  enforce 
the  security.^  The  costs  are  regarded  as  incident  to  the  debt. 
It  is  the  debtor's  neglect  that  renders  a  resort  to  legal  process 
necessary,  and  he  is  not  allowed  to  avoid  the  consequences  of  his 
omission  to  perform  his  contract.  Therefore,  after  action  has 
been  commenced,  either  upon  the  debt  or  the  security,  a  tender 
of  the  amount  to  discharge  it  should  include  costs ;  ^  and  costs 
incurred  in  an  attempt  to  sell  the  property  under  a  power  of  sale, 
in  accordance  with  the  terms  of  the  mortgage,  must  in  like  man- 
ner be  included.' 

902.  The  person  refusing  a  tender  properly  made  incurs 
the  burden  of  all  costs  subsequently  made  in  any  proceeding  to 
redeem  or  to  foreclose  the  mortgage.^  As  already  noticetl,  the 
tender  proving  sufficient,  he  sometimes  incurs  the  risk  of  a  com- 
plete discharge  of  his  lien  upon  the  property,  and  the  consequent 
loss  of  his  claim.^  This  would  be  prevented  in  some  states  by 
statutory  requirements,  that  upon  refusal  of  the  tender,  to  make 
it  effectual,  the  money  must  be  brought  into  court;  and  in  other 

1  Eagle  Beneficial  Society's  Appeal,  75  ment  against  him  was  comproiiiised,  see 
Pa.  St.  226.  Johnson  v.  Rice,  8  Me.  157. 

2  Grussy  v.  Schneider,  50  How.  (N.  Y.)  '"'  Marshall  v.  Wing,  50  Me.  62 ;  Mny- 
Pr.  134.  iiard  v.  Hunt,  5  Pick.  (Mass.)  240;  Jones 

3  Morrison  i-.  Morrison,  4  Hiin  (N.  Y.),  i-.  Phelps,  2  Barb.  (N.  Y.)  Ch-  440;  Cox 
410;   Carman   v.   Pultz,   21    N.    Y.    547;  v.  Wheder,  7  Paige  (N.  Y.),  248. 
Holmes   v.    Holmes,   9   N.   Y.  525,  527  ;  ^  Allen  v.  Kobhins,  7  H.  I.  .33. 
Young  V.  Hunter,  6  N.  Y.  203.  b  Cliff  v.  Wadsworth.    2  Y.  &  C.  Ch. 

*  Black  V.  Smith,  Peake,  88.  598,  604  ;    Columbian  Building  Asso.  i-. 

'■'  KawHonr.  Hall,  5r,  Mc.  142;  Hurd  i-.  Crumj),  42  Md.  192. 
Coleman,  42  Me.    182;    Hartley    v.   Tat-         "  §   893;     M.-irshall    r.    Wing,    .sH/ini  ,• 

ham,  I  Keycs  (N.  Y.),  222.     As   to  costs  Bailey  i'.  Melcalf,  6  N.  H.   150;   Robinson 

of  a  suit  against  a  surety  when  the  judg-  v.  Leuvitt,  7  N.  H.  73,  93. 

811 


§§  903,  904.]  PAYMENT   AND    DISCHARGE. 

states  judicial  rules  and   practice  would   require   this,  or  at  least 
that  the  tender  be  constantly  kept  good. 

903.  Over-payment. —  When  the  holder  of  a  mortgage,  upon 
payment  of  it,  extorts  more  than  is  actually  due,  and  the  debtor, 
in  order  to  obtain  a  speedy  discharge  or  to  prevent  foreclosure, 
pays  the  amount  demanded,  he  may  recover  the  over-payment  as 
money  received  by  the  mortgagee  to  his  use.^ 

In  like  manner  if  the  mortgagee,  in  giving  notice  of  foreclosure 
sale,  makes  no  deduction  for  a  payment  made,  and  the  mortgagor 
afterwards  redeems  from  the  sale  under  a  statute  allowing  him  to 
do  so  upon  paying  the  purchase  money  and  interest,  he  may  re- 
cover of  the  mortgagee  the  money  paid  on  the  mortgage.^ 

If  by  mistake  a  mortgagor  pay  an  instalment  of  interest  a  sec- 
ond time,  he  cannot  recover  it  if  at  the  time  the  whole  mortgage, 
both  principal  and  interest,  is  due ;  but  he  may  have  the  benefit 
of  the  payment  in  a  credit  upon  the  debt.^ 

II.  Appropriation  of  Payments. 

904.  A  matter  of  intention.  —  Payment  of  the  debt  which 
the  mortgage  was  given  to  secure  extinguishes  the  mortgage.* 
But  to  have  this  effect  in  some  states,  as  we  have  already  noticed, 
the  payment  must  be  made  at  the  time  mentioned  in  the  condi- 
tion, but  in  others  it  may  be  made  at  any  time  afterwards;  but 
everywhere  it  is  the  rule  that  the  payment  must  be  actually  ap- 
propriated to  that  purpose,  and  until  this  be  done,  the  condition 
of  the  mortgage  being  broken,  the  mortgagor  may  maintain  a  bill 
to  redeem,^  or  the  mortgagee  may  maintain  a  bill  to  foreclose. 

Whether  a  payment  be  made  by  the  debtor  to  his  creditor  who 
holds  a  mortgage  upon  his  property,  or  whether  an  account  in  his 
favor  against  the  creditor  is  to  be  regarded  as  a  payment  on  the 
mortgage,  or  simply  a  debt  due  him  from  his  creditor,  leaving  the 
mortgage  standing  as  it  was  before,  is  a  question  of  the  intention 
of  the  parties,  and  is  to  be  determined  as  a  question  of  fact.  In 
the  absence  of  any  agreement  between  the  j^arties,  express  or  im- 
plied, the  mere  existence  of  a  debt  due  to  the  mortgagor  from  the 
mortgagee    does  not  operate  as    a   satisfaction  of    the  mortgage 

1  Close  r.  Phipps,  7  M.  &  G.  586;  Fra-  3  Jackson  v.  McKnight,  17  Hun  (N. 
ser  y.  Pendlebury,  10  W.  R    104;  Wind-     Y.),  2. 

biel  V.  Carroll,  16  Hun  (N.  Y.),  101.  *  Fisher  v.   Otis,  3  Chand.  (Wis.)  83; 

2  Spottswood  V.  Herrick,  22  Minn.  548.     Martineau  v.  McCollum,  4  lb.  153. 

5  Doody  V.  Pierce,  9  Allen  (Mass.),  141. 
812 


APPROPRIATION    OF  PAYMENTS. 


[§  905. 


wholh'  or  in  part,  or  enable  him  afterwards  to  set  off  such  indebt- 
edness against  an  assignee  of  the  mortgage.^ 

905.  A  deposit  of  the  amount  of  the  debt  may  be  made 
without  appropriation,  if  it  be  agreed  that  tlie  deposit  shall  be 
placed  in  the  mortgagee's  hands  without  in  any  way  operating  as 
a  payment  of  the  mortgage,  or  the  circumstances  show  that  the 
intention  of  the  parties  was  that  it  should  not  so  operate.  This 
was  the  case  where  a  mortgagor  sold  the  estate,  agreeing  to  dis- 
charge the  mortgage  himself,  and  took  the  purchaser's  notes  for 
the  amount  of  the  purchase  money.  These  he  delivered  to  the 
mortgagee  under  an  arrangement  that  the  proceeds  when  col- 
lected should  be  applied  to  the  payment  of  the  mortgage;  but  in 
order  to  stop  the  interest,  he  deposited  with  the  mortgagee  the 
amount  of  the  mortgage  debt,  the  mortgagee  giving  a  receipt  for 
the  money  and  agreeing  that  it  should  not  go  in  payment  of  the 
mortgage.  The  purchaser's  note  was  not  paid;  but  under  the 
circumstances  the  mortgage  remained  a  valid  security  unaffected 
by  these  transactions.^ 

Where  in  a  proceeding  to  foreclose  a  mortgage  against  a  pur- 

1  Peck  V.  Minot,  3  Abb.  (N.  Y.)  App.  of  fact.     If  it  was  tlie  intention  and  agree- 
Dec.  46.5  ;  S.  C.  4  Kobt.  323.     This  point  ment  of  the  parties  that,  as  soon  as  a  bal- 
ls illustrated  in  the  case  before  the  Court  ance  of  sixteen    thousand  dollars  should 
of  Appeals  of  New  York.     A  debtor  gave  accrue  in  favor  of  Brown,  the  same  should 
his  -creditor  a  bond  and  mortgage  to  se-  be  applied  in  discharge  of  the  mortgage, 
cure  the  exact  amount  of  the  balance  of  then  the  mortgage  was  discharged  the  mo- 
their  account,  conditioned  for  the  payment  ment  such  balance  existed.     If,   on   the 
of  sixteen  thousand  dollars  in  one  year  otlier  hand,  it  was  the  intention  and  agree- 
with   interest.     Transactions  to   a   large  ment  of  the  parties  that  the  sixteen  thou- 
amount  were  had  between  tlie  parties  for  sand    dollars    secured    by    the   mortgage 
three  years  afterwards,  in  borrowing  and  should  remain  as  a  permanent  debt,  irre- 
lending   money,  checks,   and   notes,   and  spective  of  the  balance  of  accounts,  tlun  it 
transferring  vessels;  but  when  an  account  would   so   remain   until  specilically  paid, 
was  again  settled  at  the  end  of  that  period,  whatever  might  be  the  s-tato  of  atcouuts 
the   mortgagor  owed  the  mortgagee   \x\t-  between  the  parlies.      Propositions  more 
wards  of  one  hundred  thousand   dollars,  essentially    questions  of   fact   than   those 
The  claim  was  made  that  after  the  giving  thus    slated  cannot  well    bo    inia;;incd." 
of  the  mortgage  there  was  a  balance  due  The  mortgagor  in  the  mean  time  had  ac- 
the  mortgagor  on  account  suflicient  to  pay  cepted  a  release  of  a  part  of  the  mortgaged 
the  mortgage  debt.     "  If  such  balance  at  premises,  and  had  also  given  several  new 
any  time  existe<l,"  haid  Mr.  Jusiije  Hunt,  obligations  for  the  interest  that  Inul  uc- 
"ihen  the  furilur  (lui-iion  arises,  was  it  crued  on  the  bond,  and   tiicse  acts  were 
the  intintion  «f  the  parties  that  the  mort-  regarded  as  evidence  of  an   intention   to 
gage  should  be  paid  by  such  imiance,  or  keep  the  mortgage  subsisting, 
that  it  should  continue  as  a  Hiib.sistiiig  se.  ^  Howe  v.  Lewis,  14  Pick.  (Ma.sH.)  .'la'J  ; 
curity  for   the  sixteen    thousand    dollurH,  and  see  Toll  v.  lliller,   II   i'aige  (N.  Y.), 
indejiendent  of  any  balance  in  the  current  i!'28. 
accounts  ?     This  also  is  a  aiinplu  qucHlion 

813 


§  906.]  PAYMENT   AND   DISCHARGE. 

chaser  who  had  assumed  the  payment  of  it,  there  was  evidence 
that  the  mortgagee  had  previously  brought  an  action  upon  the 
mortgage  note  against  the  mortgagor,  who  settled  the  action  by 
paying  a  certain  sum,  which  was  not  indorsed  upon  the  note,  but 
was  paid  with  the  understanding  that  the  mortgagee  should  bring 
an  action  upon  the  mortgage,  and  if  he  collected  the  full  amount 
of  the  note  from  the  mortgage  security  he  should  pay  back  the 
sum  in  question  to  the  mortgagor,  it  was  held,  that  the  question 
was  one  of  fact,  whether  the  parties  intended  that  the  amount 
should  go  in  part  payment,  or  was  to  be  applied  only  in  case  the 
whole  debt  should  not  be  obtained  from  the  mortgaged  property.^ 

906.  A  mortgage  debtor  may  in  the  first  instance  appro- 
priate a  payment  to  whatever  account  he  pleases,  either  princi- 
pal or  interest,  or  to  another  debt  due  the  mortgagee.^  This  is 
his  right  in  accordance  with  the  maxim,  Quicquid  solvitur,  solvi- 
tur  secundum  modum  solventis.  But  when  the  debtor  has  omitted 
to  make  any  specific  application  of  the  money  he  has  paid,  but 
has  left  this  to  the  presumptions  of  the  law,  or  to  be  applied  by 
the  creditor  as  he  may  see  fit,  he  cannot  afterwards  go  back  and 
make  an  appropriation  of  it  himself.^  The  general  payment  may 
be  applied  by  the  creditor  to  a  claim  against  the  debtor  for  which 
he  has  no  security,  or  among  secured  claims  to  that  for  which  he 
has  the  least  security.^  In  an  action  to  compel  a  discharge  of  a 
mortgage  on  the  ground  that  certain  payments  made  by  the  mort- 
gagor were  applied  by  him  at  the  time  upon  the  mortgage,  when 
he  was  otherwise  indebted  to  the  mortgagee,  the  burden  is  upon 
the  plaintiff  to  show  such  application  by  a  preponderance  of  evi- 
dence.^ 

If  one  holding  a  mortgage  upon  the  separate  property  of  a  mar- 
ried woman  receives  payments  from  the  husband,  who  is  indebted 

1  Dean  v.  Toppin,  130  Mass.  517.  892,  per  Lord  Cottenham  ;  Schuelenburg 

2  Mills  V.  Fowkes,  5  Bing.  N.  C.  455;  v.  Martin,  1  McCrary,  348;  Field  v.  Hoi- 
Bradley  V.  Heath,  3  Sim.  543  ;  Hammers-  land,  6  Cranch,  8  ;  United  States  v.  Jan- 
ley  v.  Knowlys,  2  Esp.  666,  per  Lord  Ken-  uary,  7  Cranch,  572;  Shellabarger  v. 
yon;  Simson  v.  Ingham,  2  B.  &  C.  65,  per  Binns,  18  Kans.  345;  Ege  v.  Watts,  55 
Best,  J. ;  Petty  v.  Dill,  53  Ala.  641  ;  Vick  Pa.  St.  321  ;  Johnson's  Appeal,  37  Pa.  St. 
V.  Smith,  S3  N.  C.  80;  Harris  v.  Hooper,  268;  Prouty  i:  Price,  50  Barb.  (N.  Y.) 
50  Md.  537  ;  Leeds  v.  Gilford,  41  N.  J.  Eq.  344 ;  Bank  of  Niagara  v.  Rosevelt,  9  Cow. 
464;  Hughes  v.  Johnson,  38  Ark.  285.  (N.  Y.)  409  ;  S.  C.  Hopk.  574  ;  Feldman 

3  Wilkinson  v.  Sterne,  9  Mod.  427,  per  v.  Beier,  78  N.  Y.  293  ;  Whilden  v.  Pearce 
Lord  Hardwicke;  Mills  w.  E'okes,  5  Bing.  (S.  C),  2  S.  E.  Eep.  709;  Johnson  v. 
N.  C.  455;  Leeds  i-.  Gifford,  supra.  Thomas,  77  Ala.  367. 

*  Mackenzie  v.  Gordon,  6  01.  &  F.  875,         ^  Knox  v.  Johnston,  26  Wis.  41. 
814 


APPROPRIATION    OF    PAYMENTS.  [§  907. 

to  him,  without  special  instructions  as  to  their  application,  the 
creditor  may  apply  them  to  the  satisfaction  of  the  husband's  debt 
rather  than  to  the  mortgage  debt  of  the  wife.^ 

A  person  holding  two  mortgages  upon  the  same  property  may 
apply  a  general  payment  to  either  or  to  both  of  them  at  his  op- 
tion. Thus  if  he  receive  the  proceeds  of  a  portion  of  the  mort- 
gaged estate  directly  from  a  purchaser,  although  the  mortgagor 
may  at  the  time  request  him  to  apply  them  towards  the  payment 
of  either  mortgage,  if  lie  fail  to  make  any  application  the  mort- 
gagee is  at  liberty  to  apply  them  as  he  may  choose.^ 

A  debtor  sent  money  to  his  creditor  requesting  him  to  apply  it 
to  a  mortgage  note  ;  but  the  creditor  objected,  and  requested  tiiat 
the  payment  be  applied  to  an  open  account,  though  saying  that  it 
would  Le  applied  to  the  note  if  insisted  upon,  but  that  in  such 
case  the  account  would  be  closed.  Soon  afterwards  he  credited 
the  amount  in  the  open  account  and  delivered  receipted  vouchers 
to  the  debtor.  It  was  held  that  the  facts  showed  no  payment 
upon  the  mortgage,  but  an  acquiescence  in  an  application  to  the 
open  account.*^ 

907.  The  law  will  apply  payments  which  neither  party 
has  made  any  appropriation  of.  But  the  law  will  never  make 
an  application  when  the  parties  have  already  done  so,  and  it  will 
not  change  an  application  Avhicli  the  parties  have  deliberately  and 
legally  made.*  The  debtor  cannot  retract  his  application  of  a 
payment  to  an  illegal  or  usurious  contract,  and  the  courts  will  not 
retract  it  for  him.^  A  payment  made  by  a  mortgage  debtor  has 
in  some  cases  been  presumed  to  be  made  upon  the  mortgage  debt, 
in  the  absence  of  a  particular  appropriation  at  the  time,  where  the 
creditor  also  Jjas  other  claims  against  the  mortgagor  which  are 
unsecured,  so  far  at  least  that  the  mortgagee,  in  a  contest  with 
other  creditors  of*the  mortgagor,  is  bound  to  prove  that  the  pay- 
ment was  made  on  a  different  account.*^  Ikit  this  presumption 
would  not  apply  in  case  of  an  appropriation  by  either  party  at 
the  time.'  Much  less  can  the  creditor,  upon  receiving  a  payment 
directed  by  the  debtor  to  be  a[)plie(l  to  the  mortgage  debt,  chiiui 

1  Greig  f.  Smith  (S.  C),   7  S.  K.   Kej).  170;    Trend wcl  1  r.    .Mooro,    :t4    Me.    112; 

610.  Feldmuii  r.  (iuiiil.le,  '.'6  N.  J.  Et[.  4'M. 

-  Parker  v.  Green,  8  Met.  (Mhbh.)  137.  ''  Diikey  v.  rcnnaiieiit  Laiul  Co.  supra. 

^  renns}  Ivuiiia  Con!   Cu.   v.  IJlakc,   85  °  Tlie  Atitaretic,  1    S|ira},'iie,   201);   I'at- 

N.  Y.  220.  tison  v.  Hull,  'J  Cuw.  (N.  Y.)  7J7. 

*  Dickey  v.  reriiianciit  Land  Cu.  C.'3  .Md.  "  'I'liarp  v.  Fellz,  C  U.  M«ii.  (Kv.)  0. 

815 


§  908.]  PAYMENT    AND   DISCHARGE. 

the  right  to  apply  it  to  other  claims  and  enforce  the  mortgage  in 
full  against  the  mortgagor.^ 

If  a  mortgagee  release  a  portion  of  the  premises  to  one  who  has 
purchased  the  equity  of  redemption  of  that  portion,  the  money 
paid  him  for  such  release  is  deemed  a  payment  upon  the  mort- 
gage debt,  and  he  cannot  apply  it  in  discharge  of  other  debts  due 
him  from  the  mortgagor.^ 

A  general  payment  it  is  said  should  be  applied  to  a  debt  which 
is  the  personal  and  absolute  debt  of  the  payor  rather  than  to  one 
which  he  is  not  personally  bound  to  pay,  though  his  property  be 
holden  for  it.  Thus  where  a  purchaser  of  an  estate  incumbered 
by  a  mortgage  has  assumed  a  portion  of  the  mortgage  debt,  and 
has  thus  made  himself  personally  liable  to  the  mortgagee  for  this 
part  of  the  debt,  although  he  may  be  compelled  to  pay  the  residue 
of  the  debt  to  save  his  property,  he  is  entitled  to  have  a  general 
payment  made  by  him  applied  to  the  portion  of  the  debt  for  which 
he  is  personally  liable.'^ 

When  the  appropriation  of  credits  is  left  to  the  law,  the  rule 
has  sometimes  been  adopted  that  the  credits  will  be  applied  most 
beneficially  to  the  debtor ;  and  therefore  will  be  applied  upon  a 
debt  secured  by  mortgage  rather  than  upon  a  debt  to  the  same 
party  upon  account  or  simple  contract.^ 

But  on  the  contrary  it  has  been  said  that  as  a  rule  courts  will 
apply  payments  to  unsecured  debts  in  preference  to  those  secured ; 
and  even  that  the  court  will  exercise  a  sound  discretion,^  and  make 
the  application  as  it  deems  it  right  and  proper  in  each  case.*" 

By  the  civil  law,  and  that  of  Louisiana,  a  general  payment  is 
imputed  to  the  most  onerous  debt ;  and  therefore,  as  between  a 
mortgage  debt  and  an  open  account  between  the  same  parties, 
the  payment  is  applied  to  a  mortgage  debt  which  bears  interest.^ 

908.  The  creditor  receiving  money  on  general  account  is 
not  required  to  make  an  immediate  appropriation  of  it,  but 
he  may  apply  it  at  any  time  after  payment,  if  before  the  bringing 
of  an  action  or  the  settling  of  an  account  in  respect  of  it.^     If  the 

1  NeAV  York  Life  Ins.  &,  Trust  Co.  v.  ^  Coles  v.  Withers,  supra.     Iii  tliis  case 

Howard,  2  Sandf.  (N.  Y. )  Ch.  183.  tlie  court  made  a  pro  rata  aiipropriation. 

•^  Hicks  I'.  Biiigliiim,  11  Mass.  300.  '^  Johusou  v.  Anderson,  30  Ark.  745; 

•■*  Snyder  v.  llebinson,  35  Ind.  311.  Forstall  v.  Blanchard,  12  La.  1. 

*  Windsor  v.  Kennedy,  52  Miss.  164.  "  Clayton's  case,  1  Mer.  572,  per  Sir  W. 

5  Coles    V.    Withers,    33    Gratt.    (Va.)  Grant;  Feldman  v.  Beier,  78  N.  Y.  293; 

186.  Hnghes  v.  Johnson,  38  Ark.  285  ;  John- 
son V.  Thomas,  77  Ala.  367. 

816 


APPROPRIATION   OF    PAYMENTS.  [§  908. 

debtor  become  bankrupt,  it  would  seem  that  the  creditor  might 
then  apply  a  general  payment  to  whatever  liability  of  the  bank- 
rupt debtor  he  might  think  fit.^  "  The  distinction  is  this,"  says 
Lord  Hardwicke  :  "  where  a  man  is  indebted  by  mortgage  and 
bond,  and  pays  money  to  his  creditor,  he  must  make  the  applica- 
tion, and  declare  to  which  debt  he  applies  the  money  at  the  very 
time  he  pays  it,  and  he  cannot  make  the  application  afterwards ; 
but  his  creditor  may  make  the  application  any  time  after  a  gen- 
eral payment  by  his  debtor,  so  as  he  does  it  before  an  account 
settled  between  them  ;  and  there  have  been  abundance  of  cases 
upon  this  distinction."-  An  entry  made  by  the  debtor  in  his  own 
|>rivate  books  is  of  course  not  conclusive  of  the  appropriation  un- 
less he  has  communicated  the  subject  of  the  entry  to  his  creditor ; 
and  the  creditor's  entry  in  his  own  books  is  not  conclusive  upon 
himself  until  he  in  like  manner  communicates  the  entry  or  states 
an  account.  Until  then  he  may  change  the  appropriation  as  he 
sees  fit." 

An  application  of  payment  once  made  cannot  be  changed  with- 
out the  consent  of  both  the  debtor  and  the  creditor  ;  and  when  it 
is  made  by  the  creditor,  he  having  the  right  of  election,  it  be- 
comes irrevocable  by  him  after  he  has  communicated  the  applica- 
tion to  the  debtor.*  When  the  parties  have  themselves  agreed 
upon  an  application  of  a  payment,  there  is  no  question  of  its  ap- 
plication by  the  law.*^ 

An  appropriation  of  payments  made  by  the  parties  to  a  prior 
incumbrance  is  binding  upon  subsequent  incumbrancers,  if  the 
payments  are  made  upon  a  legal  obligation  of  the  debtor.  Al- 
though a  mortgage  bear  interest  at  the  rate  of  five  per  cent,  per 
month,  if  the  stipulation  be  not  in  violation  of  law,  subsequent 
incumbrancers  have  no  claim  for  relief  against  payments  which 
were,  by  common  consent  of  the  parties  to  the  mcn-tgage,  ai)j)lied 
to  the  payment  of  such  interest.^  Proceeds  of  a  sale  of  part  of 
the  mortgaged  jiroperty  made  by  consent  of  parties  cainiot  be 
applied,  as  against  subsequent  incunibiaiiccrs,  to  the  payment  of 
an  unsecured  debt  of  tlie  mortgagor." 

If  a  mortgagor  give  a  note  for  tin-  whole  ;imnuiil  of  his  debt  to 

'  .Johnson,  ex  jutrto,  :i   De  C,   M.  &  (i.  •   M.irrr    c.    Tift    ((i:i.),    J    S.    Iv   Kop. 

218,  2.36,  y)cr  Lonl  Criuiworlli.  1 14. 

•^  WilkiiiMon  v.  Stnrne,  9  Mod.  427.  '•  Mills  v.  Kcilocp:,  7  Minn.  469. 

»  SimHon  I'.  In(,'liain,  2  IJ.  &  V.  f>h.  '  Wvlmlur    r.    Siiif,'!.  y,    V.\    Ala.   208  ; 

*  .John.^on  v.  Tlioniii",  77  Ala.  '167.  Hughes  v.  JohnHon,  .'18  Ark.  28.5. 

VOL.  I.         62  yi7 


§§  909,  909  a.]  payment  and  discharge. 

tlie  mortgagee,  including  sums  for  which  he  had  become  indebted 
before  the  mortgage  was  given,  and  which  were  not  secured  by  it, 
and  the  mortgagee  apply  payments  made  to  him  upon  the  note 
generally,  it  is  equivalent  to  an  application  upon  the  new  and  old 
indebtedness  pro  rata,  and  a  different  aj^pHcation  cannot  be  made 
where  it  does  not  satisfactorily  appear  to  have  been  directed  or  to 
be  for  the  interest  of  the  parties.^ 

909.  What  is  a  sufficient  appropriation.  —  The  debtor's 
entries  in  his  own  books  are  not  regarded  as  sufficient  evidence 
of  his  application  of  a  general  payment.^  It  is  essential  that 
the  creditor  should  be  informed  of  the  particular  application  the 
debtor  desires  to  have  made  of  the  money,  to  make  it  of  any 
effect. 

Where  certain  notes  were  insufficiently  secured  by  a  mortgage, 
and  afterwards  further  security  was  given  for  some  of  the  notes 
separately,  it  was  held  that  this  special  fund  must  be  applied  to 
the  notes  secured  by  it,  to  the  exoneration  of  the  mortgage,  which 
was  properly  left  for  those  having  no  other  security .-"^ 

Where  a  mortgage  for  future  advances  was  executed  with  an 
agreement  that  the  same  might  be  paid  with  the  proceeds  of  cer- 
tain goods  to  be  shipped  by  the  mortgagor  to  the  mortgagee,  and 
after  advances  had  been  made  an  agreement  was  made  for  further 
advances,  and  that  the  mortgage  and  the  goods  shipped  should  be 
security  therefor,  it  was  held  that  the  mortgagee  had  the  right  to 
credit  the  amount  received  for  the  goods  on  the  advances  until 
they  were  paid,  before  applying  it  on  the  mortgage.^ 

909  a.  A  mortgagee  may,  by  agreement  with  a  purchaser 
of  a  portion  of  the  mortgaged  premises,  bind  himself  to  apply 
general  payments  upon  the  mortgage  debt  to  the  discharge  of 
the  mortgage  lien  upon  such  portion.  Such  agreement,  although 
without  consideration,  is  binding  upon  the  mortgagee  as  to  the 
purchaser,  after  he  has  acted  upon  it  and  paid  money  to  the  mort- 
gagor; but  when  the  purchaser,  being  unable  to  complete  the 
purchase,  has  reconveyed  the  land  to  the  mortgagor,  the  contract 
being  as  to  the  latter  without  consideration,  and  therefore  a  nul- 
lity, he  has  no  right  to  have  payments  subsequently  made  applied 
upon  any  particular  part  of  the  mortgaged  property.     The  agree- 

^  Shelden  v.  Bennett,  44  Mich.  634.  ^  Bridenbecker  v.  Lowell,  32  Barb.  (N. 

2  Manning  v.  Westerne,  2  Vern.  606 ;     Y.)  9. 
Wrout  V.  Eawes,  25  Beav.  369.  *  Lewis  v.   Hartford   Silk  Manuf.  Co. 

(Conn.)  12  Atl.  Rep.  637. 
818 


APPROPRIATION    OF    PAYMENTS.  [§  910. 

ment  in  sucli  case  is  for  the  purchaser's  benefit,  and  not  for  the 
benefit  of  the  mortgagor.^ 

910.  A  payment  made  on  security  held  as  collateral  for  a 
mortgage  debt  is  primd  facie  a  payment  upon  the  principal  debt,- 
but  not  ipso  facto  a  payment  on  the  principal  debt.'^  But  unless 
the  debt  or  some  part  of  it  be  due  and  payable,  the  mortgagee 
cannot,  without  the  consent  of  the  mortgagor,  apply  the  amount 
received  to  the  payment  of  the  mortgage  debt.  Thus,  for  in- 
stance, money  paid  upon  a  policy  of  insurance,  obtained  by  the 
mortgagor  for  the  benefit  of  the  mortgagee,  for  a  loss  by  fire  can- 
not be  applied  to  the  payment  of  the  debt,  if  it  be  not  due,  with- 
out the  consent  of  the  mortgagor.  The  money  received  from  the 
insurance  takes  the  place  of  the  property  destroyed,  and  is  still 
collateral  until  it  is  applied  in  payment  by  mutual  consent.  If  the 
amount  received  be  indorsed  upon  the  note,  but  is  afterwards  ap- 
plied to  the  restoration  of  the  impaired  security,  for  the  benefit  of 
all  parties,  the  holder  of  a  second  mortgage  on  the  property  has 
no  equity  which  entitles  him  to  have  the  amount  so  received  ap- 
plied in  reduction  of  the  debt  secured  by  the  first  mortgage.  The 
indorsement  of  the  money,  in  the  first  instance,  upon  the  note, 
without  authority,  gives  no  such  right.* 

If  the  mortgagee  receives  insurance  money  paid  under  a  policy 
upon  the  premises  made  payable  to  him  by  the  terms  of  the  mort- 
gage, he  is  bound  to  apply  it  to  the  payment  of  the  mortgage 
debt,  and  it  is  a  satisfaction  of  the  mortgage  debt  to  the  extent  of 
the  payment.  He  has  no  authority  to  arrange  with  an  unauthor- 
ized agent  for  a  different  disposal  of  the  money  so  received.'^ 

Money  received  by  a  mortgagee,  under  a  policy  taken  by  him 
upon  his  interest,  does  not  ordinarily  operate  as  a  satisfaction  of 
the  mortgage,  for  such  insurance  is  not  for  the  benefit  of  the  mort- 
gagor, nor  is  it  an  insurance  of  the  mortgage  debt.''  M  the  mort- 
gagee is  not  merely  a  mortgagee,  but  has  some  other  interest  in 
the  property,  such  as  a  dower  interest,  the  insurance  will  not  he 
regarded  as  exclusively  an  insurance  of  the  interest  as  mortgagee : 
and  therefore,  for  a  still  stronger  reason,  insurance  money  collected 
will  not  be  applied  in  satisfaction  of  the  mortgage.' 

1  Bush  V.  Sheriiian,  80  III.  IGO.  Muss.  .OSS;  IJryunt  i'.  Churter  Oak  \..  Iiis. 

-  I'routy   V.   Katon,   41    IJarlj.   (N.  Y.)  Co.  24  Fed.  Uep.  771. 

409.  '■  Coiinciticut  Mut.  L.  Ins.  Co.  i-.  Siniii- 

■^  Economy  Buildini^  Asho.  i*.   Hunger-  nion,  117  U.  S.  f<.'J4. 

buckler,  0.3  I'a.  St.  258.  '■  SS  419,  420. 

*  Gordon  v.  Ware  Savings  Hank,  115  '  l^oudcu  c  Wii.lillf.  '.»8  I'u.  St.  IM. 

bl'J 


§§  911-913.]  PAYMENT    AND   DISCHARGE. 

911.  Interest  to  be  first  paid.  —  When  payments  are  made  by 
a  debtor  upon  a  mortgage,  without  being  specially  appropriated 
either  to  the  principal  or  interest  of  the  debt,  the  general  rule  is 
that  the  interest  due  shall  be  paid  before  any  part  of  the  principal 
is  discharged.^  If,  however,  there  is  no  instalment  of  interest  due, 
the  payment  is  applied  to  the  principal.^ 

912.  Partial  payments  upon  a  usurious  mortgage  cannot  be 
applied  to  the  payment  of  usurious  interest,  even  with  the  consent 
of  the  mortgagor,  as  against  the  existing  rights  of  subsequent  in- 
cumbrancers.-'^ While  a  payment  of  a  bonus  upon  a  mortgage  for 
an  extension  of  the  time  of  payment  is  to  be  regarded  as  a  pay- 
ment upon  the  mortgage  debt,  yet  the  law  does  not  so  apply  it 
unless  the  debtor  asks  for  such  application.  Therefore,  where 
interest  became  due  after  such  a  payment,  and  remaining  unpaid 
for  twenty  days  and  more,  an  action  was  brought,  in  pursuance  of 
a  condition  of  the  mortgage  making  the  whole  principal  due  upon 
such  default,  to  foreclose  the  mortgage,  it  was  held  that  the  bonus 
paid  for  extension  could  not  be  regarded  as  a  payment  of  the  in- 
terest so  as  to  prevent  such  forfeiture,  inasmuch  as  no  such  ap- 
plication of  it  had  been  made  or  asked  for  previous  to  the  suit, 
and  that  the  mortgagor's  request  in  his  answer  to  have  it  so  ap- 
plied could  not  affect  the  plaintiff's  right  of  action,  though  the 
judgment  should  be  entered  for  the  amount  of  the  mortgage  after 
deducting  the  amount  of  the  bonus  paid.^ 

III.  Presumption  and  Evidence  of  Payment. 

913.  The  possession  of  the  mortgage  note  by  the  mortgagor 
or  those  claiming  under  him  raises  a  presumption,  in  the  absence 
of  all  other  proof,  that  it  has  been  paid.  This  presumption  is  one 
of  fact  and  not  of  law,  and  may  be  rebutted  by  evidence  account- 
ing for  the  mortgagor's  possession  of  the  note  without  having  paid 
it.^     The  mortgagor's  possession  of  the  mortgage  note,  even  after 

1  Chase  v.  Box,  Freem.  Cli.  261 ;  Mon-  setts  :  Richardson  v.  Cambridge,  2  Allen, 
roer.  Fohl  (Cal.),  14  Pac.  Rep.  514.  118;  Grimes   v.   Kimball,  3  Allen,   518; 

2  Davis  V.  Fargo,  Clarke  (N.  Y.),  470.         Crocker  v.  Thompson,  3  Met.  224.    Other 

3  Greene  v.  Tyler,  39  Pa.  St.  361.  States :  Bell  v.  Woodward,  34  N.  H.  90 ; 
*  Church  j;.Maloy,  9  Hun  (N.  Y.),  148;     Chapman   v.   Hunt,    18   N.   J.  Eq.   414; 

aflSrmed  70  N.  Y.  63.  Flower  v.  Elwood,  66  111.  438  ;   Ormsby 

s  New  York:  Levy  v.  Merrill,  52  How.  v.  Barr,  21   Mich.  474;    Johnson  v.  Na- 

Tr.  360;  Braman  v.  Bingham,  26  N.   Y.  tions,  26  Miss.  147;  and  see  Succession  of 

483;  Oarlock  v.  Geortner,  7  Wend.  198;  Norton,  18  La.  Ann.  36. 
l*almer  v.  Gurnsey,  lb.  248.     Massachu- 

820 


PRESUMPTION   AND   EVIDENCE   OF   PAYMENT.  [§  913. 

it  is  due,  is  not  conclusive  evidence  of  paj^ment,  only  primd  facie  ;  ^ 
but  such  possession  continued  for  a  long  time,  and  unquestioned 
by  the  mortgagee  after  a  full  knowledge  of  this  fact,  affords  a 
strong  presumption  that  the  debt  has  been  paid.^  The  possession 
of  the  mortgage  alone  without  the  bond  or  note  is  held  not  to  give 
rise  to  any  presumption  of  payment.^ 

Where  one  about  selling  a  parcel  of  land  produced  a  mortgage 
of  it  with  the  seals  torn  off,  and  gave  it  to  the  purchaser,  stating 
it  had  been  paid  and  satisfied,  and  that  he  could  have  it  cancelled 
and  discharged  of  record,  the  fact  that  there  was  no  receipt  of 
payment  indorsed  upon  it,  and  the  further  fact  that  the  bond  was 
not  produced,  were  not  regarded  as  sufificient  to  raise  a  suspicion 
and  put  the  purchaser  upon  inquiry.* 

If  a  mortgage  has  been  regularly  released  of  record,  and  there 
is  nothing  to  show  that  the  mortgage  note  is  held  by  a  third  per- 
son, or  that  it  was  negotiable,  the  fact  that  the  mortgagor  does  not 
produce  the  note  does  not  justify  one  who  has  contracted  to  pur- 
chase the  land  of  him  in  refusing  to  complete  the  purchase.^ 

One  "who  purchases  land  covered  by  an  undischarged  mort- 
gage cannot  claim  to  be  a  purchaser  in  good  faith,  and  without 
notice  of  the  mortgagee's  equities,  simply  because  the  mortgagor 
has  possession  of  the  notes  and  exhibits  them  to  him,  if  he  has 
knowledge  of  facts  sufficient  to  put  a  prudent  man  on  inquiry  ; 
and  especially  if  the  mortgagee  is  easily  accessible,  and  an  inquiry 
of  him  would  have  elicited  the  fact  that  the  mortgage  was  still  in 
force.^ 

1  Purser  v.  Anderson,  4  Edw.  (N.  Y.)  why,  —  unless  he  knew  or  believed  com- 

Ch.  17;  Grey  v.  Grey,  47  N.  Y.  552;  Har-  pliiinant  cliiimcd  the  niort<,'a;,'c  to  bo  still 

rison  v.  New  Jersey  R.  R.  &  Transporta-  in  force,  and  that  if  he  aitplied  to  him  for 

tion  Co.  19  N.  J.  Eq.  488.  a  release  facts  would  be  developed  which 

-  Gardner  v.  James,  7  R.  I.  396.  would  show  the  claim  to  be  valid,  and  put 

^  Harrison  i;.  N.  J.  R.  R.  &  Transporta-  an  end  to  all  pretence  of  claim  to  bo  a 

tion  Co.  supra.  purchaser  in  good  faith  and  without   no 

*  Harrison  f.  Johnson,  18  N.  J.  Eq.  420.  tice,  —  why  does  he  choose   to  euiploy  a 

"  Marl)urg  v.  Cole,  49  Md.  402.  lawyer  to  examine   the   condition  of  the 

«  Boxheimer  v.    Gunn,  24   Mich.   372.  mortgage  and   deBcription  of   the   noten, 

In  conniflering   the  facts   relating  to  the  and  make  nn  abstract  of  them,  and  give 

poo<l  faith  of  the  purchase,  Chief  Justice  bim  his  legal  opinion  that,  the  notes  being 

Clirisiiancy  said  :  "  Now,  when  a  release  taken  up,  the  mortgage  is  in  effect  pai<l  ' 

of  record  would  have  been  so  much  lie-tier  \Ve  think,  if  be  had   really  btditvcd  iho 

and  more  certain,  which  the  mortgagee,  if  mortgage  satisfied  as  between  the  |)uriieH 

the  mortgage  was  satisfied,  was  bound  un-  to  it,  he  would  have  taken  the  natural  and 

dcr  a  heavy  penalty  to  i!xecute,  and  which  direct  cnurse,  atui  requested   a  diBcharge 

in   all    probaliility   would    have  cost  less,  of  record." 

821 


^§  914,  915.]  PAYMENT   AND   DISCHARGE. 

The  conduct  of  the  mortgagee  in  other  respects  than  the  de- 
livery up  of  the  mortgage  and  note  may  be  sufficient,  with  or 
without  this  fact,  to  authorize  the  presumption  that  the  mortgage 
has  been  paid ;  ^  as,  for  instance,  by  representing  to  a  purcliaser 
that  the  mortgage  is  paid  ;  or  by  standing  by  or  assisting  the 
mortgagor  in  making  a  sale  of  the  entire  estate,  and  leading  the 
purchaser  to  suppose  that  payment  of  the  mortgage  has  been  or 
will  be  provided  for  from  the  proceeds  of  the  sale  or  otherwise.^ 

914.  There  is  no  presumption  that  interest  has  been  paid, 
unless  the  mortgage  or  the  bond  shows  this.  On  the  contrary,  if 
these  instruments  show  no  entry  of  the  payment  of  interest  which 
has  become  due  by  the  lapse  of  time,  the  presumption  is  that  the 
interest  is  in  default.^  Much  less  can  there  be  any  presumption 
that  interest  not  due  has  been  paid.* 

915.  Payment  is  presumed  from  lapse  of  time,  as  elsewhere 
illustrated,  when  the  mortgagor  has  remained  in  possession  with- 
out making  any  payment  of  either  principal  or  interest,  or  doing 
any  other  act  in  recognition  of  the  mortgage  debt  for  a  period  of 
tvs^enty  years  or  more,  or  whatever  may  be  the  statute  period  of 
limitation.^ 

This  presumption  is  repelled  by  a  payment  of  interest  or  any 
part  of  the  principal   within  that  time,*^  or  by   any  admission  of 

1  Ormsby  y.  Barr,  21  Mich.  474.  v.   O'Brien,   12   N.  Y.  394;    Dunham   v. 

-  M'Cormick  v.  Digby,  8  Bh\ckf.  (Ind.)  Minard,  4  Paige,  441  ;  Collins  v.  Torry,  7 

99;  Taylor?;.  Cole,  4  Munf.  (Va.)  351.  Johns.   278;    Jackson   v.    Hudson.   3  lb. 

'-^  Olmsted   v.   Elder,  2   Sandf.  (N.  Y.)  375 ;  Giles  y.  Baremore,  5  Johns.  Ch.  545; 

325.  Jackson  v.  Delaucey,  11  Johns.  365  ;  Jack- 

*  Neither  a  mortgagee  who  has  assigned  son    v.    Pratt,    10   lb.   381;    Jackson    v. 

a  bond   and    mortgage    payable    in   five  Pierce,  10  Johns.  414;  Kellogg  r.  Wood, 

years  with  interest  semi-annually,  nor  the  4  Paige,  578;  Lammer  v.  Stoddard,  9  N. 

purchaser   of  the   equity   of  redemption,  E.  Eep.  328.     New  Jersey  :  Wanmaker  y. 

can  claim,  in  defence  to  a  foreclosure  suit  Van   Buskirk,   1   N.  J.   Eq.  (Sax.)    685; 

brought  upon  a  default  in  payment  of  the  Evans  v.  Huffman,  5  N.J.  Eq.  (1  Halst.) 

first  instalment  of  interest,  that  the  whole  354.     North  Carolina  :  Roberts  v.  Welch, 

interest  for  the  five  years  had  been  paid  8  Ired.  Eq.   287  ;    Brown  v.   Becknall,  5 

to  the  mortgagee  before  the  assignment  of  Jones  Eq.  423.     Other  States  :  Ovviugs  v. 

the  mortgage,  though  not  indorsed.   New-  Norwood,  2  H.  &  J.  (Md.)  96;  Murray  v. 

ton,  &c.  Asso.  V.   Boyer   (N.  J.),  10  Atl.  Fishback,  5  B.  Mon   (Ky.)  403;  Pattie  v. 

Eep.  876.  Wilson,  25  Kaus.  326 ;  Butler  v.   Wash- 

5  See  chapter  xxiv.     Maine:'  Chick  v.  ington  (S.  C),  5  S.  E.  Rep.  601. 
Rollins,  44  Me.  104;  Blethon  v.  Dwinal,         ^  Howard  y.  Hildreth,  18  N.  H.  105; 

35   Me.    556.     Massachusetts:    Inchest-.  Hughes  y.  Blackwell,  6  Jones  (N.  C.)  P]q. 

Leonard,  12  Mass.  379;    Cheever  v.  Per-  73;  Wright  v.  Eaves,    10   Rich.   (S.  C.) 

ley,  11  Allen,  584.     New  York:  Lynch  v.  Eq.  582. 
Pf eiffer,    1 7    N.    E.    Rep.   402 ;    Belmont 

822 


PRESUMPTION   AND   EVIDENCE    OF    PAYMENT.  [§  916. 

the  mortgagor  that  the  mortgage  debt  is  still  due  ;i  or  by  a  fore- 
closure of  the  mortgage,  though  made  more  than  thirty  years 
after  the  maturity  of  the  mortgage.^  The  presumption  of  pay- 
ment from  lapse  of  time  is  a  presumption  of  law,  and  is  conclu- 
sive unless  rebutted  by  distinct  proof.^  Possession  for  less  than 
the  statute  period  may  be  left  to  the  jury,  in  connection  with 
partial  payments  and  other  evidence,  as  tending  to  show  that  the 
debt  was  fully  paid;*  but  the  legal  presumption  does  not  arise  at 
an  earlier  period.^ 

No  presumption  of  payment,  however,  can  arise  from  lapse  of 
time  when  the  mortgagee  or  his  assignee  is  in  possession  of  the 
land.^  This  proposition,  which  is  undoubtedly  law,  was  asserted 
by  Mr.  Justice  Strong  in  the  Supreme  Court  of  the  United 
States;'  but  in  the  case  decided  the  further  facts  appeared  that 
the  mortgagor  became  insolvent  and  died  before  the  debt  fell 
due,  and  the  purchaser  of  the  equity  of  redemption  also  became 
insolvent  before  the  maturity  of  the  debt,  removed  from  the  state, 
and  never  afterwards  returned.  All  this  was  regarded  as  quite 
enough  to  repel  any  presumption  of  payment  arising  from  lapse 
of  time. 

916.  But  a  shorter  period  than  twenty  years  may  be 
ground  for  a  presumption  of  payment  when  other  circum- 
stances come  in  to  strengthen  the  presumption.  What  qualitj'' 
or  amount  of  evidence  of  other  circumstances  tending  to  the  con- 
clusion that  payment  has  been  made  is  necessary  to  prove  pay- 
ment, in  connection  with  the  lapse  of  a  long  period  of  time,  can- 
not be  prescribed  by  any  rule.  Each  case  must  rest  upon  its  own 
circumstances.  The  question  of  presumption  of  payment  within 
a  less  time  tlian  twenty  years  shcmld  be  left  to  the  jury  in  con- 
nection with  other  evidence;  "and  in  such  cases,"  says  Mr.  Jus- 
tice Duller,^  "the  slightest  evidence  is  sufficient."  lu  the  same 
case  Lord  Mansfield  said  that  there  is  a  disriuc^tion  between 
length  of  time  as  a  bar,  and  where  it  is  only  evidence  of  it. 
Chief  Justice  Kent,   in  an   early   case  in   New   York,''  where   no 

1  Frearv.  Drinker,  8  I'li.  St.  520.  '  Hixhst  v.   Brock,   I'l  Wall,  nr.!;  ami 

'''  Jackson   v.  Slater,    .O   WlmhI.   (N.   Y.)  sec  ca-it!))  citeil. 

295.  "  Oswald  v.  \A%h,  1  'I'.  K.  '.'TO;  mid  hco 

=*  Whitney    v.    Kroncli,     25     Vt.     6C.T  ;  Colm-U    r.    Hiidd.   1    Ciunii.  'j:,  piT  Lord 

Cowie  V.  FiKhcr,  45  .Mich.  029.  Elh'iilioroufjli. 

*  Oould  V.  White,  20  N.  H.  178.  »  Jackson   r.    I'latl,   1(»  J.-liiiM.   (.\.  V.) 


''  IVck  V.  Miillams,  10  N.  Y.  5f)9.  .'181. 

«  Crocker  v.  Jewell,  .'51  .M..  'lOO. 


823 


§§  917,  918.]  PAYMENT   AND   DISCHARGE. 

possession  had  been  taken  under  a  mortgage,  and  no  interest  had 
been  paid,  and  no  steps  bad  been  taken  to  enforce  it  for  nineteen 
years,  held  that  it  was  not  an  outstanding  title,  and  that  a  jury 
might  well  presume  it  satisfied.  In  a  recent  case  in  Florida, 
under  peculiar  circumstances,  payment  was  likewise  presumed 
after  a  lapse  of  nineteen  years. ^ 

917.  Whether  a  mortgage  has  been  paid  or  not  is  a  ques- 
tion of  fact,  for  the  determination  of  which  any  facts  or  circum- 
stances relating  to  the  matter  may  be  considered  as  well  as  direct 
evidence,  —  and  such  indirect  evidence  is  as  good  upon  one  side 
as  upon  the  other,  —  to  prove  payment  or  to  disprove  it.^  Thus, 
while  a  mortgagor  for  the  purpose  of  proving  payment  may  show 
that  for  several  years  after  the  date  of  the  mortgage  he  occasion- 
ally worked  for  the  mortgagee,  the  latter  may  rebut  this  evidence 
by  showing  that  he  was  accustomed  to  pay  all  his  laborers  at 
short  and  stated  intervals,  and  that  the  mortgagor  was  poor,  and 
dependent  upon  his  earnings  for  support.^ 

An  indorsement  on  a  note  that  a  release  of  the  trust  deed,  by 
which  the  note  was  secured,  had  been  made  and  delivered  by 
order  of  the  holder,  affords  no  presumption  of  payment  when 
the  note  is  produced  by  the  payee  or  his  representative  with  the 
indorsement  cancelled  by  drawing  a  pen  through  the  words.^ 

It  is  not  necessary  that  pa^^nent  should  be  in  money  to  operate 
as  a  satisfaction  of  the  mortgage  lien.  It  may  be  made  in  any- 
thing agreed  upon  by  the  parties.^ 

918.  Indorsements  of  payments  made  upon  the  mortgage 
notes,  whether  of  interest  or  principal,  are  mere  admissions  of 
payment  in  behalf  of  the  maker  ;  and  parol  evidence  is  admissi- 
ble to  explain  them,  or  even  to  show  that  they  were  erroneously 
made.  Such  evidence  may  be  admitted  not  only  as  against  the 
mortgagor,  but  also  against  a  purchaser  of  the  equity,  if  at  the 
time  of  his  purchase  he  made  no  inquiry  as  to  the  amount  due 
on  the  mortgage,  or  as  to  the  indorsements  upon  the  notes.^     But 

1  Buckmaster  v.  Kellev,  15  Fla.  180.  and  see  Green  v.  Storm,  3  Sandf.  (N.  Y.) 

2  See   Schafer   v.   Hartz,  56   Ind.  389 ;     Ch.  305,  as  to  offsets. 

Popple  V.  Day,  123    Mass.  520;  Mertz's  *  Steinmetz  r.  Lanp:,  81  111.  603. 

App.  (Pa.)  TAtl.  Rep.  187;  Prichard  r.  5  §972;  Benson  i-.  Tilton,  58  N.  H.  137  : 

Sharp,   51   Mich.  432,   435;    Kennedy   v.  Bean  v.  Bean  (S.  C),  5  S.  E.  Rep.  827  ; 

Davis  (Ga.),  8  S.  E.  Rep.  52 ;  Gallup  v.  Green  v.  Fry,  93  N.  Y.  353  ;  Waugh  t-. 

Jackson,  47  Mich.  475.  Montgomery,  67  Ala.  573 ;  Rhinesmith  >: 

3  Waugh  V.  Riley,  8  Met.  (Mass.)  290;  Slote,  14  Atl.  Rep.  900. 

^  Humphreys  v.  Danser,  32  N.  J.  Eq. 

824  220. 


PAYMENT    BY    ACCOUNTING    AS   ADMINISTRATOR.         [§  911*. 

a  mortgagee  could  not  stand  by  and  allow  a  purchaser  to  buy 
the  estate  as  unincumbered,  and  afterwards  set  up  his  mortgage 
against  him  ;  nor  could  he  represent  it  as  incumbered  for  a  certain 
sum  and  then  set  up  a  larger  claim  under  his  mortgage.^ 

But  a  receipt  in  full  of  all  demands  is  no  evidence  of  the  dis- 
charge of  a  mortgage  given  to  secure  the  future  support  of  the 
mortgagee.^ 

IV.   Payment  by  Accounting  as  Administrator. 

919.  When  a  mortgagor  comes  into  possession  of  the  mort- 
gage in  a  representative  capacity,  as,  for  instance,  as  guardian, 
executor,  or  administrator  of  the  mortgagee,  he  may  at  any  time 
treat  the  debt  as  paid  and  the  mortgage  discharged  by  charging 
it  as  paid  in  his  probate  accounts.^  After  he  has  done  this,  a 
subsequent  assignment  of  the  mortgage  by  him  in  his  representa- 
tive capacity  transfers  no  title  to  the  land.  Before  so  accounting 
for  his  own  mortgage  and  debt,  he  may  assign  them  as  subsisting 
obligations,  and  then  he  would  credit  the  estate  with  the  proceeds 
of  the  sale.  If  the  mortgagor  be  sued  upon  his  probate  bond  as 
guardian  or  administrator,  and  judgment  be  rendered  for  the 
whole  amount  due  from  him  without  deducting  the  mortgage 
debt,  this  is  thereupon  taken  to  be  discharged  by  operation  of 
law.^ 

But  the  taking  of  administration  by  a  mortgagor  upon  the 
estate  of  the  mortgagee,  and  his  returning  an  inventory  in  which 
the  mortgage  debt  due  from  himself  is  included,  does  not  neces- 
sarily operate  as  payment  of  the  debt.^  As  between  the  admin- 
istrator and  those  beneficially  interested  in  the  estate,  he  is  held 
to  account  for  it  as  a  debt  paid,  because  he  cannot  sue  himself  or 
collect  his  own  debt  in  any  other  mode  than  by  crediting  it  in 
his  administration  account.  But  although  it  be  a  right  on  the 
part  of  the  creditors  and  heirs  of  the  mortgagee  to  require  the  ad- 
ministrator to  credit  his  debt  in  his  administration  account,  they 
may  waive  this  right.  Therefore  the  administrator  of  a  second 
mortgagee  may,  in  his  capacity  of  administrator,  redeem  as  against 

1  McDaniels  u.  Laphain, '21   V't.  2J2.  ■•  Tuil.cll    r.    I'mkcr,    KM     Mass.    lO:*  ; 

'^  AuHtiii  V.  Austin,  9  Vt   420.  (.'omiiioiiwiHllli  i'.  (miiiM,  IIS  Mii-H.  3(H). 

3  Muriiii  f.  Sfiiiili,  124   Mh.ms.  Ill;  IpM-  ''  Millir    i-.    I)oniil<ls.)ii.   17    Oiiio,  264: 

wich  Miiimf.  Co.  r.  Story,  '>  Mot.  (Ma^M.)  Firuli  r.  Iloujilitoii,  I'J  Wis.  I4'J. 
.310. 

82o 


§§  920,  921.]  PAYMENT    AND   DISCHARGE. 

the  assignee  of  a  prior  mortgagee  who  has  purchased  the  equity 
of  redemption.^ 

920.  Although  the  legal  position  of  a  mortgagor,  who  has  be- 
come the  administrator  of  his  mortgagee,  does  not  necessarily 
determine  whether  the  mortgage  has  been  paid  or  not,  yet  the 
manner  in  which  he  subsequently  deals  with  the  mortgage 
will  determine  this  question.  Thus,  where  such  administrator, 
who  was  also  the  son  of  the  mortgagee,  after  his  appointment, 
made  a  second  mortgage  of  the  same  property  with  the  usual 
covenants  of  warranty  and  against  incumbrances,  it  was  held  that 
the  mortgage  of  his  father  was  thereupon  discharged,  and  that  his 
subsequent  assignment  of  it  was  without  effect.^  In  like  manner, 
when  the  owner  of  an  equity  of  redemption,  subject  to  a  mort- 
gage given  in  trust  for  certain  heirs,  is  appointed  their  trustee, 
although  he  thereby  acquires  a  legal  title  to  the  mortgage,  it  is 
not  merged  ;  yet  if  he  afterwards  conveys  the  land  by  deed,  with 
covenants  against  incumbrance  and  of  warranty,  and  he  receives 
the  purchase  money,  the  naortgage  is  extinguished,  unless  the 
money  is  misappropriated  with  the  knowledge  of  the  purchaser.^ 
But  where  at  the  time  of  the  making  of  a  second  mortgage  the 
first  mortgage  was  in  part  unpaid,  and  stood  undischarged  of  rec- 
ord, and  the  second  mortgagee  with  knowledge  of  these  facts  in- 
duced the  mortgagor,  who  was  administrator  of  the  first  mortgage, 
to  enter  satisfaction  of  the  prior  mortgage,  such  enti-y  did  not  give 
the  junior  mortgage  priority.^ 

If  an  administrator  of  the  mortgagor  takes  an  assignment  of  a 
mortgage  upon  his  intestate's  estate  to  himself,  and  afterwards 
assigns  this  to  another,  the  mortgage  may  be  foreclosed  by  the 
assignee  as  a  subsisting  security.  This  is  upon  the  ground  that 
the  mortgage  was  purchased  by  the  administrator  in  his  individual 
capacity  from  his  own  funds. ^ 

921.  The  purchase  by  an  executor  of  a  mortgage  on  his 
testator's  estate,  and  the  assignment  of  it  to  a  person  to  hold  for 

1  Kinney  v.  Ensign,  18  Pick.  (Mass.)  be  according  to  his  title,  and  that  will  be, 

232  ;  Pettee  v.  Peppard,  120  Mass.  522.  and  will  appear  by  the  record  to  be,  in  his 

"The  complainant,"  said  Chief  Justice  representative  capacity.'' 

Shaw,  "is  in  a  situation  to  do  just  what  ^  Ritchie  v.  Williams,  11  Mass.  50. 

any  other  administrator  would  do,  as  if  he  ^  Hadley  v.  Chapin,  11  Paige  (N.  Y.), 

were  not  himself  the  original  mortgagor.  245  ,  Pettee  v.  Peppard,  120  Mass.  522. 

On  redemption  he  will  be  put  into  posses-  ■*  Remann  v.  Buckmaster,  85  111.  403. 

sion  of  the   estate  ;  but  he  will  hold  it  in  ^  Dg  Forest  v.  Hough,  13  Conn.  472. 
autre  droit;  his  seisin  and  possession  will 

826 


PAYMENT   BY   ACCOUNTING   AS   ADMINISTRATOR.       [§§  922,  923. 

the  executoi-,  does  not  operate  as  a  discharge  of  the  mortgage,  if 
the  executor  made  the  purchase  with  his  own  personal  funds, 
without  intending  it  as  a  payment  of  the  mortgage,  or  to  use  it 
for  his  own  benefit  to  the  disadvantage  of  the  trust  estate  ;  ^  and 
in  such  a  case,  though  the  executor  receive  from  the  testator's 
estate  money  more  than  enough  to  pay  off  the  mortgage,  but  he 
applies  it  pai'tly  to  paying  off  other  debts,  the  testator's  devisees, 
in  an  action  against  them  to  recover  the  mortgaged  premises,  can- 
not sustain  a  defence  of  payment  on  the  ground  of  the  conduct  of 
the  executor,  without  showing  affirmatively  that  the  executor  re- 
ceived money  from  the  estate  which  he  might  have  applied  in  dis- 
charge of  the  mortgage  debt,  and  did  not  in  fact  apply  it  to  the 
discharge  of  other  debts.^ 

In  like  manner  a  purchase  by  an  executor  of  the  first  mort- 
gagee, at  a  sale  of  the  mortgaged  property  under  a  second  mort- 
gage, does  not  operate  as  a  merger  or  extinguishment  of  the  first 
mortgage,  unless  it  was  so  intended  by  the  purchaser  ;  and  if  the 
purchase  be  made  in  his  own  right,  with  his  own  funds,  an  inten- 
tion that  it  should  not  so  operate  is  manifest.^ 

Upon  the  same  principle,  where  the  trustees  under  a  mortgage 
of  a  railroad  company  purchased  a  portion  of  the  land  embraced 
in  the  mortgage,  at  a  sale  under  a  decree  of  foreclosure  obtained 
upon  a  prior  mortgage,  the  purchase  being  made  in  their  indi- 
vidual right,  it  cannot  be  treated  as  a  payment  of  the  mortgage 
by  them.* 

922.  And  so,  on  the  other  hand,  if  the  mortgagee  be  ap- 
pointed administrator  of  the  estate  of  the  original  debtor,  the 
mortgage  is  not  extinguished  unless  assets  come  into  his  hands 
which  can  be  applied  in  payment  of  the  debt.^ 

If  an  executor  or  administrator  discharges  a  mortgage  belong- 
ing to  the  estate  he  is  administering,  upon  a  consideration  moving 
only  to  him  personally  and  not  to  tiie  estate,  although  the  mort- 
gagor knows  this,  the  release  is  not  void,  but  voidable  only  ;  and 
if  parties  in  interest  seek  to  enforce  the  mortgage  as  a  subsisting 
security,  they  must  first  liav(^  tin;  release  set  aside." 

923.  Bond  by  heir  to  pay  the  debt.  —  Wiu-n  an  heir,  to  pre- 
vent a  sale  of  mortgaged   IhikI,  gives  a  bond  for  the  payment  of 

1  Stillinun  V.  Stilli.iuii,  21  N.  J.  Kq.  *  ihVUH  v.  Detroit  &  Milwjuik.'o  lUil- 
J20.  way  Co.  10  Miili.  117. 

■^  SandtiHon  v.  Iviwanls,  1 1 1  Maa».  335.         "  linuiH  r.  ('.ill,  10  AlU-n  (Mush.),  512. 
8  Clift  V.  While,  12  .N.  V.  -Ol'J.  "  Wiir  r.  iM...sli.r.  I'J  Wis.  :Ul. 

827 


§  924.] 


PAYMENT    AND   DISCHARGE. 


the  debt  and  takes  an  assignment  of  the  mortgage,  the  mortgage 
in  some  cases  lias  been  held  to  be  discharged,^  and  in  others  to 
remain  a  subsisting  security. 

V.    Changes  in  the  Form  of  the  Debt. 

924.  No  change  in  the  form  of  indebtedness  or  in  the  mode 
or  time  of  payment  will  discharge  the  mortgage.  A  mortgage 
secures  a  debt,  and  not  the  note  or  bond,  or  other  evidence  of  it. 
No  change  in  the  form  of  the  evidence,  or  the  mode  or  time  of 
payment,  —  nothing  short  of  actual  payment  of  the  debt,  or  an 
express  release,  —  will  operate  to  discharge  the  mortgage.  The 
mortgage  remains  a  lien  until  the  debt  it  was  given  to  secure  is 
satisfied,  and  is  not  affected  by  a  change  of  the  note,  or  by  giving 
a  different  instrument  as  evidence  of  the  debt,  or  by  a  judgment 
at  law  on  the  note  merging  the  original  evidence  of  indebted- 
ness, or  by  a  recognizance  of  record  taken  in  lieu  of  the  mortgage 
note.2 


1  See  §  866 ;  Eobinson  v.  Leavitt,  7  N. 
H.  73. 

-  Massachusetts :  Taber  v.  Hamlin,  97 
Mass.  489,  492 ;  Watkins  v.  Hill,  8  Pick. 
522;  Pomroj  v.  Rice,  16  lb.  22;  Baxter 
V.  Mclntire,  13  Gray,  168,  171  ;  Osborne 
V.  Benson,  5  Mason,  157.  Iowa:  Swan  v. 
Yaple,  35  Iowa,  248  ;  Port  v.  Kobbins,  35 
Iowa,  208;  State  v.  Lake,  17  Iowa,  215; 
Jordan  v.  Smith,  30  Iowa,  500;  Chase  v. 
Abbott,  20  Iowa,  154;  Sloan  v.  Rice,  41 
Iowa,  465 ;  Hendershott  v.  Ping,  24  Iowa, 
134 ;  Heively  v.  Matteson,  54  Iowa,  505 ; 
Foster  v.  Paine,  63  Iowa,  85.  Indiana: 
"Walters  v.  Walters,  73  Ind.  425  ;  M'Cor- 
mick  V.  Digby,  8  Blackf.  99  ;  Mayer  v. 
Grottendick,  68  Ind.  1  ;  Cissna  v.  Haines, 
18  Ind.  496  ;  Pence  v.  Armstrong:,  95  Ind. 
191  ;  Ponder  v.  Ritzinger,  102  Ind.  571. 
Illinois  :  Hugunin  v.  Starkweather,  5 
Gilm.  492  ;  Flower  v.  Elwood,  66  111.  438 ; 
Hamilton  v.  Quimby,  16  111.  90;  Wayman 
V.  Cochrane,  35  111.  155  ;  Elliott  v.  Blair, 
47  111.  342  ;  Rogers  v.  Trustees  of  Schools, 
46  111.  428  ;  Bond  v.  Liverpool,  L.  & 
Globe  Ins.  Co.  106  111.  654  ;  Citizens'  Nat. 
Bank  v.  Dayton,  116  111.  257;  Jenkins  v. 
International  Bank,  HI  111.  462.  Ver- 
mont: Seymour  v.  Darrow,  31  Vt.  122; 
Dana  v.  Binney,  7  Vt.  493 ;  McDonald  v. 

828 


McDonald,  16  Vt.  630  :  Dunshee  v.  Par- 
melee,  19  Vt.  172;  Slocum  v.  Catlin,  22 
Vt.  137.  New  York  :  Babcock  v.  Morse, 
19  Barb.  140  ;  Bank  of  Utica  v.  Finch,  3 
Barb.  Ch.  293;  Rogers  v.  Traders'  Ins. 
Co.  6  Paige,  583;  Hill  v.  Beebe,  13  N.  Y. 
556 ;  Gregory  v.  Thomas,  20  Wend.  1 7  ; 
Cole  V.  Sackett,  1  Hill,  516  ;  Jagger  Iron 
Co.  V.  Walker,  76  N.  Y.  521.  Connecticut: 
Franklin  v.  Cannon,  1  Root,  500 ;  Bolles 
V.  Chauncey,  8  Conn.  389.  Maine :  Had- 
lock  V.  Bulfinch,  31  Me.  246  ;  Parkhurst 
V.  Cummings,  56  Me.  155  ;  Smith  v.  Stan- 
ley, 37  Me.  11  ;  Bunker  v.  Barron,  8  Atl. 
Rep.  253.  Alabama  :  CuUum  v.  Branch 
Bank  at  Mobile,  23  Ala.  797  ;  Helmetag 
I'.  Frank,  61  Ala.  67;  Kieser  v.  Baldwin, 
62  Ala.  526.  Missouri  :  Christian  v.  New- 
berry, 61  Mo.  446  ;  Lippold  v.  Held,  58 
Mo.  213  ;  Thornton  v.  Irwin,  43  Mo.  153. 
Mississippi :  Heard  v.  Evans,  1  Freem.  Ch. 
79  ;  Morse  v.  Clayton,  13  S.  &  M.  373, 
375  ;  Whittaker  v.  Dick,  5  How.  296 ; 
Terry  v.  Woods,  14  Miss.  139  ;  Gleason  v. 
Wright,  53  Miss.  247  ;  Sledge  v.  Oben- 
chain,  58  Miss.  670.  Virginia :  Coles  v. 
Withers,  33  Gratt.  186;  Farmers'  Bank 
V.  Mutual  Asso.  Society,  4  Leigh,  69.  New 
Hampshire  :  Elliot  v.  Sleeper,  2  N.  H. 
525.     Wisconsin  :    Williams  v.   Starr,  5 


CHANGES    IN    THE   FORM    OF    THE   DEBT. 


[§  925. 


This  rule,  as  applied  to  a  renewal  of  the  note,  holds  equally 
in  those  states  where  a  negotiable  note  is  held  to  be,  primd  facie, 
payment  of  the  debt  for  which  it  was  given, ^  In  Massachusetts, 
where  this  rule  prevails,  it  is  subject  to  qualification,  and  may  be 
rebutted  and  controlled  by  evidence  or  admitted  facts.  "  And  it 
has  been  uniforml}^  held,"  says  Mr.  Justice  Endicott,  "  that  the 
presumption  of  payment  is  controlled  where  its  effect  would  be 
to  deprive  the  party  who  takes  the  note  of  his  collateral  security, 
or  any  other  substantial  benefit."  ^ 

The  presumption  may  also  be  rebutted  by  parol  evidence  of  an 
agreement  to  the  contrary  made  by  the  parties.^ 
■•  925.  A  new  note  is  not  a  discharge  as  against  a  subse- 
quent purchaser,  unless  it  is  so  as  to  the  mortgagor.  As  a 
general  rule  a  purchaser  from  a  mortgagor  or  a  subsequent  in- 
cumbrancer cannot  claim  that  a  new  note  for  the  whole  or  any 
part  of  the  moi-tgage  debt  operates  as  a  payment,  unless  the  facts 


are  such  that  the  mortgagor  himself  could  make  this  claim. 


The 


mortgagee's  security  cannot  be  affected  by  any  dealings  of  the 
mortgagor  with  other  persons.*  Of  course  if  the  mortgagee  by 
his  acts  or  declarations  leads  another  who  is  about  to  become 
interested  in  the  property  to  suppose  that  the  amount  for  which 
a  new  note  has  been  taken  is  actually  paid,  and  is  no  longer  cov- 


Wis.  534.  South  Carolina  :  Burton  v. 
Pressly,  1  Chc'\  es,  1 .  Texas  :  Focke  v. 
Weishuhu,  55  Tex.  33 ;  Ames  v.  N.  O., 
Mobile  &  Tex.  R.  R.  Co.  2  Woods,  206. 
Arkansas:  Olipliint  v.  Eckerley,  36  Ark. 
69.  North  Carolina  :  Vick  v.  Sinitli,  83 
X.  C.  80;  Kidder  v.  Mclihenny,  81  N.  C. 
123.  Minnesota  :  Geib  v.  Reynolds,  35 
Minn.  331. 

In  Flower  v.  Elwood,  66  111.  438,  Mr. 
Justice  Walker  stated  this  general  princi- 
ple as  follows :  "  As  a  general  rule,  the 
mere  change  in  the  form  of  the  debt  does 
not  satisfy  a  morlgiige  given  to  .secure  it, 
unless  it  is  intended  so  to  operate.  The 
lien  of  the  delit  attaches  to  the  inortt,'agcd 
property,  and  the  lien  can,  us  between  the 
piirtifs,  only  l)e  desirnyed  by  the  ji;iynient 


the  lien,  still  leaves  it,  as  between  the  par- 
ties, in  full  vigor.  This  is  a  rule  in  equity 
that  is  sanctioned  by  many  adjudged  cases. 
In  that  forum  mere  form  is  di^regilrdcd, 
and  the  substance  only  is  considered." 

1  Watkins  v.  Hill,  8  Tick.  (Mass)  5'22  ; 
Pomroy  v.  Hice,  16  lb.  22  ;  Bank  of  S.  C. 
V.  Rose,  I  Strobh.  (S.  C),  Eii-  257  ;  Duu- 
shee  V.  Paimelee,  19  Vt.  172;  McDonald 
V.  McDonald,  16  Vt.  630  ;  Bolles  v.  t'haun- 
cey,  8  Conn.  389  ;  Fridley  v.  Bowcn,  5 
Bradw.  (111.)  191. 

-  Parham  Sewing  Machine  Co.  v.  Brock, 
113  Mass.  194;  and  see  Worthy  r.  War- 
ner, 119  Mass.  530. 

=>  Langlcy  i;   Bartlett,  33  Mc.  477. 

*  Robinson  v.  Uniuharl,  12  .N.  J.  K<|.  (I 
Beas.)  515;  Strachn  v.  Koss,  42  N.  II.  43. 


.r  discharge  of  tb<-  debt,  or  by  a  relexse  of     A  slatiite   ].a>Hed   after  the  making  of    u 


the  mortgage.  Mere  cliauge  <jf  the  form 
of  the  evidence  of  the  debt  in  nowise  af- 
fects the  lien.  A  renewal  of  the  iiotr,  its 
reduction  to  a  judgment,  or  other  change 
jiot  intended  to  ojicrute  us  a  discharge  of 


mortgage,  and  befoiu  the  niuwnl  nf  it,  itt 
held  not  to  all'ect  the  new  security  to  the 
injury  of  the  mortgagee.  Poudor  c.  Hit- 
/.inger,  102  luil.  571. 


§  926,]  PAYMENT    AND   DISCHARGE. 

ered  by  the  mortgage,  he  is  estopped  to  claim  that  as  to  such 
person  the  new  note  was  not  a  discharge  of  the  mortgage  debt. 
A  second  mortgage  and  note  taken  for  the  same  debt,  without  a 
surrender  and  discharge  of  the  first  mortgage  and  note,  is  pre- 
sumably a  further  security  for  the  same  debt,  and  not  a  substitu- 
tion for  that.i 

Where  a^new  mortgage  and  note  are  taken  by  a  mortgagee 
from  a  purchaser  of  a  mortgaged  estate,  under  an  agreement  with 
the  mortgagor  that  the  original  mortgage  should  not  be  enforced 
if  the  property  included  in  the  new  mortgage  should  prove  suffi- 
cient for  the  purpose,  the  mortgagee  having  neglected  to  record 
the  new  mortgage  for  a  long  time,  and  by  his  laches  lost  the* 
benefit  of  it  by  the  intervention  of  other  incumbrances,  when  the 
property  itself  was  sufficient,  he  was  held  to  have  lost  the  right  to 
enforce  the  original  mortgage.^ 

926.  Intention  generally  controls.  —  Whether  a  new  note 
shall  be  treated,  and  have  effect  between  the  parties,  as  a  pay- 
ment of  a  former  one  for  which  it  is  substituted,  will  depend 
upon  the  purpose  and  understanding  of  the  parties  to  the  trans- 
action. But  not  only  will  the  intention  of  the  parties  be  de- 
termined by  the  express  agreement  of  the  parties,^  but,  in  the 
absence  of  this,  by  the  circumstances  attending  the  transaction 
from  which  such  intention  may  be  inferred.*  The  assent  of  the 
mortgagor  that  the  lien  of  the  mortgage  shall  continue  will  have 
that  effect  as  against  him,  even  when  the  mortgagee  so  conducts 
the  business  as  to  discharge  the  lien  as  against  other  parties  inter- 
ested.^ In  the  absence  of  any  express  agreement,  and  of  any 
circumstances  showing  intention,  the  renewal  of  the  note  does  not 
affect  the  security.^  The  burden  is  upon  the  mortgagor  to  show 
the  existence  of  an  agreement  that  the  mortgage  lien  should  be 
released  upon  the  execution  of  the  new  note,  and  not  upon  the 

1  Schumpei-t  v.  Dillard,  55  Miss.  348,  wood,  66  111.  438 ;  Lippold  i;.  Held,  58  Mo. 
364.  213;    McDonald   v.  Hulse,   16   Mo.    503; 

2  Teaff  V.  Eoss,  1  Ohio  St.  469.  Birrell  v.  Schie,  9  Cal.  104 ;  and  see  How- 

3  Worcester  Nat.  Banic  v.  Cheenej,  87  ell  v.  Bush,  54  Miss.  437  ;  National  Bank 
111.  602,  614  ;  S.  C.  U  Chicago  L.  N.  31 ;  v.  Bigler,  83  N.  Y.  51. 

Sledge  V.  Obenchain,  58  Miss.  670.  5  McCouihe  i-.  McClurg,  18  Wis.  637. 

4  Grimes  v.  Kimball,  3  Allen  (Mass.),  6  Cullum  v.  Branch  Bank  at  Mobile, 
518 ;  Taft  v.  Boyd,  13  lb.  84;  Watkins  v.  23  Ala.  797  ;  Coles  v.  Withers,  53  Gratt. 
Hill,  8  Pick.  (Mass.J  522  ;  Pomroj  v.  Rice,  (Va.)  186;  Seymour  v.  Mackay,  21  111. 
16  lb.  22  ;  Baker  v.  Gavitt,  128  Mass.  93;  App.449  ;  Bond  v.  Liverpool,  L.  &G.  Ins. 
Hoag  V.  Starr,  69  111.  365;  Flower  v.  El-  Co.  106  111.  654. 

830 


CHANGES    IN    THE    FORM    OF    THE    DEBT.  [§  926. 

mortgagee  to  show  an  agreement  that  the  mortgage  should  con- 
tinue as  a  security  for  the  debt  covered  by  the  new  note.^ 

It  is  of  course  competent  for  the  parties  to  agree  that  a  change 
in  the  form  of  the  mortgage  debt  shall  operate  as  a  payment  of 
the  debt,  although  the  mortgage  be  not  cancelled  in  form.  Such, 
also,  will  be  the  effect  of  the  substitution  of  a  new  security  for 
the  old,  when  the  circumstances  of  the  transaction  indicate  an 
intention  or  understanding  that  the  original  debt  shall  be  paid. 
The  question  of  an  intention  in  such  cases  always  conies  in  with 
controlling  force  ;  and  the  intention  may  operate  as  well  to  ex- 
tinguish the  debt  as  to  keep  it  alive.  If  a  new  note  be  taken 
with  the  intention  or  agreement  that  it  shall  operate  as  payment 
in  whole  or  in  part  of  the  old  debt,  then  the  mortgage  is  accord- 
ingly paid  wholl}'  or  in  part,  as  the  case  may  be.'-  Thus  where 
a  mortgage  was  given  as  security  for  a  note  payable  in  instal- 
ments, and  after  the  first  instalment  had  become  due  the  mort- 
gagee called  on  the  mortgagor  for  payment,  saying  he  could  sell 
the  note  and  mortgage  if  that  instalment  were  paid,  the  mortgagor 
thereupon  gave  a  note  payable  in  four  months  for  the  amount 
due,  upon  which  the  mortgagee  obtained  a  discount  at  a  bank ; 
and  the  following  indorsement  was  at  the  same  time  made  on  the 
mortgage  note  :  "  Received  the  first  instalment  on  the  within  of 
$402.78."  The  mortgagee  thereupon  assigned  the  mortgage  and 
the  original  note.  Before  the  maturity  of  the  new  note  the  mort- 
gagor failed,  and  it  was  paid  by  the  mortgagee  who  indorsed  it. 
Chief  Justice  Shaw,  delivering  the  opinion  of  the  court,"^  said : 
"  The  indorsement  on  the  note  of  a  receipt  of  payment  of  the  first 
instalment  is  primd  facie  evidence  of  payment;  the  other  facts 
agreed  confirming,  instead  of  rebutting,  this  presumption.  Pay- 
ment by  a  negotiable  note  shall  operate  as  a  discharge  and  extin- 
guishment of  a  prior  debt  when  so  intended  by  the  parties.  The 
rule  of  this  commonwealth  differs  from  that  of  the  common  law, 
only  in  determining  what  shall  be  presumed  to  be  the  intent  of 
the  parties,  from  the;  fact  of  giving  and  accepting  a  negotiable 
note  for  a  simple  contract  debt.     Without  further  evidence  of  in- 

1  Sloan  r.  Kice,  41  Iowa,  4G5.    luaciiBe  niiikt-r,  wuh   laid    by  a  niiijority  of    the 

in  Illinois,  however,  the  taking  of  a  new  court  to  opernte  as  a  relciiku  of  the  mort 

note  by  a  rnorlgngce,  payable  in  two  years  gage.     .laruagan  v.  Gaines,  81  111.  20.'1. 
without  interest,  after  tiie  inntilution  of         -  Iowa  County  i".  Foster,  49  lown,  G76 ; 

proceedings    in    bankruptcy    against    the  Jaffray  v.  Crane,  50  Win.  ;U9;  Meyer  v. 

maker,    under   a    compoHilion    agreement  Jjithrop,  7.'l  N.  V.  315. 
entered   into   bv  all  the    creditors  of  the         "  Fowler  r.  Hush,  t^l  Pick.  (.Mass.)  2.10 


§§  927,  927  a.]  payment  and  discharge. 

tent  we  construe  it  to  be  payment,  but  the  common  law  deems  it 
collateral  security.  But  this  presumption  may  be  controlled  by 
other  evidence,  and  when  ascertained  such  intent  shall  govern." 

The  question  of  intention  in  these  cases  as  well  as  in  others  is 
one  for  the  jury.  It  is  one  of  fact.  Considerations  of  the  effect 
of  regarding  the  transaction  as  a  payment  upon  the  rights  and 
interests  of  the  parties  may  properly  be  urged  as  reasons  why  it 
should  or  should  not  be  so  considered. ^ 

927.  The  taking  up  of  the  mortgage  note  and  the  substitu- 
tion of  another  is  not  a  discharge  of  the  original  debt  either  as 
between  the  parties  or  as  to  a  subsequent  purchaser.^  Even 
where  the  purchaser  finds  the  mortgage  note  in  the  hands  of  the 
mortgagor,  the  mortgage  remaining  unsatisfied  of  record,  he  has 
no  right  to  presume  that  it  was  satisfied.  The  mortgage  is  suffi- 
cient to  put  him  upon  inquiry .^  Upon  making  a  partial  payment 
of  the  mortgage  debt,  the  mortgagee  may  give  up  the  old  note 
and  take  a  new  one  for  the  balance  I'emaining  unpaid ;  and  the 
transaction  does  not  impair  or  defeat  the  mortgage.^  In  like  man- 
ner the  original  mortgage  notes  may  be  given  up,  and  in  lieu  of 
them  an  agreement  made  that  the  mortgagor  shall  pay  the  amount 
of  the  notes  upon  an  indebtedness  of  the  mortgagee  for  the  same 
land,  without  in  any  way  discharging  the  mortgage  security  ;  ^ 
and  it  would  seem  that  the  agreement  might  just  as  well  be  for 
the  payment  of  any  debt  of  the  mortgagee  to  the  amount  of  the 
mortgage  debt. 

If  payments  upon  a  mortgage  be  made  by  acceptances,  some  of 
which  the  mortgagee  afterwards  places  in  the  mortgagor's  hands 
for  collection,  and  the  mortgagor  gives  the  mortgagee  his  note  for 
a  part  of  the  amount  collected  by  him,  this  does  not  amount  to  a 
change  of  securities  so  that  the  new  note  remains  secured  by  the 
mortgage.  The  new  note  is  for  a  new  loan  on  an  independent 
transaction  after  the  acceptances  had  been  taken  in  payment.® 
927  a.    When  a  mortgage    is    discharged    and  a  new  one 

1  Collamer  v.  Langdon,  29  Vt.  32;  Conn.  389  ;  Harrison  i;.  N.  J.  R.  &  T.  Co. 
Couch  V.  Stevens,  37  N.  H.  169;  Hodg-  19  N.  J,  Eq.  488  ;  Boxheimcr  w.  Giinn,  24 
man  v.  Hitchcock,  15  Vt.  374.  Mich.  372  ;  Geib  v.  Reynolds,  supra. 

2  Heively  v.  Matteson,  54  Iowa,  505  ;  •»  Chase  v.  Abbott,  20  Iowa,  154. 
Frink  t'.  Branch,  16  Conn.  260,  274;  Wal-  ^  Hugunin  i-.   Starkweather,   10  111.(5 
ters  ?;.  Walters,  73  Ind.  425 ;  Brinckerhotf  Gilm.)    492.      See    Tucker  v.   Alger,   30 
V.  Lansing,  4  Johns.  Ch.  (N.  Y.)  65  ;  8  Am.  Mich.  67. 

Dec.  538  ;  Geib  v.  Keyuolds,35  Minn.  331.         «  Pettis  v.  Darling,  57  Vt.  647, 

3  See   §   355;    Bolles    v.   Chauncey,   8 

882 


CHANGES    IN    THE   FORM    OF   THE   DEBT.  [§  928. 

taken  as  part  of  one  transaction,  the  seisin  between  the  release 
and  the  new  mortgage  is  but  momentary,  and  will  not  admit  any 
right  or  interest  of  the  mortgagor  under  the  homestead  act  to  in- 
tervene ;  ^  nor  would  such  a  seisin  give  his  wife  a  right  of  dower. 
Neither  the  mortgagor  nor  his  heirs  can  claim  that  the  original 
mortgage  was  extinguished  and  the  new  mortgage  substituted  in 
its  place,  unless  such  appears  to  have  been  the  intention  of  both 
parties.^  But  as  regards  intervening  liens  of  third  persons,  a  re- 
lease of  the  original  mortgage  and  the  taking  of  a  new  one  would 
naturally  let  them  into  a  position  of  priority  to  the  new  mortgage, 
and  it  requires  very  clear  evidence  of  fraud,  accident,  or  mistake, 
to  induce  a  court  of  equity  to  interfere  to  prevent  this  result.'^ 

When  the  original  mortgage  is  left  undischarged  upon  the  tak- 
ing of  the  second  mortgage,  in  the  absence  of  an  express  agree- 
ment that  the  latter  is  received  in  satisfaction  of  the  former,  for 
stronger  reasons  the  original  mortgage  remains  as  a  security  for 
the  original  debt.**  If  the  new  note  and  mortfrage  secure  an  atldi- 
tional  amount,  this  fact  shows  a  motive  for  the  transaction,  but 
it  has  no  tendency  to  show  that  the  prior  security  was  extin- 
guished.^ If,  however,  the  new  note  and  mortgage  be  taken  ex- 
pressly in  payment  and  satisfaction  of  the  first,  or  if  they  be  given 
in  settlement  of  mutual  running  accounts,  of  which  the  first  mort- 
gage debt  is  only  a  part,  the  first  mortgage  lien  is  discharged  and 
not  continued  in  the  second.'' 

The  consideration  of  the  new  note  and  mortgage  may  be  shown 
by  parol  evidence." 

928.  The  giving  up  of  the  bond  of  defeasance  executed  at 
the  time  of  the  deed  of  the  land  and  constituting  with  it  a  niort- 

1  Bums  f  Thayer,  101  Mass.  426;  Dil-  Slaughter,  54  Iowa,  2G3  ;  St.  Alhans  Trust 

Ion  V.  Byrne,  5  Cal.  455;  Swift  t'.  Krae-  Co.  v.  Farrar,  53  Vt.  542;  Barnes  f.  Molt, 

mer,  13  Cal.  526.     Intention  as  shown  by  64  N.  Y.  397  ;  Smith  r.  Bynum,  92  N.  C. 

the   transaction   will   govern.     Howell    v.  108.     Sec,  iiowever,  §  971  ;  Childs  v.  Stod- 

Bush,  54  Miss.  437;  Jones  v.  Parker,  51  dard,  130  Mass.  110. 

Wis.   218;    Walters   v.  Walters,    73   Ind.  *  Gregory   i'.   Tlionias,   20  Wend.   (N. 

425.  Y.)  17;    Christian  v.  Newberry,  61   Mo. 

•^  Sledge  v.  Obenchain,  58  Miss.  670.  446;  Burdett   v.  Clay,  8  B.   Mon.  (Ky.) 

"  Dingman    v.    Kandall,    13   Cal.   512.  287,  296;    Slate   r.  Lake,    17  Iowa,  215. 

See,  however,    Packard   v.  Kingman,    11  219;  Wiushington  Co.  i-.  Sluugliler,  su/jrn. 

Iowa,  219,  where  an  intervening  landlord's  ''  Hill  i'.   Behcc,  13  N.  Y.  556  ;  but  sec 

lien  was  postjioned.     has.selle  r.  Burnett,  Iowa  County  r.  Foster,  49   Iowa,  676  ;  .S. 

I   Blackf.  (liid.)  150  ;  Stearns  v.  (iodfrey,  C.  13  West.  Jur.  36. 

16  Mo.  158  ;  United  States  v.  Crookshauk,  «  Wallers  i>.  WnllerH,  73  Ind.  425. 

I    Edw.  (N.  Y.)  233;  Washington  Co.  r.  '  Waltem  r.  Widiom,  fu/^ra. 

VOL.  I.             53  833 


§§  929,  930.]  PAYMENT    AND   DISCHARGE. 

gage,  and  the  taking  of  a  new  bond  at  a  subsequent  date,  do  not 
defeat  the  transaction  as  a  security  for  the  original  loan.^ 

929.  The  taking  of  further  security  for  the  mortgage  debt, 
whether  it  be  by  a  second  mortgage  u^Don  the  same  hind  or  real 
or  personal  security  upon  other  property,  is  generally  no  waiver 
of  the  original  mortgage.^  Neither  does  the  taking  of  a  new  note 
with  an  indorser  where  there  was  none  originally,  nor  the  taking 
of  a  new  note  without  an  indorser  in  place  of  an  old  one  secured 
by  an  indorsement,  release  the  premises  from  the  lien.^  Nor  does 
the  renewal  of  the  note  with  different  names  have  this  effect ;  * 
nor  the  giving  of  the  new  note  different  from  the  old  by  making 
it  payable  at  a  certain  place ;  ^  nor  the  giving  of  the  new  note  at 
the  request  of  the  holder  of  the  old  to  one  to  whom  it  was  in- 
tended the  security  should  be  assigned,  such  delivery  to  the  in- 
tended assignee  amounting  in  fact  to  an  assignment  of  the  debt ;  ^ 
nor  the  assumption  of  the  mortgage  debt  by  a  purchaser  of  the 
equity  of  redemption.''  The  taking  of  a  new  bond  and  mortgage 
for  the  amount  of  taxes  and  assessments  paid  by  the  mortgagee 
on  the  mortgaged  property  does  not  of  itself  prevent  his  claim- 
ing the  same  under  the  lien  of  the  first  mortgage,  or  as  incident 
to  that  lien.'^  Of  course,  if  further  security  be  taken  for  part  of 
a  mortgage  debt,  with  the  intention  and  mutual  understanding 
of  the  parties  that  such  part  shall  be  withdrawn  from  the  opera- 
tion of  the  mortgage,  it  will  have  this  effect.^ 

930.  The  incorporating  in  the  new  note  of  an  additional 
sum  loaned  will  not,  in  the  absence  of  an  agreement  to  the  con- 
trary, discharge  the  mortgage  as  between  the  parties  ;  and  parol 
evidence  is  admissible  to  show  that  at  the  time  the  new  note  was 
given  it  was  agreed  that  the  mortgage  should  continue  as   secu- 

1  See   §  252;  Judd    v.  Flint,   4    Gray     Hampshire  Bank   v.   AVillard,   10   N.   H. 
(Mass.),  557;    Tennery  v.   Nicholson,  87     210. 

111.  464.  i  Fond  v.  Clarke,  14  Conn.  334. 

2  Hutchinson  v.  Swartsweller,  31  N.  J.         5  "Whittaker   v.   Dick,  5    How.  (Miss.) 
Eq.  205  ;  Firemen's  Ins.  Co.  v.  Wilkinson,     296. 

35  N.  J.  Eq.   160;  Flower  v.  Elvvood,  66  6  Burdett  v.  Clay,  supra;  Christian  v. 

III.  438 ;  Burdett  v.  Clay,  8  B.  Men.  (Ky.)  Newberry,  61  Mo.  446,  451. 

287,  296 ;  Gregory  v.  Thomas,  20  Wend.  ■?  Latiolais   v.   Citizens'  Bank,   33    La. 

(N.  y.)  17  ;  Byers  v.  Fowler,  14  Ark.  86  ;  Ann.  1444. 

Cissna  v.  Haines,  18  Ind.  496;   and  see  »  Eagle  Fire  Ins.  Co.  v.   Pell,  2  Edw. 

Bank   of  England  v.  Tarleton,  23  Miss.  (N.  Y.)  631. 

173.  9  Boston    Iron    Co.   v.  King,   2   Gush. 

3  Darst    V.    Bates,    51    III.   439;    New  (Mass.)  400. 

834 


CHANGES   IN    THE   FORM    OF    THE    DEBT.       [§§  931,  932. 

rity  for  it.^  And  where  the  note  had  been  increased,  diminished, 
and  renewed  several  times,  it  was  held  that  the  mortsaire  secur- 
ing  it  was  still  a  valid  security  for  the  amount  remaining  due 
upon  it,  even  as  against  third  persons.^  Especially  when  the 
mortgage  by  its  terms  is  given  to  secure  notes  made  for  tlie  ac- 
commodation of  the  mortgagor,  and  renewals  of  those  notes  from 
time  to  time  until  they  should  all  be  paid,  it  is  not  necessary, 
to  constitute  the  notes  subsequently  issued  renewals,  tliat  tliey 
should  be  for  the  same  amounts,  or  for  the  same  periods,  or  that 
each  successive  note  should  have  been  applied  to  take  up  its  im- 
mediate predecessor.  A  continuing  loan  of  the  same  credit  would 
be  within  the  terms  of  the  mortgage.^ 

931.  But  if  a  new  note  for  a  different  amount,  payable  at 
another  date,  be  given  in  place  of  one  of  several  notes  secured 
by  the  mortgage,  without  any  agreement  that  it  shall  be  secured 
by  the  mortgage,  the  holder  loses  his  right  to  the  security  as 
against  the  holder  of  other  notes  secured  by  the  mortgage.*  But 
by  agreement  of  the  parties  the  mortgage  may  be  made  to  stand 
as  a  security  for  a  different  sum.  Thus  it  may  be  continued  for 
a  less  sum  found  due  on  accounting,  or  agreed  upon  by  compro- 
mise ;  and  then  if  there  is  a  default  the  mortgage  will  be  en- 
forced for  such  amount  if  it  appear  that  this  amount  was  sub- 
stituted, or  agreed  upon,  in  place  of  the  original  liability.'' 

932.  The  taking  of  a  new  note  for  the  interest  ;ici  i  lU'd  ujion 
a  mortgage  debt  does  not  generally  remove  this  part  of  the  debt 
from  the  security  of  the  mortgage.*'  The  indorsement  of  the 
amount  for  which  the  new  note  is  taken  upon  the  origiiud  mort- 
gage note  does  not  have  the  effect  of  a  payment  even  as  against 
subsequent  incumbrancers,'  unless  their  dealings  with  the  mort- 
gagor were  based  upon  a  knowledge  of  such  indorsement,  and  a 
belief  that  such  auKJunt  had  been  paid  ;  nor  against  a  subsequent 
purchaser  of  the  property  subject  to  the  mortgage,  if  such  pur- 
chaser had  notice  that  the  interest  was  not  in  fact  jiaid.^ 

'  Port  ».  Robbiiis,  .T)  Iowa,  208;  Goc-  ''  Keiislmw  r.  Taylor,  7  Orfj;.  ."Mr), 

nen  v.  Sclirotder,  18  Minn.  60;  l)c  Cottes  °  Elliot  v.  Slei'iiur,  2  N.  II.  .')2.'i ;  Tark- 

/'.  Jeffers,   7  ria.  284.     New  note  includ-  hurst  v.  Cuinniin;;^,   5(i  Mc     \U'\  \    Tvlco 

in;j  interist  accrued.     I'oniroy  y.  Hici-,  IC  v.  YhIcs,  .3  Hurl).  (N.  Y.)    222;    Uii-o    v. 

Pick.  (MasJH.)  22;  KllHwortli   v.  Mitchell,  Dewey,  .')4    Harli.  (N.  V.)  4.').');   lliitcliin- 

.31  Me.  247.  Hon   v.    Swartswcllcr,  .31    N.  J.    Va\.  205; 

■^  Brinckirliofr  v.  \ /.iwAw^,  4  Jolins.  (.\.  Fclilinan  r.  Hcii-r,  78  N.  Y.  2'.t.3. 

Y.)  Ch.  G.'i.  "   Fririk     v.    Hrandi,    10    Conn.    200; 

='  Gault  V.  .McGiaili,  .32  I'a.  St.  .3'.)2.  IluiM|)lir<-yH  v.  Danser,  .32  N.  J.  i:(|.  220. 

*   VVillielini   v.   Lconanl,   1.3  l(»wa,  330.  **   Kcl<! man  v.  Heier,  «u/ir«. 

Sec  Tucker  c  Al;,'cr    30  .Midi.  07.  835 


§§  933-935.]  PAYMENT    AND   DISCHARGE. 

Where  a  note  was  given  for  tlie  amount  of  interest  accrued  on 
a  mortgage,  together  with  a  further  loan  made  at  that  time,  and 
an  indorsement  was  made  on  the  mortgage  note,  "  Received  on 
the  within,  interest  up  to  date,"  and  there  was  evidence  that  the 
note  was  intended  by  the  parties  to  be  taken  in  payment  of  the 
interest,  it  was  held  that  such  interest  was  no  longer  secured  by 
the  mortgage.^ 

933.  A  new  note  given  for  the  balance  found  due  on  a 
mortgage  is  not  invalid  for  want  of  consideration,  althousrli 
the  old  note  be  not  given  up,^  but  is  left  with  the  mortgagee  as 
collateral  to  the  new  note.  Under  a  mortgage  for  advances,  a 
new  note  made  afterwards  for  the  balance  of  account  of  such  ad- 
vances, the  creditor  retaining  the  original  note  and  mortgage,  is 
regarded  merely  as  a  statement  of  the  liquidated  balance.-'^  An 
extension  of  the  time  of  payment  under  the  new  note  is  a  suffi- 
cient consideration  to  uphold  it. 

934.  A  mortgage  of  indemnity  is  generally  held  to  cover 
successive  renewals  of  the  note  for  which  the  indemnity  was 
taken.^  Nor  does  it  make  any  difference  that  the  renewed  note 
has  different  names  upon  it,  or  is  for  a  different  amount ;  so  long 
as  the  mortgagee  remains  liable  for  the  debt  he  was  indemnified 
against,  he  may,  upon  being  compelled  to  pay  it,  rely  upon  the 
protection  of  the  mortgage.'^  Nor  is  it  material  that  the  renewal 
note  is  for  a  larger  amount,  but  signed  and  indorsed  as  the  first 
one  was  ;  ^  or  that  there  are  successive  renewals.^ 

When  the  surety  does  not  become  liable  upon  the  new  note, 
but  this  is  taken  with  other  sureties,  and  the  old  is  taken  up,  the 
condition  of  the  surety's  mortgage  is  saved,  and  consequently  no 
interest  remains  in  him  which  he  can  pass  by  assignment.^ 

935.  If  a  payment  be  made  upon  a  mortgage  by  check  or 
bill  of  exchange  which  is  not  paid,  although  an  indorsement  of 

1  Goenen  v.  Schroeder,  18  Minn.  66;  B.  Mon.  (Ky.)  98  ;  Choteau  i-.  Thompson, 
and  see  Meyer  v.  Lathrop,  73  N.  Y.  315  ;     3  Ohio  St.  424. 

Pettis  V.  Darling,  57  Vt.  647.  *  Kightingale  v.  Chafee,  11  R.  I.  609  ; 

2  Langley  f.  Bartlett,  33  Me.  477;  Kap-  National  Bank  v.  Bigler,  83  N.  Y.  51; 
ban  V.  Ryan,  16  S.  C.  352.  Pond  v.  Clarke,  14  Conn.  334,  overruling 

3  Kaphan  v.  Ryan,  supra.  Peters  v.  Goodrich,  3  Conn.  146. 


*  Robinson  v.  Urquhart,  12  N.  J.  Eq 
(1  Beas)  515;  Enston  v.  Friday,  2  Rich 
(S.  C.)  427,  n. ;  Smith  v.  Prince,  14  Conn 
472;  Boswell  v.  Goodwin,  31  Conn.  74 
Markell  v.  Eichelberger,  12  Md.  78 
Handy  v.  Commercial  Bank  of  N.  O.  10  57  Pa.  St.  360. 
836 


«  Boxheimer  v.  Gunn,  24  Mich.  372. 

"  Boxheimer  v.  Gunn,  supra. 

8  Abbott  V.  Upton,  19  Pick.  (Mass.) 
434;  and  see  Van  Rensselaer  v.  Akin,  22 
Wend.   (N.  Y.)   549;  Ayres  v.  Wattson, 


CHANGES  IN  THE  FORM  OF  THE  DEBT.        [§  936. 

payment  be  made  upon  the  mortgage  note  or  bond,  yet,  no  part 
of  the  debt  being  actually  paid,  no  part  of  the  mortgage  lien  is 
extinguished,^  A  mortgage  having  been  paid  by  a  clieck  and 
bills  of  exchange,  the  latter  were  dishonored.  The  titlo  and  mort- 
gage deeds  were  delivered  up  to  the  mortgagor,  togetiier  with  a 
receipt  by  the  mortgagee  declaring  that  the  check  and  bills  were 
received  in  full  of  principal  and  interest  due  upon  the  mortgage, 
and  agreeing  whenever  required  to  execute  a  convej'ance  of  the 
property.  The  mortgagor  became  bankrupt  without  having  ob- 
tained a  reconveyance.  It  was  held  that  the  mortcrage  was  not 
dischai'ged,  but  that  it  might  still  be  foreclosed  for  the  balance  of 
the  debt  remaining  unpaid.^ 

936.  The  merger  of  the  note  in  a  judgment  does  not  extin- 
guish the  debt,  and  the  mortgage  continues  a  lien  till  it  is  satis- 
fied, or  the  judgment  is  barred  by  the  statute  of  limitation.^ 

The  rule  is  the  same  whether  the  judgment  be  for  the  whole 
or  for  a  part  only  of  the  mortgage  debt ;  *  and  whether  the  secu- 
rity be  in  tiie  form  of  an  ordinary  mortgage  or  of  a  trust  deed.^ 
Neither  does  a  decree  in  a  foreclosure  suit,*"  nor  a  judgment  on 
scire  facias,^  impair  the  lien  of  the  mortgage  ;  nor  the  taking  of 
a  recognizance  for  the  sum  due  in  place  of  the  mortgage  note.^ 
The  mortgagee  may  afterwards  foreclose  the  mortgage.''  The 
land  is  liable  for  the  debt  till  the  judgment  is  paid. 

1  Maryland  &  X.   Y.  Coal  &  Iron  Co.  Phillips,  12  Iowa,  81  ;  Shearer  v.  Mills,  35 

V.   Wingert,   8  Gill    (Md.),   170;    Tucker  Iowa,  499;  Hi-uder.shott  i;.  Tin;?,  24  Iowa, 

V.  Alger,  30  Mich.  67,  where   a  due    bill  134  ;  Jordan  i-.  Smith,  30  Iowa.  500.    Mia- 

was  taken;  Burrows  i-.  Bangs,  34  Mich,  souri:    Kiley    i'.    McCord,   21    Mo.    285; 

.304;  Humphreys  i-.  Danser,  32  N.  J.  Eq.  Thornton  v.   Pigg,  24   Mo.  249.     Maine: 

220.  Jewett  v.  Hamlin,  68  Me.  172.   New  York  : 

-  Teed  i-.  Carruthers,  2  Y.  &.  C.  Ch.  31.  Butler  i'.  Miller,  1  N-  Y.  490. 

•  Massachusetts:  Torrey  v.  Cook,   116  *  Applcgate  v.  Ma-on,  13  Ind.  75. 

Mas.s.  163  ;  Ely  i;.  Ely,  6  Gray,  439.     Illi-  *  Hamilton  r.  Quimhy,  supra. 

nois:    Priest   v.    Wheclock,    58    III.    114;  «  Hendershott  f.  Ping,  sii/<ni  ,•  Stahl  i;. 

Darst   V.   Bates,   51    III.   439;    Hewitt   v.  Koost,  34  Iowa,  475;  Peck's  Appeal,  3( 

Tem^deton,    4H    III.    367;    Hamilton    i;.  Conn.  215;  Evansvillo  Giis   Light  Co.  v. 

Quimby,  46  III.  90;  Vansant  c.  Allmoii,  Stiitc,   73   Ind.    219;    Lapping   «'.   Duffy, 

23  III.  .30;   Wayman   ('.Cochrane,  35    III.  47    Ind.  51;   Teal  v.    Hiiichman,  C9    Ind. 

152.     Indiana  :  Marklo  17.  Uapp,  2  Blackf.  379;   Uilcy   i>.  McCord,  snpm  ;  Prio'«t    i-. 

268;  Hensicker  I'.  Lamhorn,  13  Ind.  468  ;  Wheclock,  tupra.    See,  howovor,    People 

O'Leary   i-.   Snedikcr,    16  Ind.  404;  Jen-  t\   Beel.c,   1    Bark  (N'.   Y.)  379;  Gago  v. 

kinsoD  V.  Ewing,  17    Ind.  5<)5  ;  CisMua  v.  Brewhter,  31  N.  V.2I8. 

HaiiiCH,  18  Ind.  496.     New  Jersey :   Fl.in-  t  li,„.kwell    i-.    Servunf,   63    111.    424; 

iigan  V.  VVcHlcotl,  11  .N.  J.  E.j.  (.1  Stockt.)  H.lmlM.ld  v.  Man.  4  Whart.  (Pa.)  410. 

264  ;  Lewi'*  v.  Conover,  21    N.  J.  E<|.  230.  "   Davin  c  Maynurd,  9  MaMH.  242. 

Iowa  :  .Morrison  v.  .Morrinon,  38  Iowa,  73  ;  'J  Thoruion  t'.  Pigg,  *upra. 

State   V.   Lake,    17    Iowa,    215  ;   Walil   i'.  y,'{7 


§§  937,  938.]  PAYMENT   AND   DISCHARGE. 

When  the  judgment  is  paid  by  the  mortgagor  or  any  one  claim- 
ing under  him,  the  payment  has  the  effect  of  a  redemption,  and 
gives  him  the  same  rights  in  respect  to  the  property  that  he  would 
have  had  upon  paying  the  debt  before  judgment.^  And  so  when 
the  mortgage  is  satisfied  by  a  sale  of  the  mortgaged  land  under  a 
decree  of  foreclosure,  neither  the  mortgage  nor  the  decree  is  any 
longer  a  lien  upon  it.^  But  if  the  proceedings  in  the  foreclosure 
suit  be  set  aside  and  vacated,  the  judgment  and  sale  do  not  cancel 
the  mortgage,  but  the  lien  remains  and  may  be  enforced  by  new 
proceedings.'^ 

937.  A  judgment  for  a  portion  of  the  mortgage  debt,  as, 
for  instance,  for  one  of  several  mortgage  notes,  is  no  waiver  of  the 
lien  upon  the  mortgaged  property  for  the  amount  reduced  to  judg- 
ment. If  an  execution  be  issued  upon  the  judgment  the  mort- 
gage lien  still  continues  until  tlie  execution  is  actually  satisfied  ; 
so  that  if  the  creditor  is  obliged  to  abandon  his  levy  for  any  rea- 
son, his  rights  remain  the  same  as  if  no  levy  had  been  made.^ 
Neither  does  the  satisfaction  of  a  judgment  for  a  part  of  the  debt 
affect  the  mortgage  lien  for  the  balance.  If  one  holding  a  bond 
and  mortgage  as  collateral  security  for  an  amount  less  than  that 
secured  by  the  mortgage  recovers  a  judgment  merely  for  the 
amount  of  the  debt  due  to  himself,  the  satisfaction  of  it  does  not 
extinguish  the  mortgage  lien  for  the  balance.^ 

938.  Judgment  under  trustee  process.  —  A  mortgagor  may 
be  held  to  answer  to  a  trustee  process  brought  by  a  creditor  of 
the  mortgagee  whenever  he  would  be  chargeable  if  the  debt  were 
not  secured,  and  a  payment  under  such  process  will  discharge 
the  mortgage  joro  tanto.^  The  judgment  obtained  in  the  trustee 
process  does  not,  until  it  is  satisfied  wholly  or  in  part,  affect  the 
mortgage  lien.'''  But  where  the  mortgagor  was  delayed  in  such 
process,  and  arrested  for  the  debt  and  committed  to  prison,  from 
which  he  was  discharged  on  taking  the  poor  debtor's  oath,  and 
the  judgment  was  thereupon  released  to  him  by  the  creditor,  this 
constituted  no  defence  to  an  action  on  the  mortgage.^ 

1  Sibley    v.   Rider,  54   Me.   463  ;    Yeo-  ^  Eaton    v.   Whiting,   3   Pick.    (Mass.) 

mans  v.  Rexford,  35  Pa.  St.  273.  484.     Otherwihe  if  the  debt  be  not  liable 

-  People  ;;.  Beebe,  1  Barb.  (N.  Y.)  379.  to    the   process,  and   the  trustee  pay  the 

^  Stackpole  v.  Robbins,  47  Barb.  (N.Y'.)  judgment  in  hit;  own  wrong. 

212;  S.  C.  48  N.  Y.  665.  Watkins  v.  Cason,  46  Ga.  444. 

*  Applegate  v.  Mason,  13  Ind.  75  ^  Gary  v.  Prentiss,  7  Mass.  63. 

^  Brumagim    r.    Ghew,    19    N.  J.   Eq. 
130. 

838 


CHANGES   IN   THE    FORM    OF    THE    DEBT.       [§§  939-942. 

939.  Proceedings  against  the  mortgagor  personally  by  a 
suit  upon  the  mortgage  debt,  and  his  coimnitment  to  prison  upon 
execution,  do  not  dischai'ge  the  mortgage. ^ 

940.  Release  of  judgment.  —  But  it  is  generally  held  that 
the  release  of  a  judgment  recovered  upon  the  mortgage  debt  dis- 
charges the  inortgage.2  The  mortgagee's  acknowledgment  of  sat- 
isfaction of  judgment  is  not,  however,  conclusive.^ 

Whether  a  foreclosure  commenced  by  entry  under  process  of 
law  is  waived  by  a  subsequent  release  of  the  judgment  is  a  ques- 
tion of  fact  for  the  jury,  when  the  evidence  as  to  the  object  of 
the  continued  possession  is  conflicting.* 

941.  The  failure  to  charge  an  indorser  who  has  made  a  mort- 
gage to  secure  the  notes  indorsed  by  him  does  not  discharge  the 
lien  of  the  mortgage.^ 

If  a  holder  of  a  mortgage,  upon  assigning  it,  guarantees  the 
payment  of  it,  he  is  liable  as  guarantor  without  notice  of  prose- 
cution and  dishonor  of  the  note,  unless  he  can  show  that  he  has 
been  prejudiced  by  reason  of  the  want  of  notice.  His  liability, 
being  upon  the  guaranty  and  not  upon  the  indorsement  of  the 
note,  it  is  not  contingent  upon  notice  of  non-payment  and  protest.^ 

942.  The  extension  of  the  time  of  payment  of  a  mortgage  in 
no  way  impairs  the  security  as  against  subsequent  incumbrancers, 
even  if  this  be  effected  by  a  renewal  of  the  mortgage  note."  It 
of  course  does  not  impair  the  security  as  against  the  mortgagor 
when  the  debt  extended  is  his  own,  and  lie  remains  primarily 
liable  for  it.  But  the  rule  is  different  when  he  has  mortgaged 
his  property  to  secure  the  debt  of  another.'^  In  such  case  the 
mortgagor  occupies  the  position  of  a  surely  of  the  ilebt,  and  an 
extension  of  the  time  of  payment  of  that  debt  without  the  surety's 
concurrence  discharges  the  mortgage  ;  as,  for  instance,  where  a 
wife  mortgages  her  land  to  secure  notes  indorsed  by  licr  husband, 
or  any  renewals   of   them,  an  extensi(jn  of   the   time  of   payintMit 

1  iJavis  V.  liatline,  2  Kusfl.  &  M.  70.  5()S;  Clcvcbuil  v.  M;vrtiii,  2  Head  (  ri'im), 

-  Porter  «;.  Perkins,  5  MuKH.  233,  236.  128;    Naltner   v.   Tuppov,  Si    linl.    107; 

3  Perkins  v.  Pitts,  II  Ma-'S.  125.  Ford  v.  Burks,  37  Ark.  '.U. 

■»  Couch  «;.  SteveuH,  37  N.  II.  109.  *  Giilin   v.   NieuRowicz,   II    Wi-ud.    (N. 

6  Mitrhcil  y.  Clark,  3.0  Vt  104;   Hilton  V.)   312;  S.    C.  3  PhIk*',  014;  Christnur 

f.  Ciitherwood,  10  Ohio  St.  I0'.».  r.  Hrowti,    10    lowii.    130;  MlI/,  v.   Todd, 

'•  Cliiflin  w.  |{ct')ie.  54  Iowa,  ."ill  ;     Uohu  30   .Mich.   473;    Wiilkur   v.   (i.il.lsuiillt,    7 

baijj;jli  V.  Pitkin,  40  Iowa,  544.  (Jrcg.  101. 

'   Hank  of  Uiica  v.  I'incii,  3   Harh.  (N. 
Y.)  Ch.  293  ;  Whiltacre  v.  Fuller,  5  Minu. 

839 


§  943.]  J»AYMENT   AND  DISCHARGE. 

without  a  renewal  would  discharge  her  liability  ;  ^  and  in  an  or- 
dinary mortgage  not  providing  for  any  renewal  or  continuance 
of  it,  any  extension  by  renewal  r  otherwise  without  her  consent 
would  release  her  property. ^ 

A  wife  who  has  joined  her  husband  in  a  mortgage  of  his  land 
s  not  a  surety,  and  the  mere  extension  of  the  time  of  payment 
without  her  consent  does  not  release  her  inchoate  dower  interest 
in  the  land.^ 

The  mere  taking  of  collateral  security  to  a  subsisting  mortgage, 
without  an  extension  of  the  time  of  payment  of  the  mortgage, 
does  not  release  a  surety  of  the  mortgagor.* 

The  extension  of  the  time  of  payment  of  a  mortgage  covering 
several  lots  of  land,  by  agreement  between  the  mortgagor  and 
mortgagee,  does  not  impair  the  security  as  against  a  purchaser  of 
one  of  the  lots.  He  cannot  complain  that  by  the  extension  the 
property  has  diminished  in  value,  and  the  mortgagor  has  become 
insolvent.  His  only  right  as  against  the  mortgagee  was  to  pay 
the  mortgage  and  be  subrogated  to  the  mortgagee's  rights,  where- 
upon he  could  foreclose  the  mortgage  at  any  time.'^ 

VI.  Revivor  of  Mortgage. 

943.  A  mortgage  after  payment  becomes  functus  officio, 
and  neither  the  mortgagee  nor  any  one  else  has  as  a  general  rule 
any  power  to  transfer  it  as  a  subsisting  security,  or  to  revive  it 
to  secure  the  same  or  any  other  liability.*^  A  mortgage  given  to 
secure  the  repayment  of  a  legacy  in  case  such  payment  should 
prove  to  be  invalid  is  functus  officio  upon  a  final  decision  being 
made  sustaining  the  payment,  and  cannot  be  enforced  by  an 
assignee.'' 

Such  -^as  also  the  decision  where  a  mortgagor  paid  and  took  up 
the  mortgage  note  and  the  next  day  redelivered  it  to  the  mort- 

^  See  §  742;  Smith  v.  Townsend,  25  N.  ^  McGiven  v.   Wheelock,  7  Barb.    (N. 

Y.  479  ;  Leary  v.  Shaffer,  79  Ind.  567, 571.  Y.)  22  ;  Mead  v.  York,  6  N.  Y.  449  ;  Led- 

2  Bank  of  Albion  v.  Burns,  46  N.  Y.  yard  v.   Chapin,  6   Ind.   320;    Thomas's 

170.  Appeal,  30  Pa.  St.  378  ;  Perkins  v.  Sterne, 

"•  Crawford  v.  Hazelrigg  (Ind.),  18  N.E.  23  Tex.  561  ;  Fewell  v.  Kessler,  30  Ind. 

Kep.  603.  195;  Pelton  v.  Knapp,  21  Wis.  63;  Har- 

*  Firemen's  Ins.  Co.  v.  Wilkinson,  35  ris  v.  Hooper,  50  Md.  537 ;  Dolan  v.  Kehr, 

N.  J.  Eq.  160.  9  Mo.  App.  351  ;  McClure  v.  Andrews,  68 

s  Case  V.  O'Brien    (Mich.),   33   N.  W.  Ind.  97. 
Rep.   405.      The  extension   in   this  case,  "'  Rickard  v.  Talbird,  Rice  (S.  C.)  Ch. 
moreover  was  a  verbal  one  and  was  not  158;   York  County  Savings  Bank  v.  Rob- 
binding  erts,  70  Me.  384. 

840 


REVIVOR    OF   MORTGAGE.  [§  944. 

gagee,  took  back  part  of  the  money  paid  on  the  note,  had  the  bal- 
ance indorsed  npon  it,  and  agreed  with  the  mortgagee  that  the 
mortgage  should  i-emain  as  security  for  the  money  repaid  to  him, 
and  for  a  collateral  liability  incurred  by  the  mortgagee  for  him  ; 
a  creditor  who  had  attached  the  land,  or  levied  an  execution  upon 
it,  or  obtained  any  other  incumbrance  upon  it,  was  entitled  to  hold 
it  discharged  of  the  mortgage.^  It  is  not  in  the  power  of  the 
mortgagee,  by  reloaning  the  money  paid,  to  revive  the  mortgage 
to  the  prejudice  of  a  bond  fide  incumbrancer  whose  claim  is  sub- 
sequent to  the  mortgage  but  prior  to  the  repayment;  and  it  is  im- 
material that  no  receipt  of  payment  has  been  indorsed  upon  the 
mortgage,  or  upon  the  bond  or  note,  if  the  debt  has  in  fact  been 
once  paid.2  But  a  payment,  to  have  the  effect  of  discharging  the 
debt,  must  be  made  to  the  creditor ;  and  therefore  if  the  principal 
debtor  upon  a  joint  note,  secured  by  a  mortgage  of  the  property 
of  the  other  joint  maker,  pay  the  amount  of  the  debt  to  the 
mortgagor,  who  obtains  an  extension  of  the  mortgage,  thereupon 
the  latter  becomes  the  principal  debtor,  and  the  former  principal 
debtor  the  surety.  The  mortgage  continues  because  there  has 
been  no  payment  of  the  mortgage  debt.^ 

944.  When  the  mortgage  debt  is  once  paid,  though  the 
mortgagor  takes  an  assignment  of  the  mortgage  to  himself, 
he  cannot  reissue  the  mortgage  by  assigning  it  to  a  thirtl  per- 
son, so  as  to  operate  to  defeat  the  chaims  of  prior  or  intervening 
creditors;*  nor  can  he  revive  it  to  tlie  prejudice  of  others  by  re- 
paying the  money  to  the  mortgagee  and  agreeing  wit li  him  that 
the  mortgage  shall  stand  as  security.'^  But  if  the  rights  of  third 
persons  have  not  intervened,  the  mortgage  might  be  kept  alivo  \\\ 
this  way  ;  or  for  a  valuable  consideration  might  be  contiimed  for 
another  debt.  Tluis,  a  mortgage  debt  being  due,  tiie  mortgagor 
delivered  a  tiiousand  dollars  to  the  mortgagee,  which  after  retain- 
ing a  few  days  lie  returned  to  the  mortgagor  at  his  request,  and 
it  was   not  indorsed  upon   the  mortgage.      Although  as  between 

1  Uowinari    f.    Mantor,  .'W   N.   H.  .ViO  ;  •'  KicMs  .-.  Slu-rrill,  18  K.um.  .U.r.. 

Warner    v.   Blakcmati,    30    i'.arb.  (X.  Y.)  '  (Jaidncr  v.  Jaiiius,  su,,ra  ;  ("jirltMu   v. 

r,oi.  Jackson,   121    Mush,   r.92  ;  nn<l  see   Whit 

■i  Ganlner  v.  James,  7  U.  I.  aOC ;  [.arge  noy  v.  Kruiiklin.  28  N.  J.  K(|.  120. 

,,-.  Van  Doreri,  14  N.  J.  Ivi.  20H ;   Kcllo>,'j,'  '  Marvin  v.  Vi-.l.lur,  r.  Tow.  (N.  Y.)  CTl  ; 

„   AmeH   41    Hnrh.  (N.  Y.)  218;   I'lirner  r.  Mni.l  ,-•.  York.  0  N.  Y.  44'J  ;  Cl.a.niM.ry  r. 

Anderson,  4  Kdw.  (N.  Y)  17  ;  York  Co.  Coop.-.  32   N.  Y.  .'.43,  reversing  34  llarb. 

Savin^H  Hank    v.  Uohcrts,  70   Me.   384;  ft3'.t  ;   Hown.ai.  r.  .Munt.r,  5»/.rri. 
Mitchell  V.  Coonibs,  96  I'a.  St.  430. 

841 


§§  945,  946.]  PAYMENT   AND    DISCHARGE. 

the  parties  there  would  be  no  difficulty  in  continuing  the  mort- 
gage lien  for  the  whole  amount  of  the  mortgage,  as  against  other 
creditors  of  the  mortgagor  the  payment  is  deemed  to  have  been 
made  upon  the  mortgage  debt,  and  the  redelivery  of  the  money 
does  not  revive  the  mortgage  lien.^ 

945.  If  an  assignment  be  made  at  request  of  the  mortgagor 
to  another  creditor  of  his,  although  the  consideration  for  the  as- 
signment moves  from  the  mortgagor  and  not  from  the  assignee, 
the  transaction  does  not  amount  to  a  payment  of  the  mortgage, 
but  the  assignee  may  enforce  it.^  In  such  case,  especially  if  the 
arrangement  for  the  subsequent  transfer  of  the  mortgage  be  made 
at  the  time  it  was  originally  given,  the  mortgage  will  be  kept 
alive,  and  the  benefit  of  it  secured  to  the  subsequent  assignee  to 
the  exclusion  of  the  mortgagor's  creditors.^ 

And  so  if  a  mortgagor  upon  paying  the  mortgage  debt  has  the 
mortgage  assigned  to  a  third  person,  and  afterwards  borrows 
money  of  another  and  has  the  mortgage  transferred  to  him  as 
security  for  this  loan,  the  latter  assignment  gives  new  life  to  the 
mortgage,  although  it  was  of  no  validity  in  the  hands  of  the  for- 
mer assignee.* 

946.  Redelivery  of  note.  —  Where  a  mortgage  note  is  found 
among  the  mortgagor's  papers  after  his  death,  the  presumption, 
in  the  absence  of  all  evidence  of  the  time  and  manner  of  pay- 
ment, is  that  it  was  paid  according  to  its  terms ;  and  the  estate 
of  the  mortgagee  is  thereupon  terminated  without  a  release.  A 
return  of  the  note  by  the  heirs  of  the  mortgagor  to  the  heirs  of 
the  mortgagee  would  not  revive  the  mortgage,  as  that  was  extin- 
guished.^ By  the  performance  of  the  condition  of  a  mortgage  the 
condition  is  saved,  and  the  mortgagor  is  in  of  his  former  estate. 
The  mortgage  cannot  be  continued  in  force  by  parol  agreement, 
even  if  the  note  be  reissued  for  value.^ 

After  a  mortgage  has  been  paid  and  discharged,  it  would  seem 
that  to  revive  it  the  same  formalities  of  an  instrument  under  seal 
are  necessary  as  were  requisite  to  create  the  mortgage  in  the  first 

1  Marvin  v.  Vedder,  5  Cow.  (N.  Y.)  ^  Richardson  v.  Cambridge,  2  Allen 
671  ;  and  see  Darst  v.  Gale,  83  III.  136.         (Mass.),  118. 

2  Sheddy  v.  Geian,  113  Mass.  378.  «  Holman  v.  Bailey,  3  Met.  (Mass.)  55; 

3  Hubbell  V.  Blakeslee,  71  N.  Y.  63.  Merrill  v.  Chase,  3  Allen  (Mass),  339 ;  Fur- 
*  BoUes  V.  Wade,  5  N.  J.  Eq.  (3  Green)     bush  v.  Goodwin,  25  N.  H.  425.    See,  how- 

458;  and  see  Hoy  v.  Bramhall,  19  lb.  74,     ever,  Parser  v.  Anderson,  4  Edw.  (N.  Y.) 
563;    Goulding  v.  Bunster,  9  Wis.  513;     17. 
Hall  V.  Southwiek,  27  Minn.  234. 

842 


REVIVOR    OF    MORTGAGE.  [§  947. 

instance.  Effect  may  in  some  instances  be  given  to  an  instru- 
ment made  with  the  intention  of  reviving  the  mortgage  by  de- 
claring it  to  be  an  equitable  mortgage.  This  was  done  in  a  case 
where  the  owner  of  the  equity  of  redemption,  who  had  assumed 
the  payment  of  the  mortgage,  paid  the  first  of  the  three  mort- 
gage notes  to  the  mortgagee,  Avho  wrote  upon  it  a  receipt  of  pay- 
ment and  surrendered  it.  The  owner  of  the  equity  subsequently 
obtained  a  loan  of  money,  and  by  an  agreement  between  him, 
the  mortgagee,  and  the  person  making  the  loan,  the  receipt  of 
payment  was  erased,  and  an  indorsement  of  the  note  made  to  the 
lender,  with  an  agreement  made  by  all  the  parties,  but  not  under 
seal,  written  upon  the  back  of  the  note,  whereby  the  mortgagee 
assigned  the  note  and  the  incident  security  in  the  mortgage,  and 
extended  the  time  of  payment  as  to  the  mortgagor,  with  the 
understanding  that  the  payment  of  this  note  should  be  postponed 
to  that  of  the  two  other  notes.  Although  the  agreement  could 
not  operate  in  the  way  intended,  as  a  revival  of  the  mortgage, 
effect  was  given  to  it  as  an  agreement  to  charge  the  lands  as  an 
equitable  mortgage.^ 

When  by  any  arrangement  between  the  mortgagee  and  mort- 
gagor the  mortgage  is  continued  in  force  as  a  security  for  a  new 
indebtedness,  although  the  mortgage  has  no  binding  force  as  a 
mortgage,  yet  a  court  of  equity  will  not  aid  the  mortgagor,  who 
has  obtained  the  mortgagee's  money  upon  the  strength  of  such 
arrangement,  in  obtaining  a  release  or  discharge  of  the  mortgage ; 
nor  will  it  aid  one  to  do  this  who  has  taken  a  conveyance  of  the 
land  from  the  mortgagor  with  a  knowledge  of  the  facts.^ 

947.  After  a  mortgage  is  once  paid,  whether  it  can  by  a 
mere  verbal  agreement  of  parties  be  transferred  to  a  new 
debt,  which  it  was  not  originally  given  to  secure,  may  be  ques- 
tioned,^^  but  tlui  mortgage  cannot  be  retained  against  the  will  of 
the  mortgagor  as  security  for  another  debt."  A  mortgage  upon  a 
homestead  cmce  paid  cannot  be  revived  by  the  agreeuu-nt  of  the 
husband  alone,  cither  verbal  or  written,  where  a  statute  provides 
that  an  ali<Miation  of  tli.-  homestead  shall  he  not  valid  without  the 
signature  of  the  wife     The  wife's  assent  is  necessary." 

A  mortgage  which   a  del.tor  after  pa\iiig   it   redelivered   to  hi.s 

>  I'cckhaiM  i;.  Ilad.ioek.  M  111.  38.  •'  .Ior,lyn   .'.  Wyinaii.  «uy<.<i  ;    M.rrill  >'. 

•i  Joslyii  .•.    Wyiimii,    :>  Allen   (Mush.),  (.'Iiii-o.  :J  ll>.  .'»:J'J. 

62;    Noriliborou^li    >:   Wood,    \U    Msv-h.  *  lU-unlHloy  r.  Tuiil-.  1 1  Win.  7t. 

5j,'  t>  SjHJiKer  i;.  Frcil.iiiiiill,  li  Win.  066. 

848 


§  948.]  PAYMENT   AND   DISCHARGE. 

creditor  as  security  for  a  new  loan  cannot  be  enforced  by  fore- 
closure after  the  death  of  the  debtor,  though  tlie  debtor  himself 
might  be  estopped  to  deny  that  the  mortgage  was  a  security  for 
the  new  loan.^ 

This  rule  applies  as  well  to  an  absolute  deed  and  parol  defea- 
sance. Such  a  mortgage  when  once  paid  cannot,  without  consent 
of  all  persons  interested  in  the  property,  be  held  for  another  debt 
of  the  grantor,  but  he  can  compel  a  reconveyance.^ 

A  mortgage  for  a  definite  sum,  after  the  payment  of  that  sum, 
cannot  be  held  as  security  for  a  further  indebtedness  without  an 
agreement  to  that  effect.  "  There  never  was  a  case,"  says  Lord 
Eldon,^  "  where  a  man  having  taken  a  mortgage  by  a  legal  con- 
veyance was  afterwards  permitted  to  hold  that  estate  as  further 
charged,  not  by  a  legal  contract,  but  by  inference  from  the  pos- 
session of  the  deed."  Something  more  than  a  subsequent  verbal 
agreement  is  necessary  in  order  to  make  the  mortgage  available 
for  future  liabilities.^ 

A  purchaser  of  land  subject  to  a  mortgage  having  paid  the 
mortgage  notes,  and  afterwards  obtained  a  loan  upon  them  by 
representations  leading  to  the  belief  that  the  mortgage  was  still  a 
subsisting  lien,  is  estopped  from  showing  and  insisting  upon  the 
fact  of  the  payment  of  the  notes.  It  would  be  a  fraud  on  his 
part  thus  to  contradict  a  statement  to  the  injury  of  another  who 
had  been  influenced  to  act  upon  the  statement  as  true.^ 

948.  Generally  the  chief  difficulty  in  reviving  or  continuing 
in  force  a  mortgage  which  has  been  substantially  satisfied  is 
on  account  of  the  intervening  rights  of  third  persons,  which 
would  be  thereby  injuriously  affected.  The  condition  of  a  mort- 
gage having  been  performed,  a  subsequent  incumbrancer  has  the 
right  to  avail  himself  of  the  advantage,  and  not  to  be  postponed 
to  equities  newly  created  which  in  fact  are  subsequent  to  his  own 
claim.^  Thus,  a  mortgage  given  to  indemnify  the  mortgagee  for 
his  liability  as  an  indorser  of  the  mortgagor's  note  cannot,  after 
the  payment  of  that  note,  be  assigned  for  the  mortgagor's  benefit 
as  security  for  another  debt,  as  against  the  holder  of  a  second 

1  Thompson  i;.  George  (Ky.),  5  S.  W.  ■'  International  Bank  v.  Bowen,  80  111. 
Kep.  760.  541. 

2  Spencer  v.  Fredendall,  15  Wis.  666.  ^  Jones  v.  Brogan,  29  N.J.  Eq.  139.  So 
•^  Ex  parte  Hooper,  19  Ves.  477.  a  grantor  after  payment  by  a  purchaser 
■*  Johnson   f.  Anderson,  30  Ark.  745 ;     who  had  assumed  the  mortgage.     Swope 

Whiting    V.   Beebe,    12   Ark.   421,    428;     y.  Leffingwell,  4  Mo.  App.  525. 
Walker  v.  Snediker,  Hoff.  (N.  Y.)  145. 

8U 


REVIVOR    OF    MORTGAGE.  [§  949. 

mortgage  upon  the  estate  then  of  record,  although  as  between  tlie 
mortgagor  and  the  assignee  it  would  be  a  good  security.^ 

The  question  in  these  cases  is  whether  the  original  debt  has 
been  satisfied  within  the  terms  of  the  mortgage.  It  does  not  mat- 
ter whether  this  has  been  accomplished  by  payment  in  money, 
or  by  the  acceptance  of  anything  else  in  its  place.  Other  secu- 
rity may  be  taken  in  place  of  the  original  debt,  under  agreements 
or  circumstances  which  make  the  acceptance  of  the  new  security 
a  discharge  of  the  old  ;  and  whenever  this  happens  the  original 
mortgage  cannot,  as  against  third  persons  especially,  be  dealt  with 
as  a  subsisting  security .^  But  where  the  original  mortgage  sur- 
rendered before  maturity  remains  uncancelled  of  record,  and  the 
mortgage  notes  are  reissued,  the  indorsers  of  those  notes  and  the 
holders  of  them  may,  under  some  circumstances,  have  priority 
over  a  mortgage  subsequently  executed,  the  mortgagor  and  the 
subsequent  mortgagees  being  equitably  estopped  to  claim  tliat  the 
original  mortgage  was  discharged.'^ 

949.  A  ■wife  who  mortgages  her  separate  property  to  se- 
cure her  husband's  debt  is  a  surety,  and  as  such  is  entitled  to 
the  benefit  of  all  securities  which  the  creditor  receives  from  her 
husband  for  the  debt,  and  therefore  the  proceeds  of  other  security 
for  the  debt  should  be  first  applied  to  relieve  her  estate  ;  and  al- 
though an  application  to  the  payment  of  a  further  debt  of  the 
husband  made  with  his  approval  is  binding  against  him,  as  against 
the  wife  it  is  a  perversion  of  the  security,  and  operates  to  dis- 
charge, to  the  extent  of  it,  the  lien  upon  her  land.^ 

A  wife  having  joined  in  a  mortgage  to  release  her  rigiit  of 
homestead  and  right  of  dower  in  land  mortgaged  by  her  husband, 
to  secure  his  indebtedness,  is  entitled  to  the  benefit  of  payments 
made  upon  the  mortgage  and  indorsed  upon  tlie  note  ;  so  that 
without  her  consent  the  mortgagee  and  her  husband  cannot,  by  a 
subsequent  arrangement,  apply  the  payment  made  upon  the  mort- 
gage debt  to  another  indebtedness,  and  agree  that  the  mortgage 
shall  stand  security  for  the  original  amount  of  the  debt.  In  a 
subsequent  foreclosure  the  mortgage  can  be  enforced  as  against 
the  husband  according  to  the  agreement  made  by  him  ;  but  as 
against  the  wife,  only  for  the  balanc(!  of  tlic  mf)rtgagi'  after  the 

'  I'lirHcr  V.  Anderbori,  4  ICdw.  (N.  V.)  V.)  'Jl' ;  llcjdj^iimii  r.  Ililclu-oik,  15  N't 
17.  374. 

^  McGiven    r.    Wheelock,    7   JJarb.    (N.  '  Jonluii  f.  l-orlun;:,  I'J  Ohio  Si.  89. 

*  I'urvin  V.  Curiila|)lian,  7.J  N.  (J.  575. 

845 


§  950.]  PAYMENT    AND    DISCHARGE. 

payment  made  upon  it.^  If  there  is  no  payment,  an  extension  or 
renewal  of  the  debt  does  not  invalidate  the  security  as  against  the 
homestead  .2 

VII.  Foreclosure  does  not  constitute  Payment. 

950.  A  foreclosure,  whether  strict  or  otherwise,  does  not 
of  itself  discharge  the  mortgage  debt.^  The  mortgagee  may  sue 
for  and  recover  the  debt  or  the  balance  of  it.  A  foreclosure  sale, 
either  by  decree  of  court  or  under  a  power,  fixes  the  amount  of 
the  deficiency.  After  a  strict  foreclosure  a  suit  at  law  may  be 
maintained  for  any  deficiency  which  may  be  proved  in  the  suit. 
The  commencement  of  the  action  for  the  debt  does  not  of  itself 
destroy  the  effect  of  a  strict  foreclosure,  but  the  mortgagor  is 
thereupon  entitled  to  bring  his  bill  for  a  redemption,  and  upon  a 
payment  of  the  whole  debt  to  have  a  reconveyance  ;  but  if  he 
does  not  so  elect,  and  a  judgment  be  recovered  against  him  for 
the  difference  only  between  the  estimated  value  of  the  estate  and 
the  debt,  there  is  no  equity  in  allowing  him  thereafter  to  redeem.* 

Foreclosure  when  complete  is  a  satisfaction  of  the  debt  to  the 
amount  of  the  value  of  the  property  at  the  time  when  the  mort- 
gagor's right  was  extinguished,  and  when  the  mortgaged  prem- 
ises are  of  greater  value  than  the  debt  of  course  the  debt  is  fully 
satisfied.^  If  the  property,  after  the  extinction  of  the  equity  of 
redemption,  depreciates  in  value,  the  loss  falls  upon  the  mortgagee 
and  not  upon  the  mortgagor. 

The  question  of  the  value  of  the  land  at  the  time  the  foreclos- 
ure is  complete  is  one  of  fact,  to  be  determined  on  all  the  evi- 
dence.^ 

An  agreement  by  a  junior  mortgagee  to  pay  oif  a  prior  mort- 

1  Brockschmiclt   v.   Hagebuscli,  72   111.  ■*  Lovell  c.  Leland,  3  Vt.  581  ;  Noyes  r. 

562.  Rockwood,  56  Vt.  647. 

-  Hambrick  v.  Jones,  64  Miss.  240.  &  Lovell   v.   Leland,  supra  ;    Hatch   v. 

■^  §  1567;  Shepherd   v.  May,  115  U.  S.  White,  2  Gall.  152;  Amoiy  v.  Fairbanks, 

505;    Strong  v.  Strong,  2   Aikens    (Vt.),  3  Mass.   562;  Dunkley   i;.  Van  Buren,  3 

373  ;  Smith  v.  Lamb,  1   Vt.  395  ;  Deve-  Johns.  Ch.  330;  Hurd  v.  Coleman,  42  Me. 

reaux  v.  Fairbanks,  52  Vt.  587  ;  Vansant  182  ;  Green  v.  Cross,  45  N.  H.  574;  Noyes 

i:  Allmon,  23  111.  30 ;  Brown  v.  Wernwag,  v.  Rockwood,  supra ;  Clark  v.  Jackson  (N. 

4  Blackf.  (Ind.)  1  ;  Nuncmacher  v.  Ingle,  H.),  11  Atl.  Rep.  59  ;  Androscoggin  Bank 

20  Ind.  135 ;  Germania  Building  Asso.  v.  v.  McKenaey,  78  Me.  442. 

Neill,  93  Pa.  St.  322.     But  in  Massachu-  *''  Lane  i-.  Barron  (N.  H  ),  9  Atl.  Rep. 

setts  a  judgment  for  the  debt  or  any  part  544. 
of  it  opens  a  foreclosure  by  entry  and  pos- 
session.    §  1274. 

846 


FORECLOSURE   DOES   NOT    CONSTITUTE   PAYMENT.         [§  951. 

gage  is  substantially  performed  by  allowing  tlie  prior  mortgage 
to  be  foreclosed,  and  buying  in  the  property  at  the  sale  for  an 
amount  sufficient  to  pay  the  prior  mortgage  debt.^ 

In  Connecticut  the  law  at  one  time  was,  that  a  foreclosure  and 
possession  of  the  mortgaged  property  extinguished  the  mortgage 
debt ;  ^  but  this  was  long  since  changed  by  a  statute  providing 
that  the  property  should  be  held  to  be  taken  at  its  value  only, 
and  so  much  of  the  debt  as  remained  should  stand  as  before.^  If 
the  value  of  the  propert}'  exceeds  the  debt,  the  foreclosure  when 
absolute  operates  even  at  law  as  a  payment  of  the  debt.^  But 
until  the  title  of  the  mortgagee  has  become  absolute  by  the  ex- 
piration of  the  time  limited  for  redemption  after  a  decree  of  fore- 
closure, the  debt  is  not  satisfied  even  in  part.^  The  purchase  of 
the  equity  of  redemption  by  the  mortgagee  at  a  sale  by  the  mort- 
gagor's assignee  in  insolvency  or  on  execution  is  not  at  hiw  a  sat- 
isfaction of  the  mortgage  debt,  and  the  mortgagee  is  not  estopped 
from  claiming  that  the  property  is  of  less  vahie  tlian  the  amount 
of  the  debt.6 

951.  The  union  of  the  titles  of  the  mortgagor  and  mort- 
gagee in  the  latter  or  his  assignee  is  tantamount  to  a  fore- 
closure, and  is  payment  of  the  mortgage  debt  to  the  extent  of 
the  value  of  the  premises."  Especially  if  the  mortgagee  takes  a 
release  of  the  equity  of  redemption  by  a  deed  reciting  a  full  con- 
sideration and  containing  full  covenants,  the  mortgage  debt  will 
be  presumed  to  be  discharged,  in  the  absence  of  very  strong 
proof  to  the  eontrar}'.^  The  fact  that  no  demand  for  the  debt  is 
made  for  a  long  time  afterwards  strengthens  the  presumption.^ 
Not  infrequently  it  is  expressly  agreed  between  the  parties  that 
the  premises  shall  be  taken  in  satisfaction  of  the  mortgage  debt  ;  ^'^ 
in  which  case  the  deed   of   release  from  the  mortgagor  may  well 

>  Hill  V.  Helton  (Ala.),  1  So.  liep.  .340.  (X.  Y.)  381  ;  Marstou  i,-.  Miirston,  4:>  Me. 

-  Derby  Bank  i-.  Lanilon,  3  Conn.  02  ;  412  ;  Puffer  i-.  Clark,  7  Allen  (.Ma^s.),  8(i. 

Coiti'.  Fitch,  Kirbjr  (Conn.),  254  ;M'Ewen  Sec    Cuttel    v.    Warwick,  6    N.  J.    L.    (I 

I-.  Welles,  1  Hoot  (Conn.),  202.  IlaUt.)   190;    Hatz's  Apppal,  40    I'a.  St. 

■'  Pott  V.  Tradesmen's  i3auk,  28  Conn.  20'J;  Post  v.  Tradesinen'H  Hank,  su/ira. 

420.  »  Triplett  v.  Parnilee,  10  Neh.  04'J. 

*   JJaBsett  r.  Mason,  IS  Conn.  131.  '•'  Hurnet   v.    DenniHtun,   5   JolinH.    (N. 

"  Peek's  Appeal,  31  Conn.  21.').  Y.)  Cli.  35.     See,  aho,  Looini'f  i:  Wlieel- 

''  Post    I'.    Trailesmen'M    Hank,    mi/irii  :  wriKht,.'!  Sandf.  (N.  Y.)  Cli.  13.'! ;  Hrc  wer 

Findlay  i;.  lIoHtncr,  2  Conn.  350  ;  (Murk  v.  c.  .SiapleH,  II).  57'J  ;  Jeruiiii^it  i'.  NVooil,  VO 

.Jaekwjn  (N.  H.),  11  Atl.  Ifej).  5'.t,  rpiotiri;,'  Ohio,  201  ;  Corwln  r.  Colli  tt,  10  ( Uiio  Si. 

text.  289. 

M  848;  Spencer  v.  Harford,  4    Wend.  »'  Catliii  r.  W«.-*lil)iirii,  3  \t.  25,  42. 

«17 


§  952.]  PAYMENT   AND   DISCHARGE. 

declare  this  fact.  Where  another  mortgage  is  held  as  collateral 
to  that  which  is  satisfied  by  a  release  of  the  equity  of  redemption, 
such  collateral  mortgage  is  thereby  discharged.^ 

If  a  mortgagee  purchases  the  entire  mortgaged  property  at  a 
sale  other  than  a  regular  foreclosure  sale,  the  purchase  extinguishes 
the  mortgage  debt  to  the  extent  of  the  price  paid,  if  the  sale  was 
a  fair  and  valid  one,  otherwise  to  the  extent  of  the  value  of  the 
property ;  and  if  the  mortgagee  buys  at  an  execution  sale  one  of 
several  parcels  covered  by  the  mortgage,  the  mortgage  debt  is  ex- 
tinguished to  the  extent  of  the  price  paid  by  the  mortgagee,  if  the 
purchase  was  a  fair  and  valid  one  ;  though  it  has  been  held  that 
the  debt  is  extinguished  in  the  proportion  which  the  true  value  of 
the  parcel  bears  to  the  value  of  the  whole  property,  when  the 
mortgt)gee's  bid  at  the  sale  was  for  a  less  sum.^ 

952.  When  foreclosure  is  made  by  entry  and  possession 
the  mortgage  debt  is  thereby  paid  in  full  or  in  part,  according  to 
the  value  of  the  land,^  but  the  foreclosure  must  be  complete,  and 
the  title  of  the  mortgagee  indefeasible,  before  nuj  defence  of  pay- 
ment can  be  set  up  by  the  mortgagor  by  reason  of  the  proceed- 
ings to  foreclose.^  The  value  of  the  property  is  ascertained  by 
appraisement,  when  suit  is  brought  for  the  debt.  But  if  a  mort- 
gagee who  has  never  entered  under  his  own  mortgage  purchases 
the  title  of  a  prior  mortgagee  who  has  foreclosed  his  mortgage, 
and  afterwards  brings  suit  on  his  own  mortgage  note,  the  mort- 
gagor is  not  allowed  to  prove,  as  evidence  that  such  debt  is  paid, 
that  the  mortgaged  premises  and  the  rents  and  profits  received 
by  the  mortgagees  are  of  greater  value  than  the  sums  secured  by 
both  mortgages,  for  by  the  conveyance  from  the  prior  mortgagee 
the  second  mortgagee  obtained  an  absolute  title  wholly  indepen- 
dent of  his  own  mortgage.^ 

A  mortgage  and  note  assigned  as  collateral  security  for  a  debt 
become  a  trust  in  the  hands  of  the  assignee  for  the  benefit  of  all 
parties  interested  ;  and  if  the  assignee  forecloses  the  mortgage  by 
entry  and  three  years'  possession,  the  relation  of  the  parties  is 
not  changed,  but  the  property  as  well  after  foreclosure  as  before 
is  held  in  trust ;  first  to  pay  the  debt  for  which  it  is  pledged,  and 

1  Wheelwright  v.  Loomer,  4  Edw.  (N.  v.  White,  2  Gall.  152  ;  Dooley  v.  Potter, 

Y.)  232;  McGiven  v.  Wheelock,  7  Barb.  140  Mass.  49. 

(N.  Y.)  22.  *  AVest  v.  Chamberlin,  8  Pick.  (Mass.) 

-  Trimmier  v.  Vise,  17  S.  C.  499.  336. 

3  Newall  V.  Wright,  3  Mass.  138,  150;  &  Hedge  v.    Holmes,   10  Pick.   (Mass.) 

Amory  v.  Fairbanks,  3  Mass.  562  ;  Hatch  380. 

848 


FORECLOSURE  DOES  NOT   CONSTITUTE   PAYMENT.         [§  053. 

then  the  surphis  to  the  owner.  Such  foreclosure  does  not  operate 
as  payment  of  the  debt ;  but  the  property  must  still  be  reduced 
to  cash  by  a  fair  and  proper  sale  of  it.  Any  rise  in  value  in  the 
mean  time  is  the  assignor's  gain,  and  any  decline  in  price  is  his 
loss.  The  payment  dates  only  from  the  actual  sale  of  the  prop- 
erty and  conversion  into  money. ^ 

953.  Generally,  upon  a  foreclosure  sale  of  the  property  the 
mortgage  debt  is  extinguished  to  the  amount  of  the  purchase 
money,-  whether  the  sale  be  under  a  power,  or  by  a  decree  of  a 
court  of  equity  in  a  foreclosure  suit,  or  upon  a  judgment  for  the 
debt.  If  the  debt  be  fully  paid  by  such  sale,  it  seems  that  the 
purchaser  is  not  entitled  to  hold  the  note  or  bond  for  the  greater 
security  of  his  title  without  the  debtor's  assent,  inasmuch  as  he 
is  entitled  to  have  this  evidence  of  the  debt  delivered  up  to  him 
and  cancelled.^  If  upon  a  foreclosure  sale  duly  made  the  full 
amount  of  the  mortgage  debt,  together  with  the  expenses  of  the 
sale,  be  received,  the  mortgage  debt  is  paid  ;  and  if  the  mortgagee 
himself  bids  the  full  amount  of  the  debt  secured  and  the  expenses 
of  sale,  the  debt  is  paid,  and  he  cannot,  by  refusing  to  execute 
the  deed,  rescind  the  sale  and  maintain  an  action  on  the  note.^ 
The  mortgagee,  on  becoming  the  purchaser,  is  bound  to  complete 
his  purchase  to  the  same  extent  as  any  other  purchaser.'^  If  land 
be  sold  under  a  power  contained  in  a  mortgage  which  a  subse- 
quent grantee  has  assumed  and  agreed  to  pay,  and  the  grantor 
becomes  the  purchaser  for  a  sum  less  than  the  amount  of  the 
mortgage  debt,  this  does  not  satisfy  or  extinguish  the  whole  of 
that  debt;  and  aside  from  that  the  grantee  is  still  liable  upon 
his  promise  to  pay  the  mortgage.'' 

A  foreclosure  sale  properly  made,  whether  under  a  jiower  or 
by  decree  of  court,  discharges  the  mortgage  lien  if  the  whole  es- 
tate be  sold.  Even  if  only  a  part  of  the  mortgage  debt  is  due, 
and  a  sale  of  the  whole  property  be  made  to  satisfy  the  amount 
then  due,  the  sale  of  necessity  releases  tiie  security  for  the  amount 
not  due."  Likewise  if  a  decree  of  sale  be  obtained  upon  the  last 
of  a  series  of  mortgage  notes,  witiiout  including  th(jse  which  had 

1  Brown  t>.  Tyler,  8  Gray  (MasB.),  135.  »  In   r,    Costir,  '-'   Joliiis.    (N.   Y.)  Ch. 

^  Deare  v.  Carr,  3  N.  J.  K([.  (2  Green)  .')03. 

513;  Tierce  u.  I'ottcr,  7  Watts  (I'a.),  47.'> ;  *  Iltxdl  v.  Atluin«,  IJl  Muhs.  4M. 

Bergcr  v.  iliestcr,  G   Whart.  (l*a.)  UIO;  '  Hood  c.  Adaiim,  «"/»«  ;  and  ^'^•c  Fcn- 

iMott  V.   Clark,  y   I'a.   St.  3'J'J  ;   Hart/,  v.  ton  r.  Lord,  \'2H  .Mans.  40t). 

Woods,  8   lb.  471  ;   Wing  r.  llayford,  ll.'»  '    I'tnton  v.  I^ord,  mi/'»<i. 

.M.-isH.  24'J.  '  Smith  i'.  Smith,  32  111.  I'JH. 

vol..  I.                 .04  H49 


§  953.]  PAYMENT    AND   DISCHARGE. 

previously  matured,  a  sale  under  it  wholly  releases  the  lien  of 
the  mortgage,  and  no  foreclosure  can  afterwards  be  liad  upon  the 
other  notes.i  For  a  further  reason  should  a  foreclosure  for  a 
part  of  the  notes  operate  as  a  release  of  the  mortgage  lien,  when 
the  holder  of  the  remaining  note  becomes  the  purchaser  of  the 
premises  and  receives  the  deed  of  it,  inasnmch  as  he  would  be 
presumed  to  have  bought  the  land  at  its  value,  less  the  unpaid 
note.^      I 

When  a  foreclosure  sale,  either  under  a  bill  in  equity  or  under 
a  power  conferred  in  the  mortgage,  is  defective  for  any  reason, 
so  that  the  purchaser,  although  he  takes  a  conveyance  under 
the  sale,  does  not  acquire  an  indefeasible  title,  he  nevertheless 
tbei-eby  acquires  the  mortgage  title.  The  sale,  therefore,  does 
not  amount  to  a  payment  in  whole  or  in  part,  but  only  to  an  as- 
signment." If  the  mortgagee  himself  has  purchased  at  such  sale, 
and  the  equity  of  redemption  for  any  reason  is  in  no  part  fore- 
closed, his  title  remains  unaffected  by  the  proceedings.* 

When  a  sale  under  a  power  has  not  been  conducted  in  a  man- 
ner to  obtain  the  real  value  of  the  property,  or  the  sale  is  merely 
a  nominal  one,  it  is  a  good  defence,  to  an  action  to  recover  the 
balance  of  the  debt,  that,  if  the  sale  had  been  made  in  good  faith, 
the  property  would  have  sold  for  more  than  enough  to  pay  the 
debt.^  The  holder  of  the  mortgage,  in  making  sale  of  the  prop- 
erty, is  bound  to  adopt  all  reasonable  modes  of  proceeding,  in 
order  to  render  the  sale  as  beneficial  as  possible  to  the  debtor. 
As  a  trustee  he  cannot,  unless  specially  authorized,  become  the 
purchaser  ;  and  this  objection  is  not  obviated  by  his  assigning 
the  mortgage  to  another  who  makes  the  sale  and  the  trustee  pur- 
chases the  property  under  its  value.  In  a  suit  for  the  balance 
of  the  debt  such  facts  may  be  shown,  and  the  actual  value  of  the 
land  must  be  allowed. 

Of  course  when  proceedings  for  the  foreclosure  of  a  mortgage 
have  been  set  aside  on  account  of  irregularities  or  fraud  in  such 
proceedings,  the  mortgage  remains  unsatisfied  in  any  part,  as 
much  as  if  no  attempt  to  foreclose  had  been  made,  and  the  mort- 
gagee may  again  proceed  to  enforce  it.^ 

1  Rains  v.  Mann,  68  111.  264.  Chief  Justice  Siiaw,  commenting  upon  the 

■•^  Robins  v.  Swain,  68  111.  197.  evidence  in  this  case,  said  :  "  It  shows  that 

•^  See  §  812;  see,  however,  Goodenow  v.  it  is  the  plaintiff's  own  fault  that  the  debt 

Ewer,  16  Cal.  461.  is  not  fully  paid." 

*  Hollisterr.  Dillon,  4  Ohio  St.  197.  ^  Stackpole  v.   Bobbins,  47  Barb.   (N. 

^  Howard  v.  Ames,  3  Met.  (Mass.)  308.  Y.)  212. 
850 


FORECLOSURE   DOES   NOT   CONSTITUTE   PAYMENT.       [§§  954,  955. 

The  statute  of  limitations  may  be  pleaded  in  bar  of  an  action 
to  recover  the  balance  due  after  the  value  of  the  land  has  been 
applied  towards  the  payment  of  the  mortgage. ^ 

954.  If  the  holder  of  a  first  mortgage  purchase  the  equity 
of  redemption  at  a  sale  upon  execution,  the  sale  being  made 
subject  to  the  mortgage,  the  purchase  operates  as  a  payment  of 
the  mortgage  debt,  and  he  has  no  further  remedy  on  the  debt.^ 
Such  is  the  case  also  if  the  holder  of  one  note  secured  by  the 
mortgage  purchase  at  a  sale  upon  foreclosure  for  the  other  notes.*^ 
The  pui-chaser  is  presumed  to  have  bought  the  land  at  its  value 
less  the  unpaid  note.  The  mortgagee's  purchase  of  the  premises 
at  a  foreclosure  sale,  thouojh  for  a  less  sum  than  the  mortcfaire 
debt,  extinguishes  the  mortgage,  though  not  the  debt.'^ 

955.  If  the  mortgaged  property  be  sold  for  taxes,  and  the 
mortgagor  buys  in  the  land,  or  subsequently  redeems  it  from  such 
sale,  he  does  not  thereby  defeat  the  mortgage  title  ;  but  inasmuch 
as  it  is  his  duty  to  pay  the  taxes  and  protect  the  mortgage  title, 
his  purchase  must  be  regarded  merely  as  a  payment  of  the  taxes 
by  him.^  Whether  a  tax  is  a  lien  upon  the  entire  estate,  or  only 
upon  the  equity  of  redemption  of  the  owner  to  whom  the  tax  is 
assessed,  depends  upon  the  special  statutes  of  the  different  states 
regulating  this  matter;^  but  even  when  the  lien  for  taxes  is  su- 
perior to  the  mortgage  lien,  it  is  usual  to  allow  to  the  mortgagee 
a  certain  time  for  redemption  after  actual  notice  to  him  of  the 
sale. 

And,  on  tiie  other  hand,  if  the  mortgagee  acquires  a  tax  title 
to  the  mortgaged  premises,  this  is  regarded  as  merely  in  protec- 
tion of  his  mortgage  title,  and  not  as  a  bar  to  the  mortgagor's 
redeeming.  Upon  redemption,  however,  the  mortgagor  must  pay 
the  sum  advanced  for  the  tax  title  in  addition  to  the  mortgage 
debt.  The  .same  rule  applies  when  the  mortg  ige  is  by  way  of  an 
absolute  deed  with  a  bond  of  defeasance.^ 

'  Cross  V.  Gannett,  39  N.  H.  140.  '  Sec  §  680;  Frye  v.  Bank  of  IlliiioiM, 

•i  Speer  i-.  Whitfield,  10   N.  J.  Ivj.  (2  II   III.  :}()7  ;   Hawkins  i-.  McVae,  14  La. 

Stockt.)  107  ;  Biygins  v.  Brockman,  C'J  III.  Ann.  339. 

316  ;  Murphy  v.  Klliott,  6  BliickL  (Ind.)  "  Sea  I'arkort-.  Bu.xier,  2  llray  (.Miuw.), 

482.  IS.") ;  Terry  c.  Brinloii,  13  I'a.  St.  202. 

3  Robins  v.  Swain,  68  III.  197;  :ui-l  .sec  '  Clark  v.  Luu;,'liliii,  02   III   27H.     Soc 

Weiner  v.  IKintz,  17  111.  2.'i9.  §  714. 

'  SeligNian  v.  Lauliheiiner,  58  111.  124; 
Finley  u.  Thayer,  42  III.  350. 

851 


§  956.]  PAYMENT    AND   DISCHARGE. 

VIII.    Who  may  receive  Paymeiit  and  make  Discharge. 

956.  Payment  should  be  made  to  the  person  to  whom  the 
mortgage  debt  is  due.  Even  if  the  mortgage  itself  has  not  been 
assigned,  if  the  debtor  has  knowledge  that  the  debt  has  been  as- 
signed, and  is  held  by  a  person  other  than  the  mortgagee,  who 
appears  by  record  to  be  the  holder  of  the  mortgage,  he  must  pay 
to  the  assignee  of  the  debt  without  regard  to  the  ownership  of  the 
mortgage  as  it  appears  by  the  records.  Generally  a  discharge  of 
the  mortgage  would  be  tendered  with  a  demand  for  the  payment 
of  it ;  but  even  if  this  be  not  done,  the  debtor,  when  satisfied  of 
the  right  of  the  holder  of  the  debt,  may  pay  to  him,  and  rely  upon 
the  statutory  provisions  for  enforcing  a  discharge  of  record.  x\s 
already  observed,  payment  alone,  even  at  common  law,  when 
made  in  accordance  with  the  condition  of  the  mortgage,  discharges 
the  mortgage  lien  ;  and  in  many  of  the  states  payment  at  any  time 
has  the  same  effect.  If  the  debtor  be  in  doubt  to  whom  to  make 
payment,  or  as  to  obtaining  a  sufficient  discharge  of  the  lien,  he 
may  resort  to  a  bill  to  redeem. 

In  making  a  payment  upon  a  mortgage  the  debtor  should  al- 
ways require  the  production  of  the  note  or  bond  secured  by  it ; 
otherwise  it  may  turn  out  that  this  evidence  of  the  debt  has  been 
assigned,  or  perhaps  that  a  formal  assignment  of  the  mortgage 
has  been  made  and  recorded.^  In  such  case,  if  the  mortgage 
secures  a  negotiable  note,  and  the  assignment  be  made  before  ma- 
turity to  a  bond  fide  purchaser,  the  mortgagor,  though  having  no 
notice  whatever  of  the  assignment,  cannot  thereafter  pay  off 
the  note  and  mortgage  to  the  mortgagee  so  as  to  defeat  the  real 
owner ;  2  and  as  against  such  assignee  he  cannot  claim  a  credit  for 
a  payment  made  to  the  mortgagee.^  The  assignee  takes  the  mort- 
gage as  he  does  the  note,  free  from  all  equities.  If  the  mortgage 
be  overdue  at  the  time  of  the  assignment,  or  it  secure  a  bond  or 
other  non-negotiable  instrument,  the  mortgagor  may  be  protected 
in  making  payment  to  the  mortgagee  until  he  has  received  notice 
of  the  assignment  of  the  mortgage;*  yet  this  notice  may  be  con- 
structive as  well  as  actual,  and  the  debtor  always  incurs  much  risk 

1  Williams  i-.  Paysinger,  15  S.  C.  171,  ^  Brayley  i'.  Ellis  (Iowa),  32  N.  W.  Rep. 

quoting  text ;  Fassett  v.  Mulock,  5  Colo.  254-. 

466;  Keohane  v.  Smith,  97  111.  156.  *  Hodgdon  v.  Naglee,  5  W.  &  S.  (Pa.) 

-  Lee  V.  Clark,  89  Mo.  553;  Burhans  217;  Seitz  v.  Durning,  8  Mo.  App.  208. 

V.  Hutcheson,  25  Kans.   625  ;  AVindle  v.  See  §  791. 
Bonebrake,  23  Fed.  Rep.  165. 

852 


WHO  MAY  RECEIVE   PAYMENT   AND   MAKE   DISCHARGE.      [§  957. 

in  making  payments  without  having  actual  knowledge  that  the 
person  to  whom  he  makes  payment  actually  holds  the  mortgage 
at  the  time.i 

Yet  this  rule  does  not  hold  as  against  subsequent  purchasers 
and  mortgagees  who  have  acquired  their  interests  in  the  property 
without  notice  of  the  rights  of  the  holders  of  tlie  outstanding  notes, 
and  while  the  record  shows  a  regular  discharge  of  the  mortgage.^ 

The  assignee  of  the  note  rather  than  the  subsequent  purchaser 
should  be  the  one  to  bear  the  loss,  because  he  is  chargeable  with 
negligence  in  not  taking  and  recording  an  assignment,  so  as  to 
give  notice  of  his  interest  in  the  mortgage.^ 

A  married  woman  holding  a  mortgage  as  her  separate  estate 
can  of  course  receive  payment ;  but  as  a  general  rule  a  discharge 
of  the  mortgage  should  be  executed  by  her  in  the  manner  pre- 
scribed by  statute  for  a  conversance  of  her  separate  estate.  Her 
separate  discharge,  like  her  separate  receipt  of  the  debt,  might  be 
equitably  sufficient,  even  under  laws  which  make  her  separate  con- 
veyance ineffectual.  But  where  it  is  necessary  to  a  valid  convey- 
ance of  her  separate  property  that  her  husband  should  join  in  the 
deed,  it  is  proper,  and  generally  necessary,  that  he  should  join  in 
her  discharge  of  a  mortgage.  The  necessity  for  this  may  be  done 
away  with  by  special  statute,  as  is  the  case  in  Pennsylvania.*  Of 
course  in  states  where  a  married  woman  can  convey  her  separate 
estate  as  if  she  were  sole,  she  can  alone  make  a  valid  discharge. 

A  mortgage  securing  a  bond  conditioned  to  pay  the  mortgagee 
an  annuity  for  life,  and  after  his  death  a  similar  annuity  to  his 
wife,  cannot  be  released  by  the  mortgagee,  so  far  as  his  wife's  in- 
terest is  concerned.  So  far  as  the  wife  is  beneficially  interested, 
she  alone  can  release  the  mortgage  or  compel  j)erforniauce  of  it.^ 

957.  When  a  recorded,  mortgage  is  discharged  by  a  person 
other  than  the  mortgagee,  the  person  paying  tlu;  money,  and  all 
subsequent  purchasers  as  well,  are  bound  to  inquire  what  author- 
ity he  liad  to  discharge  it,  and  are  chargeable  with  notice  of  such 
facts  as  by  proper  inquiry  migiit  have  been  ascertained.''     If  the 

1  Clark  V.  I{,'f;l8ironi,  T)!    How.  (N.  Y.)  of  rcconl  with  liko  cfli-ct  ns  if  hIic  wero 

I'r.  407.     See  §  814.  iinrnarricil.     riinioir»  Ami.  Di;;.  p.  1156, 

-  0|,'le  i:  Turjiin,  \0'.  111.    148;  cliHtin-  §45. 

-,'ui.shed   from   Kcohnne   v.  Smith,  97   111.  ^  McClttiif,'hry    i-.    .Mcf'liiiiuhry    (Ph.), 

I.')6.  15  All.  Kcj).  Cl.'J;    I'ftcrsoM  c  Lolhroi),  34 

■'  Ot;lc  V.  Tiirpin,  mi/ird.  I'li.  St.  '2'2:\. 

'  Any    mnrricil    woman,    owning   nny  "  Swjirlhont    v.    Curtis,   5    N.    Y.  ."JOl  ; 

morlgogc,  may  a.-tMgn  or  satisfy  the  Bunu-  TrmlrMiK  h'h  IttiildiiiK  Ahho.  tt.  ThumpHori 

853 


§  957.]  PAYMENT    AND   DISCHARGE. 

discharge  is  made  by  one  professing  to  act  in  a  representative  ca- 
pacity, as,  for  instance,  as  administrator  or  guardian,  and  he  has 
not  been  empowei-ed  to  act,  or  has  been  empowered  to  act  only 
after  giving  a  bond,  and  has  failed  to  comply  with  this  require- 
ment, the  discharge  will  not  bind  those  whom  he  represents,  and 
■will  not  protect  one  who  afterwards  purchases  in  good  faith. ^  In 
like  manner  when  moneys  have  been  invested  by  a  clerk  or  other 
officer  of  court,  under  its  direction  in  his  own  name,  an  order  of 
court  would  generally  be  necessai-y  to  empower  him  to  discharge 
it,  and  his  discharge  without  such  order  would  be  void,  even 
against  subsequent  purchasers  in  good  faith .^ 

A  mortgagee,  with  notice  that  a  prior  mortgage  has  been  im- 
properly discharged  without  being  satisfied,  still  holds  subject  to 
that  mortgage  as  much  as  if  no  discharge  had  been  made  ;  ^  if, 
for  instance,  he  has  notice  that  the  prior  mortgage  has  been 
assigned  as  collateral  security,  and,  the  assignment  not  being  re- 
corded, the  assignor  enters  satisfaction  of  it  on  record,  this  does 
not  deprive  the  assignee  of  his  priority  of  claim.  The  discharge, 
however,  would  bar  all  equitable  rights  of  the  assignor,  and  the 
assignee  could  recover  only  to  the  extent  of  his  actual  interest  in 
the  mortgage.* 

And  yet  the  cases  go  further  than  this,  and  hold  that  an  entry 
of  satisfaction  by  a  mortgagee,  after  he  has  parted  with  his  in- 
terest in  the  security,  will  not  discharge  the  mortgage  in  favor  of 
one  who  had  acquired  an  interest  in  the  land  before  the  discharge 
was  made.^  He  is  no  worse  off  than  he  supposed  himself  to  be 
when  he  acquired  his  interest ;  and  there  is  no  reason  in  equity 
why  the  person  really  entitled  to  the  mortgage  should  not  have 
the  benefit  of  it  so  far  as  he  is  concerned.*^  But  the  case  is  quite 
otherwise  when  one  has  purchased  the  land  in  good  faith  after 
such  entry  of  satisfaction  and  relying  upon  it,  having  no  notice  of 
the  assignment,  or  of  any  want  of  authority  in  the  person  making 

31  N.  J.  Eq.  535 ;  Cerney  v.  Pawlot,  66  ^  Farmers'  Loan  &  Trust  Co.  ;;.  Wal- 

Wis.  262 ;  Harris  v.  Cook,  28  N.  J.   Eq.  worth,  1  N.  Y.  433. 

345;  Smith  v.  Kidd,  68  N.  Y.  130;  Con-  s  Morgan  v.  Chamberlain,  26  Barb.  (N. 

necticut  Mut.  L.  Ins.  Co.  v.  Talbot  (Ind.),  Y.)  163  ;  Ely  v.  Scofield,  35  lb.  330. 

14  N.  E.  Rep.  586;  Reeves  v.  Hayes,  95  *  Qibson  i-.  Miln,  1  Nev.  526. 

Ind.  521  ;  Williams  v  Paysinger,  15  S.  C.  °  Williams  v.  Paysiuger,  supra;  Lynch 

171,  quoting  text ;  Waterman  i-.  Webster,  v.  Hancock,  14  S.  C.  66. 

33  Hun  (X.  Y.),  611;  Foster  r.  Paine,  63  ^  Quoted  with   approval   in    Lynch   v. 

Iowa,  85.  Hancock,  supra. 
1  Swarthout  v.  Curtis,  5  N.  Y.  301. 

854 


WHO   MAY   RECEIVE    PAYMENT    AND   MAKE   DISCHARGE.       [§  958. 

such  entr^^  The  effect  of  the  discharge  cannot  be  avoided  as 
against  him.^ 

A  mortgage  given  by  a  trustee  to  his  cestui  que  trust,  condi- 
tioned for  the  faithful  execution  of  the  trust,  cannot  be  discharged 
by  his  paying  the  money  to  himself,  nor  by  his  receiving  the 
money  from  a  purchaser  of  the  property .^ 

A  release  executed  by  a  trustee  in  a  deed  of  trust,  without  the 
authority  of  the  cestui  que  trust,  and  without  having  received  pay- 
ment of  the  debt  secured,  does  not  discharge  the  lien.^  A  mort- 
gage to  a  trustee  may  in  equity  be  discharged  by  tiie  cestui  que 
trusts 

Where  by  the  terms  of  a  mortgage  the  interest  is  made  payable 
to  a  person  other  than  the  mortgagee  for  life,  and  after  his  death 
a  part  of  the  principal  sum  is  payable  to  the  mortgagee,  and  the 
remainder  is  to  be  invested  for  the  benefit  of  certain  minor  chil- 
dren, and  to  be  paid  to  them  when  they  should  become  of  age,  a 
payment  of  the  whole  amount  to  the  mortgagee  after  the  death  of 
the  person  to  whom  the  interest  was  payable  for  life,  and  after  the 
children  had  attained  majority,  is  unauthorized,  and  a  discharge 
executed  by  him  will  be  set  aside  at  the  suit  of  the  beneficiaries.^ 

958.  A  mortgage  held  by  two  or  more  persons  jointly  to 
secure  a  joint  debt  may  be  paid  to  any  one  of  them,  and  lie  can 
effectually  discharge  it,  either  by  an  entry  upon  the  record  or  by 
a  deed  of  release.^  As  between  the  mortgagees,  he  who  receives 
payment  is  a  trustee  for  the  benefit  of  all  who  have  an  interest  in 
the  fund  ;  but  this  does  not  concern  tiie  mortgagor,  who  may  deal 
with  one  as  representing'all.  Upon  the  death  of  one  of  two  joint 
holders  of  the  mortgage,  the  survivor  has  the  exclusive  right  to 
receive  payment  and  discharge  the  mortgage."  When,  however, 
the  mortgage  secures  notes  or  other  obHgations  which  are  held  by 
the  mortgagees  separately,  it  is  necessary  that  all  of  them  siutuhl 

'  Roberts  v.  Ilalstead,  9  Pa.  St.  32.  before.     Caiman  v.  Piiltz,  '2\   N.  Y.  547. 

2  Hawkins  v.  Taylor,  61  Ga.  171  ;  6'.  C.  r,^0;  People  r.  Keysor,  28  N.  Y.  226,  2.35  ; 

7  Reporter,  105.  Pierson  r.  Hooker,  .3  .lobns.   (N.  Y.)  68; 

•'  Lakenan  v.  Robards,  9  Mo.  Ajij).  17'J.  Rulkley  v.  Dayton,  14  lb.  .187  ;  Stuyvcsant 

*  MeHride  r.  Wriubt,  46  Mich.  205.  v.  Hall,  2   Harb.  (N.  Y.)  Ob.   151  ;    Bowes 

''  Waterman  y.  Webster  (N.Y.),  15  N.  E.  i-.  Seef,'cr,  8  W.  &  S.  (Pa.)  222;    Penn  r. 

Rep.  .380.  Butler,  4  Dall.  .354. 

''•  Goodwin  v.  l{i(liardHon,  11  Miu*s.  4f.O;  '  (JilKon  r.  Gilnon,  2  Allen  (M.i's.),  1 15  ; 

Brn((!  V.  Bonney,   12  (iray  (Mnns.),  107.  Blake  v.  Sanborn,  8  (Jray  (MasH.),  155; 

In  Massachoaetts  tbis  authority  h  uiven  People  v.  KeyHor,  supra. 

bv  statute  1870,  eb.  171,  thou(;h  it  existed 

85.0 


§  959.]  PAYMENT    AND   DISCHARGE. 

join  in  receiving  payment  and  in  making  discharge  of  the  mort- 
gage ;  1  and  of  course,  upon  the  death  of  the  hokler  of  a  separate 
obligation,  his  representatives  must  join  in  a  discharge. 

Moreover,  the  fact  that  a  mortgage  to  tvii^o  or  more  persons 
secures  several  notes  or  bonds  is  enough  to  put  a  subsequent  pur- 
chaser upon  inquiry,  and  to  charge  him  with  notice  of  the  separate 
interest  of  the  other  mortgagee,  or  of  the  interest  of  an  assignee 
of  any  of  the  several  obligations.^ 

When  one  mortgagee  assents  to  a  release  made  by  a  joint  mort- 
gagee, and  receives  a  part  of  the  money  paid  to  obtain  it,  having 
knowledge  of  the  facts,  he  is  bound  by  the  release,  even  in  case 
tlie  release  alone  would  not  bind  him." 

Where  there  are  two  or  more  joint  mortgagees,  who  are  each 
owners  in  severalty  of  a  part  of  the  mortgage  debt,  one  of  them 
may  so  act  as  to  merge  his  own  mortgage  interest  without  affect- 
ing that  of  another.* 

Where  two  persons  jointly  loan  money,  but  take  a  mortgage  as 
security  to  one  of  them  alone,  after  his  death  a  release  executed 
by  the  other  is  valid,  for  as  surviving  joint  creditor  he  has  au- 
thority to  control  the  collection  of  the  debt.  Though  he  executed 
the  release  "  as  executor,"  he  having  been  appointed  executor  of 
the  will  of  the  other  creditor,  but  failing  to  qualify,  the  release, 
though  void  in  the  capacity  of  executor,  is  valid  as  being  made  by 
him  as  a  joint  creditor.^ 

959.  An  executor  or  administrator  of  a  deceased  mort- 
gagee is  the  proper  person  to  receive  payment  of  the  mortgage 
debt  and  discharge  it  of  record.^  He  has  full  control  of  the  per- 
sonal estate  of  the  deceased,  and  may  sell,  release,  or  exchange  at 
his  pleasure,  a  mortgage  belonging  to  the  estate,  and  the  transac- 
tion, if  without  fraud,  is  binding  upon  the  estate.'''  But  though 
one  is  named  as  executor  by  a  will,  he  has  no  authority  to  make  a 
release  till  he  has  qualified  as  such.^  The  heir  or  next  of  kin  has 
no  authority  as  such  to  receive  payment  and  execute  a  discharge.^ 
One  of  two  executors  may  receive  payment  of  a  mortgage  be- 
longing to  the  estate  under  their  charge,  and  give  a  valid  release, 

1  Burnett  v.  Pratt,  22  Pick.  (Mass.)  556.  6  Dayton  v.  Dayton,  7  Bradw.  (111.)  136. 

See  §  794.  So  by  statute  iu  lUinois.     E.  S.  1874,  ch. 

-  Lynch  v.  Hancock,  14  S.  C.  66.  95,  §  9. 

3  Hubbard  v.  Jasinski,  46  111.  160.  ■?  Stribling  v.  Splint  Coal  Co.  (W.  Va.) 

*  Loonier  v.  Wheelwright,  3  Sandf.  (N.  5  S.  E.  Rep.  321. 

Y.)  Ch.  135.  8  Wall  V.  Bissell,  supra. 

5  Wall  V.  Bissell,  8  Sup.  Ct.  Rep.  979.  ^  Woodruff  v.  Mutschler,  34  N.  J.  Eq.  33. 

856 


WHO   MAY   RECEIVE    PAYMENT    AND    MAKE   DISCHARGE.       [§  960. 

whether  the  mortgage  was  made  to  the  testator  or  to  the  executors 
as  such  ;  and  an  administrator  has  the  same  power.^  This  is  so 
even  where  the  will  makes  the  executors  trustees,  and  directs 
them  to  retain  the  mortgage,  with  other  securities,  for  the  pur- 
poses of  the  trust,  unless  it  appears  that  the  estate  has  been 
settled,  and  that  the  securities  are  held  by  them  as  trustees,  or 
that  not  enough  securities  remain  in  their  hands  to  fulfil  the  trust. 
Primd  facie  the  discharge  is  valid.-  Trustees  must  generally,  in 
all  matters  which  involve  judgment  and  discretion,  act  jointly; 
but  under  some  circumstances  one  trustee  may  receive  payment  of 
a  mortgage  and  enter  satisfaction,  as,  for  instance,  when  he  is  an 
acting  trustee,  and  his  co-trustee  is  absent  from  the  country'-  for  a 
long  period. 

It  seems  that  an  executor  or  administrator  may  make  a  valid 
discharge  of  a  mortgage  which  a  mortgagee  held  as  "  trustee," 
when  there  is  nothing  to  show  the  nature  of  the  trust,  and  no  new 
trustee  has  been  appointed  to  execute  the  trust.'^ 

Where  the  widow  of  a  mortgagee  procured  another  mortgage 
from  the  mortgagor  running  to  herself  and  surrendered  the  first 
mortgage,  alleging  that  the  money  loaned  was  hers,  in  a  suit  by 
the  mortgagee's  administrator  to  foreclose  the  first  mortgage,  it 
was  held  that  the  burden  of  proof  was  on  the  widow  to  show  that 
the  money  loaned  belonged  to  her  and  not  to  the  husband,  and 
that  failing  in  this  her  mortgage  must  be  held  void.'* 

960.  Whether  a  foreign  executor  or  administrator  can 
make  a  valid  discharge  of  a  mortgage  has  sometimes  been  a 
matter  of  doubt.  His  receipt  for  the  money  undoubtedly  dis- 
charges the  debt ;  but  under  the  present  system  of  recorded  titles 
it  is  a  matter  of  importance  that  the  authority  of  the  executor  or 
administrator  should  be  a  matter  of  record  in  the  state  where 
the  land  is  situated  and  the  discharge  is  to  be  recorded  ;  and  for 
this  reason  it  is  necessary  to  require  an  administration  to  be  taken 
upon  the  estate  of  the  mortgagee  or  other  holder  of  a  mortgage 

1  People  y.  Miner,  37  Barb.  (N.  Y.  1400;  ciihc  tlie  previous  decisions  arc  noticed  at 

S.  C.  2.3  How.  Pr.  22.3  ;  BoKcrt  v.  Ilertell,  length.     See  §  796. 

4  Hill  (N.  Y.),  492  ;  Douglass  v.  Satterlce,  -  Weir  i-.  Moslier,  I'J  Wis.  311. 

II   JolinH.  (N.  Y.)  16;  Murray  v.  Biuteli-  ■'  Sturtevant  f.  Jmiues,  14  Allen  (Mass.), 

ford,   1    Wend.  (N.  Y.)  583  ;  Wheeler  v.  .123,  527. 

Wheeler,  9  Cow.   (N.  Y.)  .34;    People  v.  *  Truax  v.  While  (N.  J),  II  Atl.  Kcp. 

KeyBcr,  28  N.  Y.  226,  228.     In  llii.s  latter  73.-). 

«r>7 


§  961.]  PAYMENT   AND   DISCHARGE. 

in  the  state  where  the  mortgaged  premises  are  situate,  before 
making  payment  of  the  incumbrance.^ 

While,  therefore,  an  executor  or  administrator  appointed  in  one 
state  may  receive  payment  of  a  mortgage  upon  Lmd  in  another, 
if  it  be  voluntarily  made,  yet  the  courts  of  the  state  in  which  the 
land  is  situate  will  not  aid  him  in  enforcing  payment  until  lie  is 
authorized  to  act  under  the  appointment  of  the  proper  tribunal  of 
such  state.2 

Doubtless  the  foreign  executor  or  administrator  might  exercise 
a  power  of  sale  ;  but  a  practical  difficulty  about  his  doing  so 
would  be  that  no  judicious  person  would  take  the  title  which  he 
could  give.  He  might  also  assign  the  mortgage  to  a  resident  of 
the  state  in  which  the  land  is  situated,  if  any  one  could  be  found 
to  take  such  an  assignment.  But  he  would  not  be  allowed  to 
prosecute  a  suit  in  his  representative  capacity  for  foreclosure  in  a 
state  where  he  had  not  received  appointment.^ 

961.  An  assignee  of  a  mortgage  by  a  formal  assignment  has, 
of  course,  the  right  to  receive  payment  and  power  to  make  due 
acquittance  of  it.  But,  as  already  noticed,^  although  his  assign- 
ment has  been  duly  recoi-ded,  he  makes  himself  liable  to  loss  if 
he  fails  to  give  notice  to  the  debtor  of  his  ownership  of  the  secu- 
rity ;^  for  until  he  does  this  the  debtor  is  justified  in  paying  to  the 
mortgagee,  only  that  in  making  payment  of  the  whole  amount  of 
the  debt  his  neglect  to  require  the  surrender  of  the  note  or  bond 
might  invalidate  the  payment.  Not  only  should  the  debtor  re- 
quire the  production  of  the  evidence  of  the  debt,  as  proof  of  au- 
thority to  receive  payment  of  it,  but  for  the  further  reason  that, 
upon  discharging  the  debt,  he  is  entitled  to  have  the  evidence  of 
it  delivered  up  to  be  cancelled.^  A  release  or  discharge  by  one 
claiming  to  be  assignee  of  the  mortgage,  when  in  fact  he  is  a 
stranger  thereto,  is  of  course  void." 

After  an  assignment   of  a  mortgage,   and  notice   of  it  to  the 

1  See  §  797 ;  Hutchins  v.  State  Bank,  S.    C.   29    How.    Pr.   240 ;   Vermilya   v. 

12  Met.  (Mass.)  421,  425;  Dial  v.  Gray,  Beatty,   6   Barb.    (N.   Y.)   429;    Dial    v. 

14  S.  C  573 ;  Stone  v.  Scripture,  4  Lans.  Gray,  supra. 

(N.  Y.)  186 ;  Hayes  v.  Lienlokken,  48  Wis.  3  Trecothick  v.  Austin,  4  Mason,  1 6,  33. 

509.  4  See  §§  474,  791,  956. 

~  Vroom  V.  Van  Home,  10  Paige  (N.  »  Williams  v.  Jackson,  107  U.  S.  478. 

Y.)  549 ;  Doolittle  v.  Lewis,  7  Johns.  (N.  «  In  re  Coster,  2   Johns.   (N.  Y.)   Ch. 

Y.)  Ch.  45;  Morrell  v.  Dickey,  1  lb.  153;  503. 

Parsons   v.   Lyman,   20  N.  Y.  103,  112;  '  De  Laureal  v.  Kemper,  9  Mo.  App. 

Petersen  v.  Chemical  Bank,  32  N.  Y.  22;  77. 

868 


WHO   MAY    RECEIVE   PAYMENT    AND    MAKE   DISCHARGE.       [§  962. 

mortgagor,  no  transaction  between  the  mortgagor  and  the  mort- 
gagee can  defeat  the  assignee's  right  to  enforce  tlie  note  and  raort- 
gage.i  If  the  mortgage  be  transferred  at  the  request  of  the 
mortgagor  as  security  for  another  debt  of  his,  and  the  mortgagee 
is  secured  in  some  other  wa}',  or  is  paid,  the  mortgage  remains  a 
vahd  security  in  the  hands  of  the  assignee.^ 

But  if  the  assignee  leaves  the  bond  and  mortgage  and  assign- 
ment in  the  hands  of  the  mortgagee  as  his  agent  to  collect  the 
interest,  or  even  the  bond  alone,  and  he  receives  a  part  of  the 
principal,  which  he  fails  to  pay  over  to  the  assignee,  the  latter  is 
bound  by  the  payment.^  Such  a  payment,  made  after  the  as- 
signee has  withdrawn  the  papers  from  the  mortgagee  and  revoked 
his  authority,  would  not  bind  the  assignee. 

Where  the  recording  of  an  assignment  is  not  notice  to  the 
mortgagor  of  the  assignment,  and  the  bond  or  note  is  left  in  the 
hands  of  the  mortgagee,  after  an  assignment  duly  recorded,  the 
mortgagor  may  in  good  faith  pay  the  mortgage  debt  to  the  mort- 
gagee, and  a  release  by  the  latter  of  record  is  an  effectual  dis- 
charge of  the  mortgage.^  Where,  pending  an  action  to  foreclose 
a  mortgage,  the  mortgagee  executed  an  assignment  of  the  mort- 
gage and  debt,  and  then  settled  with  the  mortgagor  and  released 
the  property  to  him,  the  discharge  was  held  to  prevail  as  against 
the  assignment.^ 

962.  After  an  equitable  assignment  of  the  mortgage  by  an 
indorsement  of  the  mortgage  note,  or  by  a  delivery  of  it  merely 
with  a  power  of  attorney  to  collect  it  in  the  name  of  the  assignor, 
a  payment  to  the  assignor  and  a  discharge  by  him  will  not  dis- 
charge the  mortgage.*"  The  fact  tliat  the  mortgagor,  on  making 
payment  to  an  equitable  assignee  wlio  has  possession  of  the  secu- 
rities, demands  and  receives  indemnity  against  loss,  knowing  that 
another  person  makes  claim  to  the  mortgage  by  a  formal  assign- 
ment, is  not  a  suspicious  circumstance  affecting  the  validity  of  the 
equitable  assignment."  The  mortgagee  may,  liowever,  at  the  re- 
quest of  the  assignee,  make  a  valid  discharge"  of  the  mortgage  of 
record.  Where  a  mortgage  secured  five  notes,  and  when  the  first 
was  paid,  the  mortgagee,  who  had  assigned  the  mortgage,  by  direc- 

J  Lehman   Hros.  r.   McQueen,  (15  Alii.  '•  MiiM.n  r.  \U-i\rh,  :>r>  Wis  r.07. 

570.  '•  Cutler  r.  Haven,  8  I'iek.  (Muss.)  400; 

-  Slieddy  r.  (Jenin,  III  .Mass.  .378.  (iordon   /•.   Miilliare,   l.'l  Win.   '22  ;  Torrey 

»  Emery  v.  Gordon,  .l.'l  N.  .J.  Fv].  447.  >:  Deiiviit.  .V»  Vt.  :i;U.     See  §  817. 

*  PettuB  y.  McGowan,  ;J7   I  Inn  (N.  V.),  '  Iluescijj  r.  IJrown,  .'J4  .Mich.  r)0;{. 

409.  859 


§§  963,  964.]  PAYMENT   AND   DISCHARGE. 

tion  of  the  assignee  executed  a  discharge  which  acknowledged  full 
payment  and  satisfaction  of  the  within  note  and  mortgage,  it  was 
held  that  the  terms  of  the  discharge  gave  no  notice  to  subsequent 
purchasers  that  the  remaining  four  notes  were  unpaid.^ 

963.  One  "who  holds  a  mortgage  by  assignment  as  collat- 
eral security  for  a  sum  smaller  than  the  mortgage  debt  may  re- 
ceive payment,  or  may  compel  payment  by  foreclosure  ;  and  hold- 
ing the  mortgage  title  of  record,  he  may  give  a  valid  discharge. 
If  he  collects  a  sum  more  than  sufficient  to  pay  the  debt  due  him, 
he  will  hold  the  surplus  in  trust  for  his  assignor.^ 

When  the  debt,  to  secure  which  the  mortgage  has  been  trans- 
ferred as  collateral  security,  has  been  paid,  a  payment  of  the 
mortgage  debt  to  the  mortgagee  and  a  discharge  by  him  are  valid, 
though  the  mortgagor  knew  when  he  made  the  payment  that  the 
mortgage  had  been  so  transferred.^ 

964.  Payment  may  be  made  to  a  duly  authorized  agent, 
and  his  agency  may  be  inferred  from  possession  of  the  secu- 
rities. As  a  general  rule,  a  mortgage  debtor  is  authorized  to 
infer  that  an  attorney  or  agent  who  has  been  employed  to  make 
a  loan  and  retains  possession  of  the  bond  and  mortgage  is  empow- 
ered to  receive  payment  of  both  the  interest  and  of  j^rincipal.'^ 
But  this  inference  is  founded  on  his  custod}?^  of  the  securities,  and 
it  ceases  when  these  are  withdrawn  by  the  creditor  ;  ^  and  it  is  in- 
cumbent on  the  debtor,  who  relies  upon  a  payment  so  made  to  an 
attorney  or  agent,  to  show  that  the  securities  were  in  his  posses- 
sion when  he  made  the  payment,  unless  the  action  of  the  creditor 
be  such  as  to  estop  him  from  denying  the  agency.^  The  son  of 
a  mortgagee  in  possession  of  the  papers  is  presumed  to  have  au- 
thority to  receive  payments,  but  this  presumption  of  course  ceases 
upon  his  father's  death.'^  A  legatee  who  is  entitled  to  the  interest 
of  a  mortgage  for  life,  having  possession  of  the  bond  or  note,  may 

1  Beal  V.  Stevens  (Cal),  14  Pac.  Eep.  Brewster  v.  Carnes  (N.  Y.),  9  N.  E.  Rep. 
186.  323 ;  Ilarbacli  v.  Colvin  (Iowa),  35  N.  W. 

2  Slee  i\  Manhattan  Co.  1  Paige  (N.  Y.),  Rep.    663;  Hagerman  v.   Sutton,  91  Mo. 
48;  Norton   v.  Warner,  3  Edw.  (N.  Y.)  519;  Lee  v.  Clarke,  89  Mo.  553. 

106;  Reynolds  t;.  Rees,  23  S.  C.  438.  ^  Megary  v.  Funtis,  5   Sandf.   (N.  Y.) 

3  Seymour  v.  Laycook,  47  Wis.  272.  376  ;  Brown  v.  Blydenburgh,  7  N.  Y.  141  ; 
*  Williams  V.  Walker,  2  Sandf.  (N.  Y.)     Cox  v.  Cutter,  28  N.  J.  Eq.  13. 

Ch.  325;  Hatfield  v.  Reynolds,  34  Barb.  6  Haines   v.  Pohlmann,  25   N.  J.    Eq. 

(N.  Y.)  612  ;  Van  Keuren  v.  Corkins,  4  179  ;  Smith  v.  Kidd,  68  N.  Y.  1-30. 

Hun  (N.  Y.),  129;  5.  C.   66   N.   Y.   77 ;  '  Megary  r.  Funtis,  swp-a. 
860 


WHO   MAY   RECEIVE    PAYMENT   AND    MAKE   DISCHARGE.       [§  964. 

be  presumed  to  be  authorized  to  receive  the  interest;  but  this 
presumption  would  not  extend  to  a  collection  of  the  principal.^ 

In  making  payments  to  an  agent  the  mortgage  debtor  should 
be  assured  of  his  continued  authority  to  act  for  the  owner  of  the 
mortgage  ;  and  such  assurance  of  this  as  may  be  derived  from 
his  possession  of  the.  mortgage  note  or  bond,  and  indorsement 
thereon  of  the  payment,  would  be  omitted  only  through  great 
negligence.2  Authority  of  an  agent  to  receive  interest  or  principal 
on  a  mortgage  cannot  be  inferred  from  the  fact  that  the  agent  had 
collected  and  paid  over  to  the  mortgagee  interest  on  other  mort- 
gages.-5  Even  authority  to  collect  the  interest  upon  a  mortgage 
does  not  afford  ground  for  inferring  authority  to  collect  the  prin- 
cipal, where  the  agent  is  not  intrusted  with  the  possession  of  the 
securities.*  The  rule  has  been  strictly  adhered  to  in  all  the  ad- 
judged cases  that  the  possession  of  the  securities  by  the  agent 
is  the  indispensable  evidence  of  his  authority  to  collect  the  prin- 
cipal.^ 

If  the  evidence  shows  that  the  agent  was  the  general  agent  of 
the  mortgagee  to  accept  payments  of  interest  and  principal  upon 
loans  negotiated  by  the  agent,  the  mortgagee  will  be  bound  by  a 
payment  of  principal  made  to  the  agent.*^  A  release  made  by  an 
attorney  in  fact  is  binding  upon  the  holder  of  the  mortgage  who 
has  accepted  the  consideration  paid  for  the  release  with  full  knowl- 
edge of  it,  although  the  attorney  exceeded  his  authority  in  mak- 
ing the  release."  After  an  agent  has  without  authority  collected 
the  principal  of  a  mortgage,  and  the  mortgagee,  after  learning  the 
fact,  but  without  full  knowledge  of  all  the  material  facts  of  the 

1  Giddiiif,'s  V.  Seward,  IG  N.  Y.  365.  mortgage  through   an  attorney,  and  cm- 

-  Sec  Kimball   v.  Goodburu,  32  Mieh.  jiloys  him  to  colket  tlie  interest,  and  in 

10,  as  to  disciiargc  of  a  mortgage  already  special  cases  authorizes  him  to  collect  the 

paid,  executed  by  the  last  secretary  of  the  principal  of  particular  mortgages,  is  sulli- 

company.  cient  to  warrant  a  finding  of  a  general 

^  Co.K  I'.  Cutter,  28  N.  J.  Eq.  13;  Smith  authority  to   collect  the  principal   of   nil 

I'.  Kidd,  08  N.  Y.  130.  the  mortgages  of  the  client,  notwithstand- 

*  Williams  v.  Walker,  2  Sandf.  Ch.  (N.  ing  that  the  client  takes  the  precaution 

Y.)  325;  Smith  v.  Kidd,  supra;  Brewster  to  retain  iiis  Bccurities  in  his  own  posscs- 

V.  Games  (N.  Y.),  9  N.  K.  Kep.  323.  sioii,   no   investor   would   bo   safe."     Per 

'''  Curtis   1-.    Drought,   1    Molloy,   487  ;  Itajjallo,  J.,  in  Smith  r.  Kid«l,  supra. 

Ilenn  r.  Conisby,  1  Ch.  Cos.  93,  n.  ;  (ierard  "  Security  Co.  i-.  IJichardson,  33   Fed. 

V.  Baker,  lb.  94  ;  Wostenholme  r.  Davies,  Uep.  10  ;  S(5Hsion8  r.   Kent  (Iowa),  39  N. 

2  P'reem.  Ch.  2H9  ;  Smith  v   Kidd,  supra.  W.  Hep.  914  ;  Kent   r.  Congdon,  33   Fed. 

"  Any  other  i»riiicipIo  would  be  dangerous  Hop.  228. 

in  the  extreme.     If  the  fact,  that  a  cup-  "  'looker  v.  Sloan,  30  N.  .1.  Kij.  391. 
italist  makes   investments   ou   bond   and 

8G1 


§  964.]  PAYMENT   AND   DISCHARGE. 

agent's  wrongful  acts,  accepts  from  him  security  for  tlie  amounts 
he  had  collected,  sucli  acceptance  is  not  a  ratification  of  the  pay- 
ment to  the  agent,  and  does  not  estop  the  mortgagee  from  re- 
pudiating it ;  nor  does  it  furnish  evidence  of  the  agent's  original 
authority  to  receive  payment.^ 

If  payment  be  made  to  an  attorney,  by  giving  other  securities 
which  he  was  once  authorized  to  receive  in  settlement,  the  mort- 
gage is  satisfied,  where  the  circumstances  are  such  that  the  mort- 
gagor was  justified  in  supposing  that  the  attorney  still  had  author- 
ity to  settle  in  that  inanner.^  In  like  manner  where  an  attorney, 
foreclosing  his  client's  mortgage,  discontinued  the  suit  and  de- 
clared the  mortgage  paid,  upon  receiving  part  of  the  amount  due 
in  cash  and  the  balance  in  the  debtor's  note  to  himself  person- 
ally, by  way  of  a  loan  to  the  debtor,  the  mortgage  was  held  to  be 
extinguished.'^  But  a  power  of  attorney  to  satisfy  a  mortgage 
does  not  authorize  the  agent  to  enter  satisfaction  unless  the  debt 
is  paid.* 

An  attorney  employed  to  foreclose  a  mortgage  cannot  without 
special  authority  receive  notes  for  the  amount,  or  extend  the  pay- 
ment of  the  debt.^  He  can  only  receive  money  in  payment. 
After  receiving  a  part  of  the  debt  he  cannot  make  a  valid  ex- 
tension of  the  time  of  payment  of  the  residue  ;  but  the  holder  of 
the  mortgage  may  proceed  to  foreclose  immediately.  The  mort- 
gagor is  in  law  affected  with  notice  that  the  attorney  has  no 
power  to  receive  notes  in  payment,  or  to  extend  the  time  of  pay- 
ment. A  payment  to  the  attorney  of  notes  so  taken  by  him  is 
not  a  payment  on  the  mortgage,  unless  the  holder  of  it  receives 
the  proceeds.^ 

If  an  agent  releases  a  mortgage  upon  receiving  a  less  sum  than 
is  due,  and  less  than  he  was  authorized  to  take  in  ]3ayment,  the 
debtor  knowing  the  extent  of  the  agent's  authority,  the  debtor  is 
still  liable  for  the  balance." 

Where  an  administrator  pledged  a  bond  and  mortgage  for  a 
loan,  and  the  pledgee  afterwards  placed  the  bond  in  the  hands  of 
the  administrator,  who  was  also  an  attorney  at  law,  for  collection, 
and  the  attorney  obtained  judgment  in  his  own  name,  and  after- 

1  Smith  V.  Kidd,  G8  N.  Y.  130.  5  Heyman  v.  Beringer,  1  Abb.  (N.  Y.) 

-  Mallory  v.  Mariuer,  15  Wis.  172.  N.  C.  315. 

^  Hawkes  v.  Dodge  County  Mut.  Ins.  ^  Heyman  v.  Beringer,  supra. 

Co.  11  Wis.  188.  •?  Hammons  v.  Bigelow  (Ind.),  17  N.  E. 

*  Hutchings  v.  Clark,  C4  Cal.  228.  Rep.  192. 
862 


DISCHARGE   BY    MISTAKE   OR   FRAUD.        [§§  965,  966. 

wards  settled  tlie  judgment  by  taking  a  surrender  of  the  mort- 
gaged land,  which  passed  into  the  possession  of  the  heirs  of  the 
estate,  the  mortgage  debtor  not  knowing  of  the  assignment  of 
the  mortgage,  it  was  held  that  the  lands  remained  liable  for  the 
payment  of  the  mortgage  debt,  tliough  the  mortgagor  might  be 
discharged. 1 

965.  A  receiver  authorized  by  order  of  court,  upon  receiving 
payment  of  a  mortgage  debt,  to  execute  formal  satisfaction  and 
discharge  of  the  mortgage,  has  authority  to  receive  payment  and 
to  satisfy  the  mortgage  although  it  be  not  due  at  the  time.^ 

IX.  Discharge  hy  Mistake  or  Fraud. 

966.  A  discharge  obtained  by  fraud  or  made  through  mis- 
take may  be  cancelled  if  other  parties,  having  no  notice  of  the 
fraud,  have  not  in  the  mean  time  acquired  an  interest  in  the  prop- 
erty.^ The  cancellation  is  of  course  presumptive  evidence  that 
the  mortgage  has  been  actually  satisfied ;  but  it  is  not  conclusive 
of  this.  The  burden  is  upon  the  person  who  would  impeach  the 
cancellation  to  show  that  the  mortgage  was  not  actually  paid,  and 
that  the  discharge  was  obtained  either  by  fraud  practised  upon 
the  holder  of  the  mortgage,  or  was  made  by  him  through  some 
mistake  of  fact."* 

The  mere  fact  that  the  debt  is  outstanding  and  unpaid  at  the 
time  the  release  is  executed  cannot,  of  itself  alone,  be  regarded 
as  presumptive  evidence  of  fraud,  or  as  tending  to  establish  ac- 
cident or  mistake.  The  release  of  a  part  or  all  of  the  mortgaged 
premises  while  the  debt  is  unpaid,  or  even  before  it  matures,  is  not 
an  unusual  occurrence.  It  is  frequently  done  by  way  of  substi- 
tuting new  securities,  or  of  carrying  out  some  other  new  arrange- 
ment between  mortgagor  and  mortgagee,  and  is  in  nu  way  incon- 

J  Reynolds  v.  Rees,  23  S.  C.  438.  N.  K.  Rep.  203  ;  Woodbury  c.  Bruce  ( Vt.), 

^  Heermans  v.  Clarkson,  64  N.  Y.  171.  11  Atl.  licp.  52  ;    FcT;;uson   v    (Jiassford 

='  Stover  V.  Wood,  20   N.  J.  Eq.  417  ;  (.Mich.),  3.5  N.  W.  Rep.  820;  lliyder  v. 

Young  V.  Hill,  31  N.  J.  Eq.  429  ;  Willcox  Excelsior  Building  Loan  Asso.  (.\.  .).)  8 

V.  FoBter,  132  Mass.  320;  McLean  v.  La-  Atl.   Rep.  310  ;  Lee  v.  Wa^uer  (Wis.),  36 

fayette  Bank,  3  MclAan,  587;  Fa.ssitt  y.  N.  W.  Rej>.  5'J7  ;  Elliott  v.  (iilclirist  (N. 

Smith,  23  N.  Y.  252  ;  B..rne.s  v.  Cainack,  II.),  9  Atl.  Rep.  3H2. 

I  Barb.  (N.  Y.)  392  ;  Weir  i-.  MoBlier,  19         *  Lilly  v.  (^uick,  2  N.  J.  E.).  (I  Cr.)  97  ; 

Wis.  311;   Ilollenhack  f.  Shoyer,   16  VVi«.  Trenton    Banking  Co.    v.   WoodrulV,    lb. 

499;   Vannice  v.  Bergen,   16  Iowa,  555;  117;  Miller  r.  Wack,  1   N.  .1.   Eq.  (Sax.) 

West's  Appeal,  88  I'a.  St.  341  ;  Lowrey  v.  204  ;  MiddleMCX  v.  Thomas,  20  N.  J.  Eq. 

Byers,  80  Ind.  443  ;  Sideiier  v.  I'avcy,  77  39  ;  Somers  v.  Crt-Bso  (N.  J.).  I'l  Atl.  IJrp. 

Ind.  241;  llcnschil  v.  Mumiro  (III.),  12  23. 

803 


§  96G.]  PAYMENT   AND   DISCHARGE. 

sistent  with  perfect  good  faith,  or  a  full  knowledge  and  under- 
standing of  the  nature  and  effect  of  the  instrument  at  the  time  of 
its  execution.! 

Of  course  an  unauthorized  cancellation  of  a  mortgage  by  the 
recorder  does  not  in  any  way  impair  the  rights  of  the  owner  of 
the  mortgage,^  even  against  one  who  has  purchased  the  mort- 
gaged premises  in  good  faith,  relying  upon  the  cancellation  ap- 
pearing of  record.^ 

If  one  be  induced  by  the  fraudulent  representations  of  the 
mortgagor  to  deliver  up  the  mortgage  together  with  the  mortgage 
note,  and  to  take  instead  worthless  security,  the  mortgage,  not 
being  discharged  of  record  or  released  by  deed,  may  be  foreclosed 
as  a  subsisting  lien.^  And  if  a  discharge  of  record  has  been  made 
b}'  the  mortgagee  upon  receiving  a  worthless  check  or  worthless 
security,  or  a  new  mortgage  subject  to  incumbrances,  the  mort- 
gage may  still  be  foreclosed,  if  no  one  has  in  the  mean  time  ac- 
quired an  interest  in  the  property  relying  upon  the  discharge, 
though  a  cancellation  of  the  discharge  might  first  be  obtained  in 
equity.^ 

If  one  mortgage  be  substituted  for  another,  and,  by  a  corrupt 
arrangement  with  the  mortgagor,  a  third  person,  knowing  the 
facts,  procure  and  take  advantage  of  an  interval  between  the  dis- 
charge of  the  original  mortgage  and  the  recording  of  the  substi- 
tute, to  record  a  mortgage  which  he  has  obtained  meanwhile  for 
himself,  and  does  this  with  the  fraudulent  purpose  of  securing 
priority,  his  mortgage  will  be  postponed  to  the  other.*^ 

A  discharge  of  a  mortgage  made  in  consideration  of  a  convey- 
ance to  the  mortgagee  of  a  portion  of  the  mortgaged  property, 
which  he  understood  to  be  unincumbered,  but  which  is  in  fact 
incumbered  by  attachment,  may  be  set  asideJ 

A  release  executed  by  the  mortgagee  and  placed  in  the  hands 
of  a  third  person,  to  be  delivered  upon  certain  conditions  to  the 
mortgagor,  is  not  operative  if  delivered  before  the  performance  of 

1  Battenhausen    v.  Bullock,   8  Brad  v'         ^  Harris  v.  Cook,  28  N.  J.  Eq.  345. 
(111.)  312,  321,  and  substantially  the  Ian-         *  Grimes  v.  Kimball,  3  Alleu  (Mass.), 
guage  of  Bailey,  J.     See,  also,  Welch  v.     518. 

Priest,   8  Allen    (Mass.),    165;   Weir  v.  5§874c;  Middlesex  y.  Thomas,  20  N. 

Mosher,  19  Wis.  311;  Trenton  Banking  J.  Eq.39;  De  Yampert  v.  Brown,  28  Ark. 

Co.  V.  Woodruff,  2  N.  J.  Eq.  (1  Gr.)  117  ;  166 ;  Farmers'  &  Drovers'  Ins.  Co.  v.  Ger- 

Barnes  v.  Camack,  1  Barb.  (N.  Y.)  392.  man  Ins.  Co.   79  Ky.  598  ;  Hammond  v. 

2  Mechanics'  Building  Asso.  v.  Fergu-  Barker,  61  N.  H.  53;  Sidener  v.  Pavey,  77 
son,  29  La.  Ann.  548;  Seitz  r.  Durning,  Ind.  241. 

8  Mo.  App.  208.  ^  Waldo  v.  Richmond,  40  Mich.  380. 

864  ^  French  v.  De  Bon,  38  Mich.  708. 


DISCHARGE    BY    MISTAKE   OR    FRAUD.       [§§  966  «,  967. 

the  conditions  ;  and  if,  by  accident,  mistake,  or  fraud,  it  is  placed 
on  record  before  such  performance,  as  against  the  mortgagee  the 
court  will  order  the  discharge  to  be  cancelled.  A  judgment  cred- 
itor of  the  mortgagor  acquires  no  rights  or  advantage  by  the  re- 
cording of  the  release,  and  may  be  restrained  from  selling  any- 
thing more  than  the  equity  of  redemption.^  And  it  would  seem 
that  an  innocent  purchaser  would  not  be  protected  by  such  record 
of  the  release  before  delivery .^  It  is  likened  to  a  deed  which  the 
grantee  had  stolen,  where  no  title  is  thereby  acquired ;  and  it  is 
distinguished  from  one  obtained  by  fraud  from  the  grantor,  when 
the  title  passes  by  the  actual  delivery  of  the  grantor  himself.^ 

A  father  havincj  made  a  mortsace  to  his  daughter,  who  was  a 
minor,  for  the  consideration,  as  expressed,  of  natural  love  and 
affection,  afterwards  being  dissatisfied  with  her  marriage,  without 
authority  from  her,  entered  satisfaction  of  it  on  record.  The 
daughter  was  still  a  minor,  and  the  mortgage  note  had  never  been 
delivered  to  her,  although  the  mortgage  itself  had  been  delivered 
and  recorded.  Upon  suit  by  her,  the  entry  of  satisfaction  was  set 
aside  as  fraudulent,  and  judgment  was  entered  for  the  amount  of 
the  note  and  interest,  and  enforced  against  the  property.^ 

966  a.  A  release  entered  without  fraud  or  mistake  for  any- 
good  and  valuable  consideration  is  binding.  Payment  in  full 
of  the  mortgage  debt  in  money  is  not  essential  to  a  discharge.  A 
discharge  obtained  upon  a  promise  made  by  the  owner  in  good 
faith  to  do  something  fur  the  benefit  of  the  mortgagee,  is  effectual, 
though  such  promise  be  not  kept.  Thus  a  release  made  by  a 
mortgagee  upon  a  promise  of  the  mortgagor  to  raise  money  on 
the  land  by  a  new  mortgage,  and  with  the  proceeds  to  purchase 
cattle  and  to  engage  together  in  the  cattle  business,  is  a  sufficient 
consideration  to  support  a  release  of  the  mortgage  ;  and  if  it 
turns  out  that  the  mortgagor  is  unable  to  raise  the  requisite 
amount  of  money  for  this  business,  and  the  mortgagee  docs  not 
immediately  seek  to  avoid  the  release,  the  release  will  operate  in 
the  same  way  as  if  full  payment  had  been  made." 

967.  If  the  giving  up  of  the  mortgage  notes,  or  a  formal 
discharge  of  the  mortgage,  has  been  obtained  by  fraudulent 
means,  or  by  forgery,  this   is   no   payment  and   discharge  of  tlu' 

'  Stanley  v.  Valeiiliiif,  7'J  111.  .044.  *  Mulk-tl  v.  Piikc,  8  Iml.  304. 

'^  Stanley  r.  Valciitiiie,  «u/;ra,  anil  cuses  '•  Seymour  v.  Mackay  (III.),  18  N.  Iv 
cited.     See  §§  640,  641.  Hep.  S.Oa. 

"  Per  Mr.  .Juhtice  Walker,  in  Stanley  v. 
Valentine,  suiira.  . 

VOL.  I.  55  865 


§  967.]  PAYMENT    AND    DISCHARGE. 

mortgage.^  In  sucli  case  a  subsequent  mortgagee,  wliose  rights 
existed  at  the  time  of  such  discharge,  cannot  object  to  the  ])rior 
mortgagee  being  restored  to  his  rights.^  And  so  also  the  mortgage 
will  be  reinstated,  not  onlj^  as  against  the  mortgagor,  but  against 
one  who  has  purchased  from  him  with  notice  of  the  mortgage,  or 
without  giving  any  new  consideration,  and  in  whose  favor  no  new 
rights  have  intervened  since  the  release.^  Of  course  the  mort- 
gage cannot  be  restored  as  against  one  who  has  in  good  faith  pur- 
chased the  property  after  the  cancellation,  or  has  advanced  money 
upon  it  upon  the  faith  of  a  clear  record  title.^  The  mortgage 
cannot  be  restored  when  the  rights  of  innocent  third  persons  will 
be  affected.^  The  holder  of  the  mortgage  wrongfully  discharged 
should  therefore  lose  no  time  in  taking  steps  to  have  his  mort- 
gage restored.*^  But  he  is  not  estopped  from  enforcing  his  mort- 
gage as  against  the  holder  of  a  subsequent  mortgage  who  is  af- 
fected with  knowledge  of  the  fraudulent  discharge  of  the  prior 
mortgage,  by  the  mere  fact  that  after  the  holder  of  the  prior 
mortgage  had  knowledge  of  the  fraudulent  discharge  he  took  no 
steps  within  a  reasonable  time  to  correct  the  record." 

If  the  cancellation  of  the  mortgage  be  the  result  of  the  mort- 
gagee's negligence,  he  will  not  be  permitted  to  establish  his  lien 
as  against  subsequent  purchasers  or  mortgagees  who  have  in  good 
faith  acted  in  reliance  upon  the  cancellation  of  record.  Such  is 
the  case  when  he  has  permitted  the  mortgagor  to  have  the  cus- 
tody of  the  mortgage,  whereby  the  latter  was  enabled  to  produce 
it  for  cancellation  on  the  record  by  the  recording  officer  in  the 
manner  provided  by  statute.^ 

If  a  mortgagee  negligently  indorses  his  name  on   the  back  of 

1  Grimes  v.  Kimball,  3  Allen  (Mass.),     v.  King,  23  Iowa,  500 ;  Reagau  v.  Hadley, 
518;  Weir  r.  Mosher,   19  Wis.  311;  and     supra. 

see  Eyre  v.  Burmester,  10  H.  L.  90 ;  S.  C.  *  Heddeu  v.  Cowell,  37  N.  J.  Eq.  89  ; 

8  Jur.  N.  S.  1019 ;  Reagan  v.  Hadley,  57  City  Council  v.  Ryan,  22   S.  C.  339  ;  53 

Ind.  509.  Am.  Rep.  713;   Lee  v.  Wagner  (Wis.), 

2  Downer  r.  Miller,  15  Wis.  612  ;  Rob-  36  N.  W.  Rep.  597. 

inson  v.  Sampson,  23  Me.  388 ;  Trenton  ^  Scholefield  v.  Templer,  4  De  G.  &  J. 

Banking  Co.   v.    Woodruff,   2  N.  J.  Eq.  429;  Fassett   v.    Smith,    23   N.   Y.   252; 

117;  Hammond?;.  Barker,  61    N.  H.  53;  Viele   v.  Judson,    15  Hun  (N.  Y.),  328; 

Heyder  v.  Excelsior  Building  Loan  Asso.  Etzler  v.   Evans,   61    Ind.   56 ;   Lewis  v. 

(N.  J.)    8  Atl.  Rep.  310;     Eggeman   v.  Kirk,  28  Kans.  497 ;  Reeves  v.  Hayes,  95 

Harrow,  37  Mich.  436  ;  Harrison  v.  N.J.  Ind.  521,  538. 

R.  Co.  19  N.  J.  Eq.  488 ;  Keller  v.  Han-  g  viele  v.  Judson,  supra. 

nah,  52  Mich.  535;  Campbell  v.  Trotter,  '  Viele  r.  Judson,  82  N.  Y.  32,  revers- 

100  111.  281.  ing  S.  C.  15  Hun,  328. 

3  Ellis  V.  Lindley,  37  Iowa,  334 ;  Reed  8  Heyder  v.  Excelsior   Building   Loan 

866  Asso.  (N.  J.)  supra. 


DISCHARGE   BY   MISTAKE   OR   FRAUD.       [§§  968,  969. 

the  mortgage  and  parts  with  its  possession,  and  a  satisfaction  ia 
written  above  his  name,  he  must  bear  the  consequences  of  his 
negligence,  and  an  innocent  purchaser  will  be  protected. ^ 

An  assignee  of  a  mortgage  which  the  mortgagee  has,  after  an 
assignment  not  recorded,  wrongfully  discharged  of  record,  may  be 
subrogated  to  the  rights  of  one  who  has  taken  a  mortgage  upon 
the  property  in  good  faith  after  the  discharge  of  the  prior  mort- 
gage of  record.2  The  assignee  of  the  senior  mortgage,  having 
thus  disposed  of  the  subsequent  mortgage  which  had  gained  the 
place  of  priority,  may  be  in  a  position  to  assert  his  rights  as 
against  the  mortgagor  and  others  who  had  notices  of  his  rights 
under  his  assignment. 

A  judgment  creditor  of  the  mortgagor  would  not  by  virtue  of 
his  lien  stand  in  the  condition  of  a  purchaser  in  this  respect,  be- 
cause he  does  not  part  with  any  value  or  become  worse  off  by 
reason  of  the  discharge  of  the  mortgage.  But  a  purchaser  under 
execution  sale  would  have  the  right  to  stand  upon  the  record  title 
if  he  had  no  notice  of  the  equities  of  the  holder  of  the  notes ;  and 
it  would  seem  that  the  judgment  plaintiil'  himself,  purchasing  at 
the  judicial  sale,  would  have  this  right.^ 

968.  When  a  mortgage  has  been  obtained  by  fraud  from 
the  mortgagor,  and  the  mortgagee  has  assigned  it  as  colhiteral 
security  to  one  who  is  not  shown  to  have  participated  in  the  fraud, 
or  to  have  known  of  it,  although  the  court  cannot  cause  the  mort- 
gage to  be  discharged  as  against  such  holder,  it  may  order  the 
mortgagee  who  fraudulently  obtained  it  to  pay  the  sum  secured 
to  the  holder  of  the  assignment  of  it,  and  to  cause  the  mortgage 
to  be  discharged  within  a  given  time.* 

When  the  lien  cannot  be  restored,  either  wholly  or  in  i)art,  the 
mortgagor  is  entitled  to  recover  of  the  person  who  induced  the 
making  of  the  release  the  amount  of  the  security  released,  and 
not  merely  such  deficiency  as  may  result  on  the  mortgage?.  lOven 
when  a  part  of  the  mortgaged  premises  are  released  and  the  part 
lemaining  is  worth  more  than  the  mortgage  debt,  yet,  so  far  as 
the  value  of  the  security  is  lessened  by  the  defenihuit's  fraud  or 
bad  faith,  the  mortgagee  is  entitled  to  recover.'' 

969.  To  entitle  one  to  relief  on  the  ground  of  mistake,  it 

'   City  (.'oiiricil  f.  liyiiii,   Tl  K.    C.   '{.■J'J  ;  '    Vaiinicc  c.  IkTj;t!ii,  Hi  lowii,  riSTi.     Sen 

53  Am.  liep.  7 I.J.  §  460. 

■^  Clark    V.    .Mackiii,  'J.'*   N.   V.  .'HG;  .'JO         ♦  Mason  c.  Duly,  117  Mii.ss. -Kl.l. 
Ilun,  411.  £>  Sii'ljbiiM    V.  llowill,  4   Abi).   (N.  Y.) 

A])|).  Dec.  *i'J7. 

867 


§  969.]  PAYMENT    AND   DISCHARGE. 

must  be  a  mistake  of  fact  and  not  a  mistake  of  law.  Thus  where 
a  husband,  under  the  erroneous  supposition  that  as  executor  of 
his  deceased  wife  he  was  liable,  paid  a  mortgage  upon  her  estate, 
no  relief  could  be  afforded  him  in  equity .^  For  mistakes  of  law, 
neither  courts  of  law  nor  of  equity  give  relief.  When  there  is  no 
mistake  nor  misrepresentation  as  to  the  facts,  and  no  fraud,  there 
is  no  redress.^  Upon  this  ground  relief  was  refused  to  one  who 
purchased  land  subject  to  a  mortgage,  and,  supposing  that  he  had 
a  good  title,  upon  paying  off  the  mortgage  had  it  cancelled  on  the 
record.  Afterwards  discovering  that  his  title  was  not  good,  he 
sought  to  have  this  cancellation  set  aside  and  the  mortgage  de- 
clared in  force,  on  the  ground  that  had  he  then  known  of  the 
defect  in  his  title  he  would  have  taken  an  assignment  of  the  mort- 
gage to  protect  his  title  ;  but  this  was  not  regarded  as  a  mistake 
as  to  a  matter  of  fact.^  The  mistake  of  fact,  moreover,  must  be 
of  such  a  nature  that  it  could  not  by  reasonable  diligence  have 
been  avoided  at  the  time  ;  and  on  this  ground  the  court  refused 
to  set  aside  a  discharge,  voluntarily  made  by  the  holder  of  a  mort- 
gage under  an  apprehension  that  the  debt  had  been  satisfied, 
when,  as  he  alleged,  it  had  not  been  satisfied.* 

Relief  may  be  had  where  the  mortgagee,  supposing  erroneously 
that  the  mortgage  had  been  foreclosed,  and  that  the  mortgagor 
was  entitled  to  the  notes,  has  delivered  them  up  without  pay- 
ment.^ In  like  manner  where  a  mortgagee,  upon  the  mortgage 
becoming  due,  b}^  agreement  with  the  mortgagor  takes  the  mort- 
gaged property  in  satisfaction  of  it,  and  thereupon  executes  a 
release,  which  is  recorded,  the  release  will  be  cancelled,  so  as  to 
restore  the  mortgage  to  its  priority  over  other  existing  incum- 
brances or  conveyances  intervening  between  the  giving  of  this 
mortgage  and  the  satisfaction  of  it.^  The  ground  of  the  applica- 
tion may  be  the  fraudulent  concealment  of  the  existence  of  the 
subsequent  incumbrances  or  conveyances,  or  mistake. 

Relief  may  also  be  given  when  a  mortgagee  has  cancelled  the 
mortgage  and  given  up  the  note  or  bond,  on  receiving  a  check  or 
draft  or  other  security  for  the  amount  of  the  debt,  which  turns 
out  to   be   uncollectible ;   and  this  would  be  given   whether  the 

1  Peters  v.  Florence,  38  Pa.  St.  194.  *  Banta  v.  Vreelanil,  15  N.  J.  Eq.  103  ; 

-  Hampton  v.  Nicholson,  23  N.  J.  Eq.  Cobb  v.  Dyer,  69  Me.  494. 

423;   Railroad   Co.   v.  Soutter,   13  Wall.  5  Smith  u.  Smith,  15  N.  11.  55. 

517.  6  Nickerson  *;.  Meacham,  14  Fed.  Kep. 

3  Bentley  v.  Whittemore,  18  N.  J.  Eq.  881  ;  Lambert   v.  Leland,  2    Sweeny   (N. 

366.  Y.),  218;    Campbell  v.  Trotter,   100  111. 

868  281. 


DISCHARGE   BY   MISTAKE   OR    FRAUD.         [§§  970,  971. 

check  was  issued  with  a  fraudulent  intent,  or  whether  it  was 
taken  under  a  mistake  of  fact  on  both  sides  that  the  draft  was 
good,  when  it  proved  not  to  be  good  by  reason  of  the  faihire  of 
the  bank  upon  which  it  was  drawn. ^ 

One  who  paid  off  a  mortgage  on  land  wliich  he  supposed  be- 
longed to  his  wife,  who  was  a  widow  at  the  time  of  liis  marriage 
with  her,  when  in  fact  it  belonged  to  her  daughter,  was  allowed 
the  amount  paid  with  interest  as  an  equitable  lien  upon  the  land.^ 

If  a  mortgagor  pays  a  note  through  mistake,  supposing  the 
signature  to  be  genuine,  when  it  was  in  fact  forged  and  the  gen- 
uine note  had  been  transferred  to  another,  he  may  recover  the 
money  paid  in  an  action  for  money  had  and  received.'^ 

970.  Relief  may  be  had  in  equity  against  a  discharge  of  a 
mortgage  made  by  mistake  or  through  ignorance,  ^vhen  an 
assignment  -was  intended.'^  But  in  the  absence  of  any  such 
ground  for  relief,  a  mere  stranger  who  voluntarily  pays  off  a  mort- 
gage and  allows  the  mortgage  to  be  cancelled,  relying  upon  the 
validity  of  his  own  title  to  the  property,  cannot  afterwards  come 
into  equity  for  relief  and  ask  to  be  substituted  in  the  place  of  the 
mortgagee.^ 

The  allegation  of  mistake  is  supported  by  proof  that,  although 
the  mortgagee  intentionally  discharged  the  mortgage,  the  person 
who  was  to  pay  the  money  only  intended  to  purchase  the  mort- 
gage at  the  request  of  the  mortgagor,  and  accordingly,  on  the 
note  and  mortsajje  being  brought  to  him,  declined  to  take  them, 
but  took  an  assignment  instead.  Under  the  prayer  for  general 
relief  the  mortgage  was  established,  and  the  mortgagor  restrained 
from  setting  up  the  discharge.'^ 

971.  When  a  new  mortgage  is  substituted  in  ignorance  of 
an  intervening  lien,  the  mortgage  released  through  mistake  may 
be  restored  in  equity  and  given  its  original  priority  as  a  lien.' 
This  was  done  in  a  case  where  the  holder  of  a  first  mortgage,  in 

1  Grimes  v.  Kimball,  :{  Aih-n  (Mass.),  ton    i:    N'ii-liolson,    lii.    f-'') ;    Skillmaii   v. 

518;  Middlesex  v.  Thomas,  20  N.J.  Kq.  Teeple,  I  N. .).  Hq.  (Sax.) '.>.')'-';  tMiumplin 

.'39;    find   sec    Hunt   v.    Vox,   ."i    H.   Mon.  »-.  Laytiii,  18  Womi.  (N.  V.)  407  ;  ("obb  r. 

(Ky.)  :J27 ;  Ilolienlmck  i-.  Slioyer,  IG  Wis.  Dyer,  O'J  Mo.  4'J4. 

499.  ''  CJuy  I'.  I)ii  Ujircy,  H".  (  al.  1 '.•.■>. 

-  Haggcriy  v.  McCaiiiiu,  a.'i  N.  J.   K.i.  ''   Mrucr    r.   Uouiha  ,    I'J   tJray    (Miuss.), 

48.  107. 

•^  Welch  V.  Goodwin,  12.'5  .Musk.  71.  '    Miitcliinsoii  r.  Swurtswcliei-,  ."11    N.  J. 

*  UuBHcIl  V.  Mixer,  42  Ci\\.  475;  Dud-  K.|.    205;  Siiinp.soij    i-.    reiisi-,    M    Iowa, 

ley  V.  Bergen,  23  N.  J.  Ivj.  397,  and  ciujcm  572  ;  (.'old)  v.   Dyer,  mipni ;  Curvy  v.  Al- 

cited  ;  DuboiH  w.  Scliaff.'r,  Ih.  40l  ;  llumi)-  dcmiiii,  40  Mich.  510;    Young  v.  Shiiucr 

Sti'l 


§  971.] 


PAYMENT   AND   DISCHARGE. 


ignorance  of  the  existence  of  a  subsequent  one  on  the  premises, 
released  his  mortgage  and  took  a  new  one.  There  was  no  evi- 
dence of  mistake  except  such  as  might  be  inferred  from  tlie  mort- 
gagee's ignorance  of  the  existence  of  tlie  intermediate  mortgage, 
and  there  was  no  evidence  that  he  would  not  have  made  this 
arrangement  had  he  known  this  fact  ;  but  it  was  considered  that 
although  the  court  was  not  at  liberty  to  infer  facts  not  proved, 
yet  that  it  was  at  liberty  to  draw  all  the  inferences  which  logically 
and  naturally  follow  from  the  facts  proved  ;  that  it  is  not  an  act 
of  reasonable  prudence  and  caution  such  as  men  commonly  use 
in  the  conduct  of  business  affairs  for  one  having  a  first  mortgage 
upon  property,  without  consideration  or  other  apparent  motive,  to 
release  it,  and  take  a  new  mortgage  subject  to  a  prior  lien  of  a 
considerable  amount  ;  and  therefore  it  may  be  inferred  that  the 
mortgagee  would  not  have  made  the  release  had  he  known  of  the 
intervening  mortgage. ^  A  court  of  equity  will  grant  relief  on  the 
ground  of  mistake,  not  only  when  the  mistake  is  expressly  proved, 
but  also  when  it  is  implied  from  the  nature  of  the  transaction.^ 
Where  a  new  mortgage  is  taken  to  secure  the  payment  of  the 


(Iowa),  35  N.  W.  Rep.  629 ;  Robinson  v. 
Sampson,  23  Me.  388 ;  Barnes  v.  Mott,  64 
N.  Y.  397  ;  Geib  v.  Reynolds,  35  Miun. 
331. 

1  §  873;  Bnise  v.  Nelson,  35  Iowa,  157. 
In  this  case  the  original  mortgnge  secured 
the  payment  of  three  notes  of  $919.50 
each.  Shoitly  afterwards,  the  mortgagee 
wishing  to  transfer  two  of  the  notes  to  a 
creditor  of  his,  it  was  arranged  between 
the  parties  that  a  new  mortgage  should  be 
made  running  directly  to  this  creditor,  and 
that  he  should  loan  to  the  mortgagor  a 
small  additional  sum,  to  make  the  amount 
of  the  mortgage  $2,000.  This  arrange- 
ment was  carried  out,  and  the  old  mort- 
gage was  entered  of  record  as  satisfied, 
and  the  mortgage  and  mortgage  notes  de- 
livered up  to  the  mortgagor. 

It  was  urged  in  this  case  that  the  sec- 
ond mortgage  was  of  record,  and  that  the 
prior  mortgagee,  having  constructive  no- 
tice of  it  when  he  took  the  new  mortgage, 
was  not  entitled  to  relief.  "  This  posi- 
tion," says  Mr.  Justice  Day,  "  proves  too 
much.  In  order  that  a  debt  may  attach 
as  a  lien  ])rior  to  a  mortgage,  it  must  al- 

870 


ways,  in  some  way,  appear  of  record,  so 
that,  in  every  case  in  which  the  claim  is 
in  a  condition  to  be  asserted  in  prefer- 
ence to  the  mortgnge,  the  mortgagee  has 
the  means  of  ascertaining  its  existence. 
The  argument,  then,  would  amount  to 
this  :  that  a  mortgage  released  in  mistake 
could  never  be  restored  against  a  prior 
claim,  which  was  in  a  condition  to  be- 
come a  lien.  In  other  words,  that  the 
lien  of  the  mortgage  could  never  be  re- 
stored, except  when  the  restoration  is  un- 
necessary and  unimportant."  See,  also, 
Cansler  v.  Sallis,  54  Miss.  446  See,  how- 
ever, §  927. 

Beck,  C.  J.,  dissented,  on  the  ground 
that  the  fact  of  the  mistake  was  a  matter 
of  inference  alone ;  and  that  relief  could 
be  had. only  against  a  mistake  clearly 
made  out  by  satisfactory  proof ;  and  that 
the  mistake  must  be  of  some  matter  lead- 
ing to  and  influencing  the  execution  of  the 
release. 

2  Gtib  V.  Reynolds,  supra ;  affirnud, 
Liggett  V.  Himle  (Minn.),  38  N.  W.  Rep. 
201 ;  Stimpson  v.  Pease,  53  Iowa,  572  ; 
Bruce  v.  Bonne^',  12  Gray  (Mass.),  107; 
71  Am.  Dec.  739 


DISCHARGE   BY   MISTAKE   OR   FRAUD.  [§  971  a. 

same  debt,  and  the  fact  is  so  stated  in  the  mortgage,  and  the  old 
mortgage  is  released  and  the  new  one  recorded  on  the  same  day, 
the  new  mortgage  will  have  priority  of  any  intervening  incum- 
brance.^ 

If  money  is  borrowed  on  a  mortgage  for  the  purpose  of  paying 
off  a  former  mortgage  of  the  same  lands,  the  fact  that  an  inter- 
vening judgment  lien  was  overlooked  in  examining  the  title  will 
not  enable  the  mortgagee  to  set  up  in  equity  the  foruier  mortgage 
after  it  has  been  duly  discharged.^ 

Delay  on  the  part  of  a  mortgagee  in  seeking  relief,  or  an  at- 
tempt to  enforce  the  new  security,  with  knowledge  of  all  the  facts, 
will  preclude  him  from  obtaining  a  cancellation  of  a  discharge  of 
his  first  mortgage.^ 

971  a.  A  prior  mortgagee  who  has  in  good  faith  received 
payment  cannot  be  compelled  to  repay  the  money  on  the 
ground  that  it  was  fraudulently  obtained  from  some  other  person. 
Thus  where  one  loaned  on  a  forged  mortgage,  and  subsequently 
the  borrower  obtained  a  larger  loan  of  another  person  on  the  same 
property  upon  another  forged  mortgage,  from  the  proceeds  of 
which  the  prior  mortgage  was  paid  so  that  the  last  mortgagee 
should  have  a  first  mortgage,  neither  mortgagee  knowing  at  the 
time  that  the  mortgages  were  forged,  it  was  held  that  the  last 
mortgagee  could  not  recover  of  the  former  mortgagee  the  amount 
paid  to  take  up  the  latter's  mortgage.* 

1  Shaver  v.  Williams,  87  111.  469 ;  S.  C.  to  do  this  by  any  false  representations  or 

18  Am.  L.  Rej,'.  (N.  S.)  132.  inducements  ;  what  was  done  appears  to 

^  Bantar.  Garmo,  1  Sandf.  (N.  Y.)  Ch.  have  been  done  for  his  supposed  benefit 

383;   Anglade  v.   St.  Avit,  67   Mo.  434.  and  at  his  request.     Whetlier,  upon  the 

For  a  case -somewhat  different  where  prior  facts,  a  court  of  eiiuity  would  allow  him 

liens  were  held  not  to  lose  their  priority  to  have   the  di>charf,'o  set  .iside  and  the 

to  a  judgment,  in  consequence  of  a  re-  first  mortgage  reinstated,  if  he  iiad  applied 

lease,  see  Van  Duync  v.  Shann,  41  N.  J.  immediately  on  ascertaining  the  existence 

En.  311.  of  the  intervening  mortgage,  wo  need  not 

«  Seymour  v.  Mackay   (111.),  18  N.  E.  inquire.    Ho  did  not  do  ho.    Knowing  that 

Hep.  502 ;  Childs  v.  Stoddard,  130  Ma.ss.  there  was  a  mortgage  held  by  the  defeud- 

1 10.  ant  he  had  two  courses  open  to  him  :  Ibl. 

"The  only  mistake  at  any  time  made  To  apply  to  have  the  record  VHC.ite.l,  and 

by  the  mortgagee  was  in  surrendering  his  his  lir>t  mortgage  restored;  '-'d.  To  roly 

note  and  in  allowing  his  first  mortgage  to  upon  the  second  morignge  he  had  rci-eivod 

be  discharged,  and  taking  a  new  note  and  from  the  mortgagor.      lie  chose  the  latter 

mortgiige  under  the  HUpj.oHition  tliat  the  course,  ami  ilid  il  knowing  all  the  facts." 

title   had  remained   unchanged,  having  in  I'er  I'.udicoit,  .1. 

fact    no    knowledge    of    the    intervening         *   Walker  v.  ('omiiit  (Mich),  ;J7   N.  W. 

mortgage,   although    ho   IiikI  coiihtructive  liep.  1"J1!. 
notice  from  the  record.     He  wjis  not  led 

871 


§  972.]  PAYMENT    AND   DISCHARGE. 

X.  Form  and  Construction  of  Discharge. 

972.  Mode  of  effecting  a  discharge.^  —  Wherever  a  mort- 
gage retains  its  common  law  character  of  a  conveyance  of  the 
legal  estate,  a  discharge  should  be  effected  either  by  a  deed  of  re- 
conveyance, or  by  an  entry  upon  the  records  in  the  manner  pro- 
vided by  statute.  A  receipt  of  the  mortgagee,  though  executed 
under  seal,  while  it  is  evidence  of  payment  and  of  a  discharge  of 
the  mortgage  by  reason  of  the  payment,  does  not  after  breach  of 
the  condition  revest  the  title  in  the  mortgagor.^  It  is  not  even 
conclusive  of  payment,  but  is  open  to  explanation.^  A  payment 
actually  received  may  be  regarded  as  an  equitable  release  of  the 
mortgage.*  A  mere  verbal  agreement  by  a  mortgagee  to  execute 
a  release,  though  made  for  a  valuable  consideration,  cannot  be 
enforced,  as  it  is  void  under  the  statute  of  frauds.^ 

No  precise  formality  in  making  a  release  of  the  lien  of  a  mort- 
gage is  necessar3^  It  may  be  effected  by  a  reconveyance,  al- 
though the  only  mode  provided  by  statute  is  for  an  entry  of  satis- 
faction upon  the  margin  of  the  record.  But  this  method  is  not 
exclusive.  Release  may  be  made  of  the  whole  or  of  a  part  of  the 
mortgaged  premises  by  a  quitclaim  deed  from  the  mortgagee  to 
the  mortgagor,*^  or  to  his  grantee  or  mortgagee.'' 

Ordinarily  a  deed  of  release  or  quitclaim  by  the  mortgagee  to 
the  mortgagor,  or  to  the  owner  of  the  equity  of  redemption,  will 
discharge  the  mortgage,  although  the  mortgagee  has  also  acquired 

1  In  New  England  a  common  form  of  a  mortgage,   I   do   hereby   cancel   and  dig- 
deed  of  release  to  discharge  a  mortgage  is  charge  the  same,  and  release  and  quitclaim 
as  follows  :  "  Know  all  men  that  I            ,  to  the  within  named  mortgagor  and  his 
of            ,  the  mortgagee  named  in  (or  the  heirs  all  right  in  and   to  the  within   de- 
assignee  of)  a  certain  mortgage  dated         ,  scribed  real  estate.     Witness,"  etc. 
and  recorded         ,  do  hereby  acknowledge  ^  gge  Allard  v.  Lane,  18  Me.  9. 
that  I  have  received  from         ,  the  mort-  ^  Perkins  v.  Pitts,  11  Mass.  125;  Por- 
gagor  named  in  said  mortgage,  full  pay-  ter  v.  Hill,  9  lb.  34 ;  Parsons  v.  Welles, 
ment  and  satisfaction  of  the  same  ;  and  in  17  lb.  419  ;  Pearce  v.  Savage,  45  Me.  90. 
con.sideration  thereof  I  do  hereby  cancel  *  §   917;    Marriott    v.    Handy,    8    Gill 
and  discharge  said  mortgage,  and  release  (Md.),  31;   Agnew   v.  Renwick    (S.   C), 
and  quitclaim  unto  the  said         ,  and  his  4  S.  E.  Rep.  223. 

heirs   and  assigns   forever,    the   premises  ^  Leavitt  r.  Pratt,  53  Me.  147 ;  Phillips 

therein  described.     Witness  my  hand  and  v.  Leavitt,  54  Me.  405;  Parker  r.  Barker, 

seal  this        day  of         ,  187  ."  2  Met.  (Mass.)  423  ;  Maynard  v.  Hunt,  5 

If  the  discharge  is  indorsed  upon  the  Pick.  (Mass.)  240 ;  S.   C.  6  lb.  489.     See, 

original  'mortgage,  the  following  is  suffi-  however,  Malins  v.  Brown,  4  N.  Y.  403. 

cient :  —  «  Waters  v.  Waters,  20  Iowa,  363. 

"Know  all  men,  that  having  received  "^  Allen  v.  Leominster  Sav.  Bank,  134 

full  payment  of  the  debt  secured  by  this  Mass.  580. 

872 


FORM   AND   CONSTRUCTION   OF   DISCHARGE.  [§  973. 

some  other  claim  or  title  to  the  premises,  as,  for  instance,  the 
equity  of  redemption,  upon  which  the  deed  might  operate.  The 
deed  would  pass  his  entire  title.^  But  the  instrument  will  be  con- 
strued according  to  the  intention  as  manifested  by  the  whole  instru- 
ment ;  and  therefore  where  a  mortgagee,  holding  an  independent 
title  by  a  subsequent  mortgage,  indorsed  upon  his  prior  mortgage 
a  discharge,  whereby  he  "  released  and  forever  quitclaimed  "  all  his 
"  right,  title,  and  interest  in  and  to  the  within  described  premises," 
it  was  held  that  his  release  passed  only  his  interest  in  that  mort- 
gage and  not  his  entire  interest.  The  natural  import  of  the  words 
used  was  satisfied  by  confining  the  effect  of  the  release  to  the 
mortgage  upon  which  it  was  written.^  But  a  mere  attachment 
which  has  not  ripened  into  a  title  would  not  be  discharged  by  a 
mortgagee's  release  of  all  his  "right,  title,  claim,  and  demand 
whatever  "  in  the  mortgaged  premises.^  The  mortgagee's  release 
to  a  subsequent  mortgagee  without  any  transfer  of  the  debt  oper- 
ates as  a  discharge  of  the  prior  mortgage.*  If  a  mortgagee  at  the 
request  of  the  owner  of  the  equity  of  redemption,  who  is  about  to 
sell  the  premises,  executes  to  the  purchaser  a  bond,  conditioned  that 
the  vendor  should  save  the  grantee  harmless  from  all  cost  and  dam- 
age in  consequence  of  any  previous  incumbrance  upon  the  premises, 
the  effect  of  the  bond  is  to  release  the  land  from  his  mortgage."^ 

973.  When  a  mortgagee  has  received  payment  of  a  mort- 
gage debt  after  maturity  without  releasing  the  mortgaged 
premises,  wherever  the  common  law  view  that  he  holds  the  legal 
estate  prevails  he  becomes  a  trustee  of  the  mortgagor,  and  so  lioids 
the  title  until  he  releases  it.*'  He  has  of  course  no  equitable  inter- 
est;  but  he  is  liable  to  the  penalties  imposed  by  statute  for  not 
discharging  tlie  mortgage  after  it  is  in  fact  paid  ;  aiul  he  is  more- 
over liable  to  an  equitable  suit  to  compel  a  discharge  or  reconvey- 
ance.'^ He  holds  the  legal  seisin  in  trust  for  the  mortgagor,  and 
the  court  will  not  permit  him  or  those  claiming  under  him  to  set 
up  this  legal  estate  to  defeat  the  possession  of  the  ceatui  qxic  trust. 
The  equitable  estate  of  the  mortgagor,  which   in  courts  of  tMjuity 

'   Woodbury  v.  Aikiii,  l.'l  III.  C'J'J.  "  IVDctor  r.  'riinill,  22  Vl.  26i'. 

-  liurnHtiildo  Saviii;^.s  Hank  v.  Hurrctt,  •>  Arinstronj;  i-.   IVirm-,  ;J   Burr.    18'JH; 

122  Mass.  172;  Donlin  v.  Uraillcv   (111.),  ItotiiiiMoii  *>.  CrosH,  22  Conn.  171;  Dour. 

10  N.  K.  Rep.  11.     Sec  §  824.  Dimon,  10  .N.  J.  L.  (.'>  HaUt)  150;  Walfo 

«  Lacey  «.  Tomliiisoa,  .O  Day  (Conn.),  v.   Dowcll.    21    Mhn.  (13  S.  &  M.)  10.1; 

77.  Smith   v.  Dm-,  2«;    Miwt.   291;  McNnlr  »• 

*   Hill  I'.   West.  8  Ohio,  222;    Allen  i:  I'icotH-,  .'KJ  Mo.  57. 

Leouiinbtor  Sav.  Hank,  i:j  J  Ma-.^.  .'»80.  '  McNair  f.  ricotU>,  mpra. 

87  J{ 


§  974.]  PAYMENT   AND   DISCHARGE. 

is  always  recognized  and  is  protected  in  a  great  many  ways,  in 
courts  of  law  obtains  recognition  by  the  fiction  of  regarding  the 
mortgagee,  after  his  debt  is  satisfied,  as  a  trustee  of  the  legal  es- 
tate for  the  mortgagor.  After  the  debt  is  paid,  the  legal  seisin  of 
the  mortgagee  is  but  a  mere  formal  title.  No  trust  will  be  raised 
for  the  benefit  of  the  mortgagor  until  the  purpose  for  which  the 
mortgage  was  made  is  answered.^ 

974.  Where  a  mortgage  is  regarded  as  merely  a  lien  upon 
the  land  and  not  a  conveyance  of  the  legal  estate,  a  discharge 
may  be  made  without  a  deed  ;  a  writing  not  under  seal  is  suffi- 
cient ;2  and  payment  without  any  writing  in  fact  discharges  the 
mortgage.^  Even  an  agreement  to  discharge  made  for  a  sufficient 
consideration,  when  the  debtor  has  fulfilled  his  part  of  the  agree- 
ment, may  operate  as  a  discharge,  upon  the  ground  that  equity 
treats  as  done  that  which  a  party  has  agreed  to  do ;  therefore 
where  the  mortgagee  agreed  verbally  to  cancel  and  discharge  his 
mortgage  in  consideration  that  the  mortgagor  would  discharge  a 
debt  due  him  from  a  third  person,  and  the  mortgagor  discharged 
his  claim,  it  was  held  that  the  mortgage  was  thereby  discharged.^ 
Upon  the  same  principle  it  is  held  that  a  mortgage  given  in  part 
payment  of  the  price  of  other  land,  which  by  agreement  is  to  be 
conveyed  to  the  mortgagor  upon  the  cancelling  of  that  agreement 
by  mutual  consent,  is  itself  annulled  and  discharged  unless  it  be 
expressly  saved  and  continued.^ 

Anything  which  amounts  to  payment  or  satisfaction  of  the  debt 
discharges  the  mortgage  lien.^  If  a  judgment  for  the  debt  be 
satisfied  out  of  other  property  of  the  debtor,  the  mortgage  is  dis- 
charged ;  and  if  one  afterwards  purchases  the  property  in  good 
faith,  relying  upon  the  records  as  showing  that  the  execution  had 
been  returned  as  satisfied,  no  inquiry  can  be  made  as  against  him 
as  to  the  regularity  of  the  proceedings  in  which  the  judgment 
was  obtained.'  When  the  purposes  of  a  trust  deed  are  accom- 
plished, the  owner  of  the  land,  without  any  action  on  his  part,  is 
vested  with  the  legal  title,  and  can  maintain  ejectment  upon  it.^ 

1  Harrison  i:  Eldridge,  7  N.  J.  L.   (2         s  §  ggg. 

Halst.)    392,    407,    per    Ch.    J.    Kinsey;  *  Griswold    v.   Griswold,   7   Lans.    (N. 

Shields  v.  Lozear,  34   N.  J.  L.  496,  per  Y.)    72;   and   see  Swain   v.    Seamens,   9 

Depue,  J.  Wall.  254. 

2  Headley   v.    Goundry,   41    Barb.    (N.  &  Evelaud  v.  Wheeler,  37  N.  Y.  244. 
y.)  279  ;  Ackla  v.  Ackla,  6  Pa.  St.  228  ;  «  Stribling  v.  Splint  Coal  Co.  ( W.  Va.) 
Wentz  V.  Dehaven,  1    S.  &  R.  (Pa.)  312  ;  5  S.  E.  Rep.  321. 

Wallis  V.  Long,  16  Ala.  738;  and  see  "  Driggs  ?;.  Simson,  3  Thomp.  &  C.  (N. 
Thornton  v.  Irwin,  43  Mo.  153.  Y.)  786. 

874  »  McNabb  v.  Young,  81  111.  11. 


FORM    AND   CONSTRUCTION    OF   DISCHARGE.       [§§  974  a-977. 

974  a.  A  bequest  of  a  mortgage  or  of  the  mortgage  debt  to 
the  mortgagoi"  discharges  the  mortgage  at  once  by  force  of  the 
will.^  In  like  manner  a  gift  b}^  the  mortgagee  of  part  of  the 
mortgage  debt  to  be  applied  thereon  operates  at  once  to  extin- 
guish the  mortgage  p7'o  tanto? 

975.  In  case  of  a  mortgage  of  indemnity,  when  indemnity 
has  in  fact  been  obtained,  although  not  by  a  compliance  with  the 
terms  of  the  contract  between  the  parties,  or  in  the  way  contem- 
plated by  them,  the  object  of  the  mortgage  being  substantially 
and  fully  accomplished,  the  mortgage  is  extinguished.^ 

976.  Whether  a  general  release  from  all  claims  and  de- 
mands whatever^  made  by  the  holder  of  a  mortgage  to  the  mort- 
gagor, releases  the  mortgage  debt  or  not,  depeftds  upon  the  in- 
tention of  the  parties.  That  the  mortgage  debt  was  not  due  at 
the  time,  and  that  the  mortgage  was  not  delivei-ed  up  or  cancelled, 
are  reasons  for  supposing  that  the  intention  was  not  to  release  the 
mortgage  debt.*  A  mortgage  is  discharged  by  the  creditor's  join- 
ing with  others  in  a  release  under  seal,  whereby,  for  value  re- 
ceived and  in  consideration  of  one  dollar,  he  releases  the  debtor 
from  indebtedness,  "  whether  on  book  account,  note  of  hand,  or 
any  other  way."  ^ 

It  is  competent  for  a  mortgagee  who  has  signed  a  general  re- 
lease or  a  composition  paper  in  behalf  of  the  mortgagor  to  show 
by  parol  evidence  that,  at  the  time  of  such  release,  he  was  not  the 
owner  of  the  mortgage,  having  previously  sold  it ;  or  he  may,  in 
the  same  way,  show  that  the  validity  of  the  release  was  dependent 
upon  a  consideration  which  has  not  been  fulfilled.^ 

977.  Surrender  of  defeasance.  —  When  a  mortgage  has  been 
made  by  giving  an  absolute  deed  and  taking  back  a  defeasance,  if 
this  has  not  been  recorded  the  parties  may  afterwards,  with  the 
intent  to  vest  the  estate  unconditionally  in  the  grantee  by  force 
of  the  deed,  surrender  and  cancel  the  defeasance,  and  the  estate 
will  thereujH)n  become  absnhit(j  in  the  mortgagee,  without  any 
furtlier  act,  if  tht^  transaction  be  fairly  <'oiiducted  and  no  rights 
of    third   parties    have   intervened."      Hut    the   a.ssignnu'nt   of    the 

'  Weeks  I'.  OMtriiiidiT,  iJO  J.  &  S.  N.  Y.  •  \';iii    H.tkkoleii    r.  Taylor,  r.2  N.  Y. 

.^12;  IG  Abb.  N.  C.  N.'}.  Ki:.,  r.v.T>iii-  N.  C.  '1  Hun,  i:»H. 

'•i  Carpenter  t'.  Soul.',  89  N.  Y.  tiM.  '•   Vmi   IJokk.len   v.  Tiiylor,  4   Thomp. 

3  Arcbaiiibiiii   r.  Orion, 'J  I    Minn,  .'i'20  ;  SlV,.\T2. 

Serjeant  I'.  Uul.b!.  .3.«  Minn.  .'{.'■>».  '  IlnrriKcn    r.    lMiilli|iii    Aiiitb-niv,    I-' 

<  Mclntyrc  r.  \Villiuni>oii,  1    Ivlw.   (N.  M,ish.  4.'>C  ;  Itii<!  v.  Hinl,  4  I'irk.  (.Muhh.) 

Y  )  ;{4  .•i:,(i    I...I.      (Jrccn  t'.  Unllur,  'id  Cal.  .')'.•:> ; 

876 


§§  978,  979.]  PAYMENT   AND   DISCHARGE. 

bond  of  defeasance  to  an  assignee  of  the  mortgage  has  been  held 
not  to  operate  as  an  extinguishment  of  the  equity  of  redemption  ; 
but  the  decision  is  questioned,  and  it  is  difficult  to  see  why  such 
assignment  should  not  have  effect  equally  with  a  mere  surrender. ^ 
When  the  debtor  has  paid  a  mortgage  made  in  tlie  form  of  an 
absolute  conveyance,  and  the  defeasance  has  not  been  recorded 
or  rests  in  parol,  the  only  relief  is  in  a  reconveyance,  which  the 
grantee  may  in  equity  be  compelled  to  execute.^ 

If  such  transactions  occur  between  the  parties  as  would  render 
it  inequitable  that  the  grantor  should  redeem,  that  itself  in  such 
case  operates  as  a  cancellation  of  the  defeasance,  and  gives  the 
deed  the  effect  of  an  original  absolute  conveyance."^ 

978.  The  mortgage  lien  may  of  course  be  cut  off  by  proper 
proceedings  had  for  that  purpose  under  a  prior  incumbrance. 
If  the  mortgagor,  however,  acquires  such  prior  title,  he  would  gen- 
erally be  estopped,  under  the  covenants  of  his  mortgage,  to  set 
it  up.  But  if  a  purchaser  from  the  mortgagor  who  has  simply 
bought  the  estate  subject  to  the  mortgage,  without  assuming  to 
pay  it,  acquires  such  prior  title,  an  intervening  mortgage  is  cut 
off,  as  much  as  it  would  be  if  the  purchase  had  been  made  by 
some  one  having  no  interest  in  the  estate.'*  Even  if  the  pui'- 
chaser  at  the  foreclosure  sale  pays  no  money,  but  takes  a  deed 
and  treats  the  subsequent  mortgage  as  a  lien  and  continues  to 
pay  interest  on  it,  his  recognition  of  it  binds  only  himself  and 
those  who  have  notice.  If  he  afterwards  conveys  the  premises 
by  warranty  deed  for  a  valuable  consideration,  a  purchaser  with- 
out notice  takes  the  entire  title  free  from  the  lien  of  the  subse- 
quent mortgage.^ 

979.  A  verbal  agreement  to  release  a  mortgage,  to  be  sus- 
tained, should  be  established  beyond  a  reasonable  doubt.  An 
owner  of  land  being  desirous  of  selling  it  went  with  the  purchaser 
to  the  mortgagee,  who  verbally  agreed  to  surrender  the  mortgage 
for  other  security,  and  told  the  purchaser  to  go  on  and  complete 
the  purchase,  as  he  had  made  an  arrangement  with  the  mortgagor 
in  relation  to  the    mortgage  debt.      The    purchase   having  been 

Seymour  v.  Mackay  (111.),  18  N.  E.  Rep.         3  West  v.  Reed,  55  111.  242;  Carpenter 

V.  Carpenter,  70  111.  457. 


.152 


1  Porter  v.  Millet,    9  Mass.    101.     See  *  McCammon  y.  Worrall,  11  Paige  (N. 

§§  252-255.  Y.),  99 ;  and  see  Bullard  v.  Leach,  27  Vt. 

-Kenton    v.    Vandergrift,   42    Pa.    St.  491.     See  §  748. 

.'339 ;  Sherwood  i'.  Wilson,  2  Sweeny  (N.  ^  Wood  v.  McClughan,  4  Thomp.  &  C. 

Y.),  684.  (N.  Y.)  420. 
876 


FORM   AND    CONSTRUCTION    OF   DISCHARGE.       [§§  080,  981. 

made,  the  mortgagee  failed  to  surrender  the  mortgage,  whereupon 
the  purchaser  sought  to  compel  him  to  cancel  it.  The  evidence 
being  contradictory,  and  not  showing  that  other  security  had  been 
given  or  offered,  relief  was  refused. ^ 

Though  such  an  agreement,  if  made  for  a  consideration,  may 
bind  the  parties  to  it,  it  does  not  bind  a  person  not  a  party  to  it ; 
and  such  a  person  cannot  enforce  it  unless  he  was  induced  by  it 
to  purchase  the  property,  to  loan  money  upon  it,  or  to  do  some 
act  prejudicial  to  his  interest.- 

But  the  mortgagee  is  bound  by  a  definite  written  agreement 
with  the  purchaser  to  release  the  portion  of  the  premises  about 
to  be  conveyed  to  the  purchaser,  upon  the  payment  of  a  certain 
sum  ;  and  if  this  be  duly  recorded,  a  subsequent  sale  of  this  por- 
tion, under  a  power  of  sale,  after  payment  or  tender  of  the  amount 
agreed  upon,  is  void." 

980.  A  release  of  a  mortgage  may  be  limited  in  its  oper- 
ation to  a  particular  person,  or  to  a  particular  denumd,  so  as 
merely  to  give  priority  to  that  particular  person  or  demand  over 
the  mortgage,  and  leave  it  unaffected  as  to  others.'*  Tiius  where 
a  mortgagee,  in  pursuance  of  a  stipulation  made  in  the  mortgage 
to  that  effect,  gave  a  release  in  favor  of  the  United  States  to 
enable  the  mortgagor  to  commence  the  distillery  business,  which 
stipulated  "  that  the  lien  of  the  United  States  for  taxes  and  pen- 
alties should  have  priority  of  said  above  mentioned  mortgage, 
and  in  case  of  the  forfeiture  of  the  distillery  premises,  or  any 
part  thereof,  the  title  shall  vest  in  the  United  States,  discharged 
from  said  mortgage,  and  for  that  purpose  the  said  party  of  the 
first  part  does  hereby  remise  and  release  "'  the  mortgaged  prem- 
ises, it  was  held,  as  against  a  party  claiming  title  under  a  junior 
incumbrance,  that  tiie  instrument  did  not  oj)in-ate  as  a  gcnerai 
release  of  tlie  premises  from  the  prior  mortgage,  but  that  its  only 
effedt  was  to  give  the  government  a  priority  of  lien. ' 

A  quitclaim  deed  obtained  by  tlie  mortgagor  frctm   the  mort- 
gagee for  the  piirpoHc.  (if  redeeming  tlu^  property  from  a  fori'cloa- 
ure  sale,  made  for  an  instaluK'nt  of  interest,  will  not  be  eonstnird 
as  discharging  tJK!  entire  mortgage,  when  such  was  not   the  inten 
tion  ot  th<;  parties  at  tlu;  time.'' 

981.  The  release  of  a  portion  of  the  mortgaged  premises, 

'  StCveriHon  v.  A<Ihiiis,  riO  Mu.  47.'>.  *  Wooil  i     Woud,  (il  lowii,  a.'iC. 

'^  Sritll    r.    riilmtr,    \'J    111.    Ai)[i.    .'J37.  '  FI<iwit  r.  Klwooil,  CC  ill.  438. 

Sec  rortcr  r.  MuIIlt,  :(  W.  Count  l{ep.  CI'J.  "  Mnhio  r.  IIaliiiK»T,  -IH  MU-h,  341. 
'  Cowen  V.  Loomi.s,  91  111.  I,'l2.  877 


§  981.]  PAYMENT    AND   DISCHARGE. 

upon  the  payment  of  proper  consideration,  does  not  discharge 
or  affect  the  mortgage  lien  upon  other  portions  of  the  land,  al- 
though they  have  previously  been  sold  ;  ^  and  the  mortgagee  hav- 
ing no  notice  of  the  prior  conveyance  of  other  portions  of  the 
premises  may  release  to  a  subsequent  purchaser,  and  the  lien  of 
the  mortgage  upon  the  land  of  the  prior  purchaser  will  not  be 
affected,  although  he  received  no  payment  in  reduction  of  the 
mortgage  debt  for  the  release.^  But  where  land  incumbered  by 
mortgage  has  been  sold  to  successive  purchasers  without  reference 
to  the  mortgage,  so  that  the  parcels  sold  are  liable  to  the  mort- 
gage debt  in  the  inverse  order  of  the  sales,  the  release  of  the 
mortgage  upon  the  second  parcel  sold  will  operate  as  a  release 
upon  tlie  first  parcel  sold.^  If  the  release  be  made  to  a  third  per- 
son, the  mortgagor  can  claim  no  benefit  from  it,  even  as  a  dis- 
charge of  that  part  of  the  land.  The  release  in  such  case  merely 
transfers  the  interest  of  the  mortgagee  in  that  portion  of  the 
mortgaged  premises  to  his  grantee.^ 

As  between  the  parties  to  the  mortgage,  and  without  reference 
to  intervening  rights,  the  mortgagee  may  release  any  portion  of 
the  mortgaged  property  without  impairing  his  lien  upon  the  re- 
mainder.^ There  is  no  obligation  on  his  part  to  first  exhaust  his 
remedy  on  the  other  realty  before  enforcing  his  claim  upon  a  por- 
tion of  the  mortgaged  premises  which  is  the  debtor's  homestead. 
He  may,  after  the  debtor  has  parted  with  all  the  balance  of  the 
mortgaged  estate  except  the  homestead,  release  such  other  realty 
and  still  maintain  his  lien  on  the  homestead.  Where  a  debtor 
after  mortgaging  his  homestead  and  other  land  was  thrown  into 
bankruptcy,  and  the  homestead  was  assigned  and  set  over  to  the 
debtor,  and  the  assignees,  on  their  application,  were  ordered  to 
sell  the  other  realty,  and  they  sold  one  piece  of  it  to  the  mort- 
gagee in  part  payment  of  the  mortgage,  and  he  released  other 
parcels  except  the  homestead  to  the  assignees,  it  was  held  that 
these  transactions  did  not  satisfy  and  cancel  the  whole  mortgage, 
but  that  the  mortgagee  might  enforce  it  for  the  balance  of  the 
claim  against  the  homestead.^ 

1  Evc-tson  V.  Ogden,  8  Paige  (N.  Y.),  *  Wyman  v.  Hooper,  2  Gray  (Mass.), 
275.     See  §§  722-729.  141 ;  Grover  v.  Thatcher,  4  lb.  526. 

2  Patty  V.  Pease,  8  Paige  (N.  Y.),  277  ;  ^  Coutant  v.  Servoss,  3  Barb.  (N.  Y.) 
McAfee  v.  McAfee  (S.  C.),  5  S.  E.  Rep.  128. 

59.3.  «  Chapman  v.  Lester,  12  Kans.  592. 

3  Stewart  v.  McMahan,  94  Ind.  389.  In  Iowa  it  is  provided  by  statute  that 

378  the  homestead  shall  be  sold  only  to  supply 


FORM   AND    CONSTRUCTION    OF    DISCHARGE.  [§  982. 

A  power  reserved  to  a  mortgagor  to  convey  portions  of  the 
mortgaged  property  upon  terms  and  conditions  stated  in  the  mort- 
gage may  be  effectually  executed,  so  that  such  portions  of  the 
property  may  be  conveyed  by  the  mortgagor  free  from  the  lien  of 
the  mortgage,  without  any  release  or  other  act  on  the  part  of  the 
mortgagee.  It  is  only  necessary  that  the  mortgagor  shall  act 
strictly  within  the  terms  of  the  power  reserved  to  him.^ 

Under  a  mortgage  wherein  the  mortgagee  agrees  with  the  mort- 
gagor, his  representatives  and  assigns,  that  he  will  release  from 
time  to  time  any  portion  of  the  land  upon  being  paid  a  specified 
sum  per  foot,  the  sums  paid  to  be  indorsed  on  the  mortgage  note, 
the  purchaser  of  a  part  of  the  mortgaged  laud  is  entitled  to  a 
release  on  paying  the  specified  sum  Avithout  interest.^ 

If  the  agreement  for  a  partial  release  is  that  it  will  be  made 
upon  payment  of  a  sum  named  at  any  time  before  maturity, 
the  mortgagor  cannot  claim  the  benefit  of  the  stipulation  after 
maturity,  and  the  commencement  of  a  suit  to  foreclose  the 
mortgage.^ 

Even  if  the  privilege  is  not  expressly  limited  to  the  maturity 
of  the  mortgage,  it  seems  that  a  partial  release  cannot  afterwards 
be  demanded."* 

982.  The  effect  of  a  mortgagee's  making  a  partial  release 
when  he  has  actual  notice  of  a  subsequent  incumbrance  upon 
another  part  is  elsewhere  considered;^  but  it  should  be  stated 
in  this  connection,  that  a  release  so  made  discharges  y^ro  tanto  hi 
own  claim  upon  the  property  as  against  the  mortgagor,  and  as 
against  any  third  person  interested  in  any  part  of  the  remainder 
of  the  property.''  But  it  is  universally  held  that  the  mere  record- 
ing of  a  subsequent  conveyance  or  incumbrance  is  not  notice  to 
the  prior  mortgagee  ;  he  is  afTected  only  by  actual  notice"     Such 

the  deficiency  remaining  after  exiiaiisting  i'.  Lannin;;,  G8  Ind.  142;  Singer's  .Aiip.  1)6 

the  other  property  of  the  debtor  liaiile  to  Pa.  St.  47'J. 

execution,  in  case  of    a   debt   contracted  -  Clark   i'.  FontJiin  (Mass.),   10   N.   K. 

prior  to  the  purchase  of  the  iioinestead,  Kep.  831. 

or  to  supply  the  deficiency  remaining  after  "  Woodlturn  v.  Gannon,  30  N.tl.  Va\.  69 

exhausting  the  other  property  pledged  for  *  lieed  v.  .I<ines,  133  Mass.  116. 

the  payment  of  the  debt  in  the  same  writ-  ''  §§  722-729. 

ten  contract,  in  ca-^c  of  a  debt  for  the  pay-  '  .Meachain  r.  Steele,  'J3  III.  \:\j  ;  Mnr 

ment  of  which  the  homestead  is  expressly  tin's  App.  It?  I'a.  St.  H.^. 

made  liable.      Code   1873,  §§   I'J92,  1993;  '  See  §§  862,723;  also,  Hiriiif  v.  Main, 

and    nee  Dickson  v.  Chorn,  6    Iowa,   10;  V9  Ark.    591,    and    cases    citnl  ;    Hoy    i». 

r\vot,'Ood  V.  Stephens,  19  Iowa,  40.'i.  liramhall,  19  N.  J.  K<|.  74  ;  .V.  i'.  lb.  r)G3 ; 

'  l''ra«h  r.  Glendy,  68  Ind.  304  ;  (ilendy  Johnson  v.  Hiee,  8  Me.   157;    Dcuitler  v. 

87  U 


§   983.]  PAYMENT   AND   DISCHARGE. 

a  release  does  not  amount  to  a  technical  discharge  of  the  part 
conveyed  ;  though  as  against  the  mortgagee  giving  the  release  it 
amounts  to  an  equitable  release  when  equity  and  justice  demand 
that  it  shall  so  operate.^ 

Upon  the  same  principle,  after  the  mortgaged  premises  have 
passed  to  several  devisees,  if  the  mortgagee  releases  one  devisee's 
portion  the  others  are  liable  only  for  that  share  of  the  debt  for 
which  their  portion  would  be  liable  had  no  release  been  made.^ 
And  so  if  the  mortgagee  releases  the  mortgagor  from  personal  re- 
sponsibility for  the  debt,  after  notice  of  his  conveyance  of  a  part 
of  the  premises  to  a  purchaser,  the  purchaser's  security  is  thereby 
diminished,  and  it  is  therefore  held  that  the  portion  he  has  pur- 
chased is  discharged  from  the  lien  of  the  mortgage.*^ 

Owners  of  those  portions  of  the  mortgaged  estate  not  released 
cannot  claim  an  entire  release  of  their  own  property  from  the 
mortgage  lien  because  of  a  partial  release  of  the  mortgaged  prop- 
erty ;  but  they  must  in  every  case  pay  their  fair  proportion  of  the 
mortgage  debt.  The  mortgage  security  at  most  is  affected  only 
to  the  extent  of  the  value  of  the  property  released.* 

The  release  of  a  portion  of  the  mortgaged  premises  does  not 
defeat  the  right  to  sell  the  remainder  under  a  power  of  sale.'^ 

983.  The  personal  liability  of  the  mortgagor  may  be  re- 
leased without  extinguishing  the  mortgage,  if  this  be  done  with- 
out any  intention  of  discharging  the  debt.^  Such  a  release  of 
personal  liability  is  sometimes  made  when  the  mortgagor  has  sold 
the  premises  to  another  who  has  assumed  the  payment  of  the 
debt,  and  the  mortgagee  is  willing  to  look  to  the  latter  and  the 
property  for  the  satisfaction  of  his  claim.'  This  release  is  per- 
sonal merely,  and  does  not  discharge  the  debt  or  the  mortgage. 
Whether  the  intention  in  any  case  was  to  discharge  the  debt  or 

McCamus,  14  Wis.  307;  Iglehart  i.  Crane,  vesant  v.  Hall,  2  Barb.  (N.  Y.)  Ch.  151  ; 

42  111.  261 ;  Patty  v.  Pease,  8  Paige  (N.  Stevens  v.  Cooper,  1  Johns.  (N.  Y.)  Ch. 

Y.),  277;  Taylor  v.  Short,  27  Iowa,  361  ;  425;    Guion  v.  Knapp,  6  Paige  (N.  Y.), 

Waters  v.  Waters,  20  Iowa,  363  ;  Howard  35  ;  AVilliams  v.  Wilson,  124  Mass.  257. 

Ins.  Co.  V.  Halsey,  4  Sandf.  (N.  Y.)  565;  ^  Dunn  v.  Fish  (Mich.  1881),  9  N.  W. 

-S.  C.  8  N.  Y.  271  ;  Union  College  v.  Whee-  Rep.  429. 

ler,  61  N.  Y.  88;  Mcllvain  v.  Mut.  Ass.  6  Donnelly  v.  Simonton,  13  Minn.  301  ; 

Co.  93  Pa.  St.  30.  Hayden  v.  Smith,  12  Met.   (Mass.)  511  ; 

1  Kendall  I).  Woodruff,  87  N.Y.  1.  Colby   v.  Place,  11    Neb.  348;  Mason  v. 

2  See  §§  722-728;    Gibson   v.  McCor-  Beach,  55  Wis.  607;  Walls  v.  Baird,  91 
mick,  10  Gill  &  J.  (Md.)  65.  Ind.  429,  quoting  text;  Ellis  v.  Johnson, 

3  Coyle  V.  Davis,  20  Wis.  564.  96  Ind.  377. 

*  Frost  V.  Koon,  30  N.  Y.  428;  Stuy-        ■?  Bentley  r.  Vanderheyden,35N.  Y.677. 

880 


FORM   AND    CONSTRUCTION   OF   DISCHARGE.  [§  984. 

merely  the  personal  liability  is  a  question  of  fact,  depending  upon 
the  circumstances  of  the  case  or  the  construction  of  the  release.^ 
A  release  from  the  debt  without  limitation  is  generally  a  dis- 
charge of  the  mortgage,  because  the  debt  is  the  principal  thing, 
and  when  that  is  discharged  the  mortgage  is  discharged  along 
with  it.2 

The  release  of  one  joint  maker  of  a  note  secured  by  a  mortgage 
given  by  the  other  joint  maker  does  not  release  the  latter  from 
his  covenant  to  pay  the  debt  contained  in  the  mortgage.'^ 

If  the  mortgage  note  be  given  up  by  the  mortgagee  to  be  can- 
celled without  a  release  of  the  mortgage,  and  the  mortgagor  re- 
leases the  land  to  him,  the  transaction  is  open  to  the  inquiry, 
whether  the  purpose  of  it  was  to  discharge  the  mortgage  or  merely 
to  release  the  mortgagor  from  personal  liability.*  If  the  debt 
was  not  in  fact  paid,  and  the  land  was  still  to  be  charged  with  it, 
the  mere  giving  up  of  the  note  would  not  discharge  the  mortgage. 

The  surrender  of  the  mortgage  note,  in  consideration  of  a  re- 
lease of  the  equity  of  redemption,  does  not  necessarily  discharge 
the  mortgage  lien.  As  against  an  intermediate  incumbrance,  this 
transaction  would  be  held  to  operate  merely  as  a  relinquishn^ent 
of  the  personal  obligation  of  the  mortgagor,  and  not  as  a  satis- 
faction of  the  mortgage.''  In  like  manner  where  a  mortgagee, 
who  has  acquired  the  equity  of  redemption  from  one  who  had 
purchased  it  from  the  mortgagor  and  assumed  tiie  payment  of 
the  mortgage,  releases  all  claims  and  demands  arising  by  vir- 
tue of  that  agreement,  neither  the  mortgage  debt  nor  lien  is  dis- 
charged.^ 

984.  Although  payment  of  the  debt  is  in  eflfect  a  discharge 
of  the  mortgage,  a  release  of  the  security  does  not  of  itself 
discharge  the  debt."  A  deed  of  release  in  the  ordinary  form,  as 
Avell  as  an  entry  of  satisfaction  upon  the  margin  as  usually  made, 
contains  an  express  acknowledgment  of  the  payment  of  the  debt: 
and  in  such  case  this  woukl  be  j>run(t  facie  evidence  of  tlie  dis- 
charge of  the  debt,**  and  perhaps  conclusive  evidence  of  it,  un- 
less fraud  or  mistake  be  shown  in  making  such  entry  or  ri'lease.*' 

»  Tripp  V.  Vincent,  .'$  Uarh.  (N.  Y.)  Cli.  ^  Haldwin  v.  Norton,  2  Conn.  Uil. 

613,614.  ''  Knowks  v.  Carpfnter,  8  U.  I.  548. 

2  Sec  §  727;  Armitage  v.  WickliflTe,  12  '  Viin  Deusen  i*.  Frink,  15  Pick.  (Miut».) 
B.  Mon.  CKy.)  488.  4-l'.» ;    Slierwooil    r.    Diinlmr,   6    Ciil.    5,T  ; 

3  Walls  V.  I}uird,  91  lud.  4'2'J.  Ivl^'in^jton  i*.  Ili-fiicr,  SI  111.  .141. 
*  Hemenway  i-.  I3ns.sctt,  l.T  CJriiv  (.Muhs  ),         "  Hurkc  c  Hni-li,  42  Ark.  57. 

378,  .'380.  "  Wrtdo    r.    Howard,   II    I'iik.    (Mniw,) 

vol-  I.  5f;  8H1 


§§  985-987.]  PAYMENT    AND   DISCHARGE. 

But  this  is  otherwise  if  the  release  contains  no  such  recital ;  al- 
though if  the  purpose  be  to  release  the  security  without  releasing 
the  debt,  this  should  be  distinctly  stated.  If  after  an  entry  of 
satisfaction  the  debtor  continues  to  pay  interest  upon  the  same 
debt,  and  the  creditor  continues  in  possession  of  the  mortgage 
bond  or  note,  the  presumption  of  payment  arising  from  such  en- 
try is  rebutted.!  If  the  mortgage  note  be  left  outstanding,  and 
there  is  no  evidence  that  the  release  was  intended  to  operate  as 
payment  of  the  note,  the  mortgagee  may  still  collect  or  negotiate 
the  note.^ 

985.  The  effect  of  a  release  or  discharge  of  a  mortgage 
upon  the  title  of  the  person  to  whom  the  release  is  made  is 
in  general  merely  to  extinguish  the  mortgage  lien,  and  to  leave 
his  title  just  as  if  the  mortgage  had  never  existed.  Sometimes, 
in  order  to  protect  the  person  who  has  paid  for  the  release,  it  is 
necessary  to  regard  the  mortgage  title  as  still  subsisting  in  him, 
but  this  is  exceptional  when  the  release  is  made  to  the  owner  of 
the  equity  of  redemption.  Where  a  mortgagor  and  mortgagee 
had  joined  in  making  a  second  mortgage  to  another  person,  who 
afterwards  entered  for  the  purpose  of  foreclosure,  and  after  the 
lapse  of  three  years  and  more  made  a  deed  of  release  to  them, 
the  effect  of  it  was  held  to  be  merely  to  replace  the  estate  in 
them  as  they  held  it  before  making  the  second  mortgage,  and  to 
restore  them  to  the  original  relation  of  mortgagor  and  mort- 
gagee.-" 

986.  A  mortgagee  who  stands  by  at  a  sale  of  a  part  or  the 
whole  of  the  premises  by  the  mortgagor,  and  acquiesces  in  a 
sale  of  the  entire  title  to  the  property  without  making  known  his 
mortgage,  and  receives  the  price,  cannot  set  up  his  mortgage 
against  the  purchaser ;  as  to  him,  the  mortgage  is  discharged.* 
In  like  manner  if  he  permits  the  mortgagor  to  sell  the  mortgaged 
land,  under  the  promise  to  pay  him  from  another  fund,  the  pur- 
chaser takes  the  land  discharged  of  the  mortgage,  although  the 
mortgagee  obtains  nothing  from  such  fund.^ 

987.  Release  wrongfully  obtained.  —  Where  a  release  was 
executed  and  sent  to  an  agent  to  be  delivered  upon  payment  of 

289,  297  ;  Chappell  v.  Allen,  38  Mo.  213  ;  3  Baylies  v.  Bussey,  5  Me.  153. 

Fleming  v.  Parry,  24  Pa.  St.  47  ;  and  see  *  M'Cormick  v.  Digby,  8  Blackf.  (Ind.) 

Cross  V.  Stahlman,  43  Pa.  St.  129.  99 ;  Curtiss  v.  Tripp,  Clarke  (N.  Y.),  318. 

1  Fleming  v.  Parry,  supi-a.  ^  Taylor  v.  Cole,  4  Munf.  (Va.)  351. 

-  Van  Deusen  v.  Frink,  15  Pick.  (Mass.) 
449, 

882 


FORM    AND   CONSTRUCTION    OF   DISCHARGE.  [§  988. 

the  debt,  and  the  owiiei*  of  the  property  procured  possession  of  it 
upon  a  promise  to  paj'  the  sum  due  in  a  few  weeks,  wliich  he 
neglected  to  do,  it  was  held  that  the  release  was  inoperative,  and 
could  not  take  effect  until  payment  of  the  mortgage  debt.^ 

The  entry  of  satisfaction  of  the  mortgage  upon  the  record  will 
protect  a  subsequent  bo7id  fide  purchaser  of  the  land  from  the 
mortgagor,  although  the  mortgagee  had  negotiated  the  mortgage 
note  to  a  third  person,  if  the  purchaser  had  no  notice  that  the 
note  was  not  paid,^  and  is  not  chargeable  with  notice  through 
neglect  to  require  the  surrender  of  it. 

If  the  holder  of  a  mortgage  under  an  unrecorded  assignment 
has  knowledge  that  the  mortgagee  has  wrongfully  discharged  it, 
and  takes  no  steps  to  have  it  restored  to  record,  he  is  guilty  of 
laches,  and  cannot  claim  as  against  a  subsequent  bond  fide  pur- 
chaser.'^ 

A  forsfed  release  does  not,  of  course,  affect  the  mortgage  lien. 
It  is  not  necessary  that  the  mortgagee  should  execute  and  record 
any  instrument  to  counteract  the  forgery,  though  it  would  be 
prudent  for  him  to  give  such  notice.  It  would  be  his  duty,  how- 
ever, to  inform  all  persons  who  might  apply  to  him  for  informa- 
tion that  the  release  is  a  forgery.-*  Neither  is  it  necessary  that 
he  should,  within  any  particular  period,  commence  i>roceeding3  at 
law  or  in  equity  against  the  forger,  or  any  one  claiming  under 
him,  to  vindicate  his  title.  lie  may  rest  upon  the  strength  of  liis 
title.'^ 

988.  The  debtor  who  demands  a  release  of  a  mortgage 
should  tender  the  instrument  to  be  executed,  and  also  the  ex- 
penses of  its  execution  ;  ^  and  if  satisfaction  be  entered  upon  the 
margin  of  the  record  he  should  offer  to  pay  the  expenses  of  this. 

'  Hale  I'.  Morgan,  68  111.  244  ;  and  see  f,'a;;c   whs  afterwards  iisi.ij;iifd  to  a  bond 

Harris  v.  Boone,  G9  Ind.  300.  Jide  piircliascr,  and  iifti-rwaids  the  prem- 

-  See  §472;  Corno",' y.  Fuller,  "iO  Iowa,  ises  were   jmrcliastil   l.y  a   person  relvinj; 

212;   Bank  of    Indiana  v.   Anderson,    14  "pon    ilie  record   that   ilu-  iiiorit;ii;;e   had 

Iowa,  544  ;  Ayers  v.    Hays,  GO  Ind.  452  ;  iH/en  disiliargetl ;  lield.  that  the  UN»i;,'nec 

Biicon  V.  Van  Schooniiovcn,  87  N.  Y.  446.  could   not  enforce  his   inoit^an*".  hecau.se 

='  Vielc  V.  Judson,  15  Hun  (N.  Y.),  328.  he   liad   not.  as  soon  as  he  disCovired  the 

♦  Chandler  v.  While,  84  111.  435.  forgery,  taken  htej)s  to  correct  tin-  record 

•■'  Chandler  v.  White,  supra;  Meley  i-.  or  enforce  his   niortf,'a-.',  the   purchiwer. 

Collins,  41  Cal.  CG3.     On  the  other  hand.  tl.rou;,'h  hit  hih^nce  and   inactivity,  InitiK 

in  Costello  v.  Meade,  55  How.  I'r.  (N.  V  )  jusiilicd   in   dealing  witli  the  proprrly  a« 

.-{.56,  the  Supreme  Court  t>i  New  York,  in  lliou;;h   the  inortKaK--   ha  I   l»  en   pro|KTly 

a  case   where  a  for^jed   untisf action   of  a  diH<har;;"'d. 

mortgage  had  heen  executed  and  filed  in  '■  See  IVtU-n^'iH  '•.  .Matin  r,  HI  Alih.  (N. 

the    register's    office,   and    the    mortuaKc  ^   '  ^'^    ''J' 

tnarked  satisfied  of  record,  and  the  niort-  SSIJ 


§§  988  a,  989.]  payment  and  discharge. 

988  a.  A  bill  in  equity  may  be  maintained  under  some 
circumstances  to  compel  a  cancellation  of  a  mortgage  which 
has  been  paid.  Thus  such  an  action  is  maintainable  by  a  pur- 
chaser of  land  upon  execution  sale  to  obtain  the  cancellation  of  a 
mortgage  which  has  been  continued  on  record  after  payment  for 
the  purpose  of  defrauding  creditors. ^ 

Payment  or  satisfaction  of  the  mortgage  debt  must  be  shown 
before  this  equitable  relief  will  be  given.  The  fact  that  a  mort- 
gage has  become  or  is  invalid  and  cannot  be  enforced,  either  in 
law  or  equity,  is  not  sulBcient  ground  for  a  decree  in  equity  that 
the  mortgage  be  surrendered  or  extinguished.  Whatever  is  equi- 
tably due  must  be  paid.  A  party  coming  into  a  court  of  equity 
for  relief  must  himself  do  equity.^  Therefore  it  is  that  such  a  bill 
must  usually  be  in  form  and  effect  a  bill  to  redeem. 

XI.  Entry  of  Satisfaction  of  Record. 

989.  Provision  is  generally  made  for  the  discharge  of  a 
mortgage  when  paid,  either  by  a  brief  entry  upon  the  margin  of 
the  record  of  the  mortgage  signed  by  the  holder  of  it,  or  by  his 
executing  a  certificate  of  satisfaction,  which  is  recorded  at  length 
with  a  proper  reference  to  and  from  the  record  of  the  mortgage. 
The  record  then  becomes  a  conveyance  within  the  meaning  of  the 
recording  acts.-^  An  abstract  of  the  statutory  provisions  for  the 
discharge  of  mortgages  is  here  given.  In  general,  it  may  be  said 
that  the  entry  or  certificate  provided  for  may  be  made  by  the  per- 
son who  is  authorized  to  receive  pa^'ment  of  th&  mortgage,  or  who 
could  properly  execute  a  deed  of  release  of  the  premises. 

The  request  to  enter  satisfaction  of  record  may  be  made  by  the 
owner's  agent  duly  authorized.  If  the  holder  of  the  mortgage 
doubts  the  agent's  authority,  he  should  place  his  refusal  to  enter 
satisfaction  on  that  ground,  and  should  demand  evidence  of  the 
authority.* 

Under  statutes  which  require  the  holder  of  the  mortgage  upon 
receiving  payment  to  enter  satisfaction  upon  the  record,  such  en- 
try is  the  act  of  the  holder  of  the  mortgage,  not  of  the  recorder. 
He  is  merely  the  custodian  of  the  records.  Though  he  attests  the 
entry,  this  does  not  constitute  a  judicial  determination  of  the  fact 

1  Eemington  Paper  Co.   v.   O'Doiigh-  -  Tuthill  v.  Morris,  81  N.  Y.  94. 

erty,    81    N.   Y.   474;   and   see   Shaw   v.  3  Bacon  r.  Van  Schoonhoven,  19  Hun, 

Dwight,  27  N.  Y.  244;  Radcliffe  v.  Row-  158;  87  2s^.  Y.  441. 

ley,  2  Barb.  Ch.  23.  *  Bell  v.  Wilkinson,  65  Ala.  477. 

884 


ENTRY    OF   SATISFACTION   OF   RECORD.  [§  990. 

that  the  mortgage  has  been  satisfied.  If  by  mistake  the  entry  is 
made  upon  the  margin  of  the  record  of  a  mortgage  between  the 
same  parties,  but  not  held  by  the  person  who  makes  the  entry,  the 
real  owner  of  the  mortgage  may  show  that  such  entry  was  made 
through  mistake  by  an  unauthorized  person,  even  as  against  a  bond 
fide  purchaser  of  the  property  for  value  witiiout  notice  of  the 
mortgage. 1  Of  course  the  holder  of  the  mortgage  is  not  bound 
by  a  discharge  of  record  entered  by  an  agent  through  fraud  or 
forgery,  unless  estopped  by  some  act  of  his  own  which  may  have 
misled  an  innocent  purchaser.^ 

These  statutes  generally  provide  also  for  the  recovery  of  a  pen- 
alty from  the  person  who  has  refused  or  neglected  to  discharge  a 
mortgage  after  having  received  payment  of  it.  This  is  a  means 
of  compelling  a  discharge,  in  addition  to  the  relief  that  may  be 
had  under  the  general  jurisdiction  of  courts  of  equity.'^  The  pur- 
pose of  the  penalty  is  not  only  to  indemnify  the  mortgagor,  but  to 
punish  the  mortgagee.*  A  statute  imposing  a  penalty  for  not  dis- 
charging a  mortgage  after  full  performance  of  the  condition,  means 
so  far  as  the  condition  is  legal  and  binding.  The  amount  payable 
to  effect  a  full  performance  may  be  disputed.^ 

990.  An  action  for  the  recovery  of  the  statutory  penalty 
for  neglecting  to  discharge  a  mortgage  is  a  pcuul  action,  and 
calls  for  a  strict  construction.*'  The  petition  or  complaint  should 
show  that  the  conditions  of  the  mortgage  have  been  fulfilled.  An 
allegation  of  a  tender  of  the  amount  due  and  of  a  refusal  of  this 
does  not  disclose  5,  cause  of  action."  The  action  should  be  brought 
against  the  person  who  has  the  power  legally  to  discharge  the 
mortgage,  whether  he  be  the  mortgagee  or  an  assignee  or  other 
holder  of  the  mortgage.^  It  is  erroneous  when  an  assignee  holds 
the  mortgage  to  join  with  him  in  the  action  the  mortgagee,  or 
any  one  else  who  could  not  execute  satisfaction  of  the  mortgage.'-* 
When  the  mortgage  is  in  the  form  of  a  trust  deed,  the  trustee, 
being  the  person   who  has  the  authority  to  (MJter  satisfaction,  is 

1  Brown  v.  Henry,  100  Pa.  St.  262.  ">  Stone  v.  Liiiiiion.O  Wis.  »'J7  ;  Jiiriatt 

■^  Lancaster  v.  Smith,  07  I'a.  St.  427.  iv  McCulie,  75  Ai;i.  :vi:>. 

't  Barnes   t;.   Camiick,  1    Barb.  (N.   Y.)         "  Criiinhly  r.  Banloii  (Wis  ).  ;10  N.  \V. 

.392;    Beach    v.   Cooke,    28    N.     Y.    50H ;  liep.  l'.». 

Sutherland    v.    Rose,   47    Barb.    (.N.    Y.)         "  Kwin«  i'.  Shrltnn,  .H   .Mc  .MH;   IVr- 

144;  Beccher  v.  Aekermau,   1    Abb.    (N.  kins  c.    Muttoson  (Kumh),   I'.i    I'uc    Ui-p. 

Y.)  I'r.  N.  S.  141.  633- 

'   K(ij;le  V.  Hall,  45  Miih.  57.  "  (Jalloway  v-  I-iichneltl.  8  Minn.  188. 

'-  Willxir  c.  IVirce,  50  .Mich.  IC'J. 

885 


§  991.]  PAYMENT   AND   DISCHARGE. 

the  one  liable  for  neglect  or  refusal  to  do  so.  An  assignee  of  a 
mortgage,  by  an  assignment  not  recorded,  is  not  subject  to  the 
statutory  penalty  for  failure  to  enter  satisfaction.^  The  penalty 
cannot  be  recovered  of  one  who  has  no  interest  in  the  mortgage 
or  the  debt  secured,  and  has  no  means  of  knowing  that  he  was  in 
default  in  not  giving  a  discharge,  though  it  appears  of  record  in 
his  name. 2  Where  an  assignee  of  a  mortgage  has  negligently 
omitted  to  provide  himself  with  authority  to  satisfy  a  mortgage  of 
record  on  payment  of  the  debt,  he  is  liable  for  the  costs  of  a  suit 
instituted  to  obtain  a  judicial  satisfaction  of  it.^ 

As  a  moi'tgage  to  several  persons  who  are  partners  may  be  dis- 
charged by  any  one  of  them,  a  request  to  one  is  sufBcient,  and  all 
the  members  are  jointly  liable  to  the  penalty  for  failure  of  one  to 
enter  satisfaction.* 

After  the  penalty  for  neglecting  to  discharge  a  mortgage  of 
record  after  req^uest  has  been  once  incurred,  a  subsequent  entry 
of  satisfaction,  even  if  entered  before  suit  is  brought  for  the  pen- 
alty, is  no  defence ;  ^  neither  is  it  any  defence  that  the  mortgagor 
has  subsequently  conveyed  the  land  to  the  mortgagee,  and  the 
deed  has  been  recorded.*" 

991.  The  holder  of  a  mortgage  renders  himself  liable  to  the 
statutory  penalty  for  refusing  to  release  a  mortgage  upon  a 
sufficient  tender,  although  he  claims  that  the  tender  is  insuffi- 
cient, and  it  so  appears  from  the  mortgage  note  by  a  strict  com- 
putation, if  in  fact  it  be  sufficient;  as,  for  instance,  where  the 
holder  of  the  mortgage  took  it  after  its  maturity,  and  after  sev- 
eral payments  had  been  made,  with  the  understanding  between 
the  parties  that  they  were  in  full  satisfaction  of  the  yearly  inter- 
est, although,  by  reason  of  being  made  after  the  time  when  the 
interest  was  due,  these  payments,  if  applied  at  large,  would  not 
have  the  effect  of  fully  satisfying  the  interest.'^ 

The  statutory  penalty  for  refusing  to  discharge  a  mortgage  after 
a  proper  tender  and  request  applies  to  all  mortgages,  whether 
large  or  small ;  and  it  is  immaterial  that  the  amount  of  the  pen- 

1  Low  V.  Fox,  56  Iowa,  221.  "  Barnard  v.  Harrison,  30  Mich.  8.    See 

2  Murphy  j;.  Fleming    (Mich.),   36   N.  Mercantile  Trust  &  Deposit  Co.  v.  Pick- 
W.  Rep.  787.  erell  (N.  C),  5   S.  E.  Rep.  417,  where  a 

3  Hillraan  v.  Stuniph,  Wils.  (Infl.)  285.  trustee  in  a  deed  of  trust  refused  to  dis- 

*  Renfro  v.  Adams,  62  Ala.  302 ;  .S'.  C.     charge  the  mortgage  because  lie  claimed 
2  South   L.  J.  207.  compensation  for  his  services  in  accord- 

5  Deete    v.  Crossley,  26  Iowa,  180.  ance  Avith  the  terms  of  the  deed. 

*  Deeter  v.  Crossley,  supra. 


ENTRY    OF    SATISFACTION    OF   RECORD.  [§  991. 

alty  is  more  than  the  amount  due  on  the  mortgage.^  It  is  im- 
material, too,  whether  the  mortgage  is  paid  vohmtavily  or  is 
enforced  by  suit.  The  penalty  may  just  as  well  be  enforced 
when  the  mortgage  is  paid  upon  a  judgment.^ 

But  it  has  been  held  that  in  an  action  for  not  entering  satis- 
faction on  a  mortgage  the  jury  may  and  should  consider  whether 
the  refusal  to  discharge  it  was  wanton  and  oppressive,  or  the  re- 
sult of  an  honest  doubt.'^  It  is  questionable  whether  this  broad 
statement  would  be  generally  sustained  under  the  statutes  now  in 
force;  but  the  mortgagee  will  never  be  adjudged  liable  to  a  pen- 
alty for  refusing  to  discharge  a  mortgage  if  he  has  in  fact  any 
substantial  ground  for  so  refusing  ;  as,  for  instance,  when  he  can 
justify  his  refusal  on  the  ground  that  although  the  mortgage  debt 
had  been  paid,  the  costs  of  a  suit  brought  by  him  to  enforce  the 
payment  had  not  been  paid.^  Nor  will  the  statutoi-y  penalty  be 
imposed  when  there  has  been  an  honest  difference  between  the 
parties  regarding  their  rights.*^  But  a  mortgagee  incurs  the  pen- 
alty if  his  failure  to  enter  satisfaction  resulted  from  inadvertence 
or  indifference,  although  it  was  not  wilful  and  intentional.''  No 
recovery  can  be  had  when  tlie  mortgage  has  not  actually  been 
paid,  but  the  mortgagee  has  united  the  legal  and  equitable  estates 
in  himself  by  purchasing  the  equity  of  redemption." 

A  mortgagee  is  liable  to  the  penalty  for  not  discharging  a  mort- 
gage, where  he  has  assigned  a  negotiable  promissory  note  secured 
by  the  mortgage  without  assigning  the  mortgage,  or  without  hav- 
ing a  formal  assignment  of  it  recorded,  and  he  has  thus  placed  it 
beyond  his  power  properly  to  make  a  discharge.^ 

In  an  action  for  the  penalty  it  appeared  that  tlie  purchaser  of 
land  subject  to  a  mortgage  made  by  another  after  paying  the 
mortgage  debt  requested  the  mortgagee  to  discharge  it  of  record. 
Tlie  latter  thereupon  gave  a  satisfaction  piece  to  the  mortgagor, 
but  it  was  never  recorded,  and  when  the  owner  of  tiie  land  again 
applied  to  him  to  execute  a  discharge,  he  said  nothing  of  his  liav- 

'  Collar  r.  Harrison,  28  Mich.  T)  18.  Piirkcs  v.  Parker,  57   Mich.  .'>7  ;  Scoti  «-. 

2  Verges  v.  Giboney,  47  Mo.  171.     Sec  FieM,  7.')  Ahi.  41'.» ;  Ciinlielil  /•.  Coiiklinj:. 

Lewiu  «;.  Conovcr,  21  N.  J.  Eq.  2.10.  41    Mich.   371;  Mycr  r.    liiiri,    »*>    Miih 

='  IliiuljLrt   v.   JIaworih,   '.»   I'hilii.  (I'li.)  •>\'!. 

12.'j.  '•  Hcnfrr.  t-.  AdiimH,  02  Alii.  ;i02 ;  S.  ('. 

*  Emerson    v.   Giliniiii,  44    .N.  H.   2.'»5  ;  2  South.  E.  J.  207. 

ami  see    Ecwih  i:  C'onover,  21   N.  J.  Eq.  '  I'hclj)!*  r.  Uolfe,  20  Mo.  479. 

230.  "  IVrkinn  v.  Mutiesoii  (Kans.),  I 'J  I'lic 

'•  Burrows    v.    BungH,    34    Mich.    304  ;  Hcji.  033. 

H87 


§  992.]  PAYMENT   AND   DISCHARGE. 

ing  executed  such  an  instrument,  and  neglected  to  execute  an- 
other. The  jury  were  correctly  instructed  that  if  they  believed 
the  satisfaction  piece  was  given  to  the  mortgagor  to  be  kept  in 
his  pocket,  and  to  be  used  as  a  defence  to  an  action  for  the  pen- 
altj'^,  and  not  to  be  recorded  as  a  discharge  of  the  mortgage, 
it  was  a  fraud  upon  the  owner,  and  no  defence  to  the  action ; 
and  moreover  that  the  fraud  might  be  inferred  from  the  circum- 
stances.^ 

Matters  of  excuse  or  justification  of  refusal  to  enter  satisfaction 
must  be  specially  pleaded,  and  cannot  be  given  in  evidence  under 
a  general  denial.^ 

A  mortgagee  who  has  assigned  his  mortgage  before  receiving  a 
request  to  enter  satisfaction  of  record  is  not  liable  to  the  statutory 
penalty.^ 

XII.    Statutory  Provisions  for  Entering  Satisfaction  of  Record. 

992.  Alabama.*  —  A  mortgagee,  upon  receiving  satisfaction 
of  the  amount  secured  by  the  mortgage,  must,  if  it  has  been  re- 
corded, at  the  request  in  writing  of  the  mortgagor,  enter  satisfac- 
tion upon  the  margin  of  the  record  of  it,  which  operates  as  a 
release  of  the  mortgage  and  a  bar  to  all  actions  upon  it.  A  pen- 
alty of  two  hundred  dollars  is  attached  to  the  neglect  of  a  mort- 
gagee to  do  this  for  three  months  after  such  payment  and  request, 
unless  at  the  time  of  such  request,  or  within  said  three  months, 
there  shall  be  a  pending  suit  between  the  parties  involving  the 
question  whether  the  holder  of  the  mortgage  has  received  satis- 
faction thereof. 

Any  mortgagee  who  has  received  any  part  of  the  amount  se- 
cured by  a  recorded  mortgage  must,  at  the  request  in  writing  of 
any  bond  fide  creditor  of  the  mortgagor  himself,  enter  upon  the 
margin  of  the  record  the  amount  or  amounts  received  by  him 
and  the  dates  thereof.     A  failure  for  thirty  days  after  such  re- 

'  Eaton  u.  Copeland,  17  Wis.  218.  mortgagors  if  there   be  raore   than  one. 

-  Petty  V.  Dill,  53  Ala.  641.  Jarratt  v.  McCabe,  75  Ala.  325. 

3  Harris  v.  Swanson,  67  Ala.  486.  The   mortgagee  is   not   estopped   from 

*  Code  1886,  §§  1868,  1869.      The  re-  denying  that  the  mortgage  has  been  satis- 

quest  contemplated  is  simply  a  notice  that  fied,  by  reason  that  he  has  not  within  the 

performance  of  the  duty  is  required.     Jor-  three  months  commenced  a  suit  involving 

dan  V.  Mann,  57  Ala.  595.     No  particular  the  question  of  satisfaction.    Scott  v.  Field, 

form  of  request  is  necessarv.     Jordan  v.  75  Ala.  419. 

Mann,  supra.  As  to  amendment  of  complaint,  see  Wil- 

The  request  must  te  signed  by  all  the  liams  v.  Bowdin,  68  Ala.  126. 

888 


PROVISIONS  FOR  ENTERING  SATISFACTION  OF  RECORD.     [§§  992  a-994. 

quest  to  make  such  entry  incurs  a  forfeiture  of  the  sum  of  two 
liundred  dollars. 

992  a.  Arizona  Territory.^  —  Any  recorded  mortgage  may  be 
discharged  by  an  entry  in  the  margin  of  the  record  thereof,  signed 
by  the  mortgagee  or  his  personal  representative  or  assignee,  ac- 
knowledging the  satisfaction  of  the  mortgage,  in  the  presence  of 
the  recorder  or  his  deputy.  Any  mortgage  may  also  be  dis- 
charged upon  the  record  thereof  by  the  recorder  in  whose  custody 
it  raav  be,  whenever  there  shall  be  presented  to  him  a  certificate 
executed,  acknowledged,  or  proved  and  certified,  specifying  that 
such  mortgage  has  been  paid,  or  otherwise  satisfied.  Every  such 
certificate  must  be  recorded  at  full  length,  and  a  reference  made 
to  the  book  containing  such  record.  If  any  mortgagee,  after  a  full 
performance  of  the  conditions  of  the  mortgage,  shall,  for  the  space 
of  seven  days  after  being  thereto  requested,  and  after  tender  of 
his  reasonable  charges,  refuse  or  neglect  to  execute  and  acknowl- 
edge a  certificate  of  discharge  or  release  thereof,  he  shall  be  liable 
to  the  mortgagor,  his  heirs  or  assigns,  in  the  sum  of  one  hundred 
dollars,  and  also  for  all  actual  damages  occasioned  by  such  neg- 
lect or  refusal. 

993.  Arkansas.2  —  Upon  receiving  satisfaction  for  the  amount 
due  on  a  mortgage,  the  mortgagee  must  upon  request  acknowl- 
edge satisfaction  upon  the  margin  of  the  record  ;  and  if  he  does 
not  do  this  within  sixty  days  after  such  request,  he  forfeits  to  the 
party  aggrieved  any  sum  not  exceeding  the  amount  of  the  mort- 
gage money,  to  be  recovered  by  civil  action.  This  acknowledg- 
ment of  satisfaction  has  the  effect  to  release  the  mortgage  and 
revest  in  the  mortgagor,  or  his  representatives,  the  title  to  the 
mortgaged  property.  If  payment  be  made  to  the  officer  before 
sale,  he  is  required  to  make  and  acknowledge  and  record  a  cer- 
tificate thereof,  which  has  the  same  effect  as  satisfaction  entered 
on  the  margin  of  the  record. 

994.  California.''  —  A  recorded  mortgage  may  be  discharged 
by  an  entry  in  the  margin  of  the  record,  signed  by  the  mortgagoo, 
or  his  personal  representative  or  assignee,  acknowledging  satis- 
faction in  the  presence  of  the  reconh^r,  who  must  certify  the  ac- 
knowledgment substantially  as  follows:  '^Signed  and  acknowl- 
edged before  me,  this  day  of  ,  in  the  year  .  A.  H., 
Recorder."     If   not  discharged    in    this    manner,  it  must   be   dis- 

I    li.  S.  1887,  §§  2.300-2303.  "  Tivil   Code,    §§  2938-2941,   Rinomlcil 

-  Di;;.  of  Slats.  1884,  §§  4745-4748.  Ajiril  If),  1880;  3  CoJcii  &  Slain.  §  7941 

889 


§§  995-997.]  PAYMENT   AND   DISCHARGE. 

charged  upon  the  record  by  the  officer,  on  presentation  of  a  certifi- 
cate signed  by  the  mortgagee,  his  representative  or  assign,  ac- 
knowledged or  proved,  stating  that  the  mortgage  has  been  paid 
or  discharged.  The  certificate  is  recorded  at  length  with  refer- 
ence to  and  upon  the  record  of  the  mortgage.  The  mortgagee 
must  immediately  upon  request  enter  satisfaction,  or  make  a  dis- 
charge of  the  mortgage  in  such  form  as  to  entitle  it  to  be  re- 
corded, and  upon  his  neglect  or  refusal  to  do  so  is  liable  for  all 
damages  which  the  mortgagor  or  his  grantee  may  sustain  by 
reason  of  such  refusal,  and  also  forfeits  to  him  the  sum  of  one 
hundred  dollars,  to  be  recovered  in  a  civil  action. ^ 

995.  Colorado.^  —  When  the  mortgagee  of  any  property 
within  the  state  receives  payment  of  the  money  due  to  him,  and 
secured  by  mortgage,  and  enters  satisfaction  or  a  receipt  for  the 
same,  either  on  the  mortgage  or  on  the  record  of  the  mortgage, 
such  satisfaction  or  receipt  so  recorded  operates  to  release  the 
mortgage  to  the  person  entitled  to  a  release,  and  reconveys  the 
title  of  any  property  in  any  mortgage  as  fully  as  a  release  deed 
would  have  done,  executed  under  the  formalities  prescribed  by 
the  law  regulating  conveyances. 

996.  Connecticut."^ — Upon  the  satisfaction  of  a  mortgage  the 
mortgagee,  or  person  by  law  authorized  to  release  the  same,  must 
execute  and  deliver  a  deed  of  release  ;  and  if  he  neglect  so  to  do 
for  thirty  days  after  a  written  request,  and  the  tender  of  the  nec- 
essary expense,  he  is  liable  to  pay  to  any  person  aggrieved  five 
dollars  for  each  week  of  such  neglect  after  thirty  days.  The  ex- 
ecutor or  administrator  of  any  deceased  mortgagee,  and  any  guar- 
dian or  conservator  of  a  mortgagee,  may  release  the  legal  title  to 
the  mortgagor  or  party  entitled  to  the  release. 

997.  Dakota  Territory.* — A  recorded  mortgage  may  be  dis- 
charged in  the  margin  of  the  record  by  the  mortgagee,  his  per- 
sonal representative  or  assignee,  in  the  presence  of  the  register,  or 
by  the  register,  on  presentation  to  him  of  a  certificate  signed  by 
the  mortgagee  or  such  other  person,  acknowledged,  or  proved  and 
certified,  stating  that  the  mortgage  has  been  satisfied.  This  cer- 
tificate is  recorded  at  length,  and  a  reference  made  in  the  record 
to  the  book  and  page  where  the  mortgage  is  recorded,  and  in  the 
minute  of  the  discharge  made  upon  the  record  of  the  mortgage, 

1  A  demand   for  the  certificate  of  dis-         -  G.  L.  1883,  §  234. 
charge    must   be  proved.      Richmond   v.         3  g.  S.  1888,  §§  2972,  2973. 
Lattin,  64  Cal.  273.  4  Civil  Code  1883,  §  \15f>. 

890 


PROVISIONS  FOR  ENTERING  SATISFACTION   OF  RECORD.       [§§998-1001. 

to  the  book  and  page  where  the  discharge  is  recorded.  B}'  failure 
so  to  discharge  on  request,  a  penalty'  of  one  hundred  dolhirs  is 
incurred,  and  also  all  damages  which  may  result. 

998.  Delaware.^  —  When  a  mortgage  debt  is  satisfied,  the 
legal  holder  of  the  mortgage  must  within  sixty  days  afterwards 
cause  an  entry  of  satisfaction  to  be  made  upon  the  record,  signed 
by  him,  or,  when  a  corporation  is  the  holder,  by  the  cashier  or 
treasurer,  and  attested  by  the  recorder.  Such  entry  extinguishes 
the  mortgage.  A  neglect  or  refusal  on  the  part  of  the  holder  of 
the  mortgage  so  to  discharge  it  renders  him  liable  in  damages 
of  not  less  than  ten  nor  more  than  five  hundred  dollars,  except 
when  special  damage  to  a  larger  amount  is  alleged  and  proved, 
to  be  recovered  by  action.  Upon  request  a  reconveyance  of  the 
premises  embraced  in  such  mortgage,  or  in  a  conveyance  in  the 
nature  of  a  mortgage,  must  be  executed. 

999.  District  of  Columbia.  —  Deeds  of  trust  are  taken  as  se- 
curity for  debts  almost  to  the  exclusion  of  mortgages.  Release  is 
made  by  a  deed  from  the  trustee.  There  is  no  statutory  pro- 
vision for  cancellation  upon  the  record. 

1000.  Florida.^ — Whenever  the  amount  of  money  due  on  any 
mortgage  shall  be  fully  paid  to  the  person  or  party  entitled  to  the 
payment  thereof,  the  mortgagee,  or  party  to  whom  such  payment 
shall  have  been  made,  shall,  within  sixty  days  thereafter,  enter  on 
the  margin  of  the  record  of  said  mortgage,  in  the  presence  of  the 
custodian  of  said  record,  to  be  attested  by  said  custodian,  satisfac- 
tion of  said  mortgage,  and  sign  the  same  with  liis,  her,  or  their 
lumd,  or  shall  make  and  execute  in  writing  an  instrument  ac- 
knowledging satisfaction  of  said  satisfied  mortgage,  and  have  tin' 
same  entered  of  record  in  the  book  of  mortgage  records  in  tin- 
proper  county,  the  said  instrunumt  to  be  first  legally  acknowl- 
edged or  proven  to  be  the  act  and  instrunuMit  of  tlu;  party  or  par- 
ties making  the  same. 

1001.  Georgia.  —  I"'ormerIy  a  recorded  nioitgagf  was  dis- 
charged by  a  written  certifi(^it<',  entered  upon  the  record  by  the 
clerk.  A  deed  of  release  was  also  used.  Now  any  mortgagor 
wlio  has  paid  off  his  mortgage  may  present  the  same,  together 
with  the  order  of  the  mortgagee  or  transferee  din-cting  llinl  the 
mortgage  be  cancelled,  to  the  clerk  of  the  superior  court  of  tin- 
coimty  in  which  thci  same  ia  recorded,  who  is  reciuired   to  write 

'    K.  Cod.-  1874,  ]>.  5(ir,.  ■■'  Law*  lH77,.li.  :iOi;i  ;  Dik-  Lawh  IHHI. 

|).  709. 

891 


§§  1002-1004.]  PAYMENT   AND   DISCHARGE. 

across  the  face  of  the  record  the  word  "  Sutlsfied,"  and  the  date 
of  such  entry,  and  sign  his  name  thereto  officially.^ 

1002.  Idaho  Territory.^ — Mortgages  may  be  discharged  by 
an  entry  on  the  margin  of  the  record,  signed  by  the  mortgagee, 
or  his  personal  representative  or  assignee,  acknowledging  satisfac- 
tion of  the  mortgage,  in  the  presence  of  the  recorder  or  his  dep- 
uty, who  must  subscribe  the  same  as  a  witness ;  and  such  entry 
has  the  same  effect  as  a  deed  of  release  duly  acknowledged  and 
recoi'ded.  A  discharge  may  also  be  made  upon  the  record  by  the 
recorder,  whenever  there  shall  be  presented  to  him  a  certificate 
executed  by  the  mortgagee,  his  personal  representative  or  as- 
signee, duly  acknowledged  or  proved,  specifying  that  such  mort- 
gage has  been  paid,  satisfied,  or  discharged.  The  certificate  is 
recorded  at  length,  with  a  minute  of  reference  to  the  record  of  the 
mortgage.  A  neglect  or  refusal  of  the  holder  of  a  satisfied  mort- 
gage after  request  to  execute  and  acknowledge  a  certificate  of  dis- 
charge renders  him  liable  to  the  mortgagor,  his  heirs  or  assigns,  in 
the  sum  of  one  hundred  dollars,  and  also  for  all  actual  damages 
occasioned  by  such  neglect  or  refusal. 

1003.  Illinois.^  —  Upon  satisfaction  of  a  mortgage  the  mort- 
gagee shall,  at  the  request  of  the  mortgagor  or  his  assigns,  enter 
satisfaction  upon  the  margin  of  the  record  in  the  recorder's  office. 
A  mortgage  or  trust  deed  may  also  be  released  by  an  instrument 
in  writing,  acknowledged  or  proved  in  the  same  manner  as  a  deed. 
If  release  is  not  made  within  one  month  after  payment  of  the 
debt  and  tender  of  all  reasonable  charges,  and  a  request  for  re- 
lease, the  person  whose  duty  it  is  to  make  the  release  shall  forfeit 
and  pay  to  the  party  aggrieved  the  sura  of  fifty  dollars,  to  be  re- 
covered in  an  action  of  debt. 

1004.  Indiana.*  —  The  mortgagee,  upon  receiving  full  payment 
of  the  mortgage  debt,  shall,  upon  request,  enter  satisfaction  on 
the  margin,  or  other  proper  place  in  the  record  of  the  mortgage, 
which  operates  as  a  complete  release  and  discharge  of  it.^    Instead 

1  Laws  1885,  p.  129,  No.  315.  record  that  "  this  mortgage  is  fully  and 

-  R.  S.  1887,  §§  3361-3364.  completely   satisfied."     Kichards   v.   Mc- 

3  Annotated  Stats.  1885,  ch.  95,  §§  8,  Pherson,  74  Ind.  158. 

9,  10.  6  Smith  V.  Lowry,   15  N.  E.  Rep.   17. 

*  R.  S.  1888,  §§  1090,  1091.     A  tender  A  recorded  release  given  by  an  adminis- 

merely  of  the  amount  due  does  not  entitle  trator  of  the  mortgagee  under  such  a  stat- 

the  mortgagor  to  a  discharge.     Storey  v.  ute,  without  inquiry  as  to  his  authority. 

Krewson,  55  Ind.  397.     It  is  an  effective  Connecticut  Mut.   L.  Ins.  Co.  v.  Talbot, 

satisfaction   to  state  upon  the  mortgage  14  N.  E.  Rep.  586. 

892 


PROVISIONS   FOR  ENTKRING   SATISFACTION   OF  RECORD.     [§§  1005-1007. 

of  such  entry  a  certificate  of  payment  may  be  made,  acknowl- 
edged and  recorded,  with  proper  references  to  the  record  of  the 
mortgage. 

1005.  lowa.^  —  When  the  amount  due  on  a  mortgage  is  paid, 
the  mortgagee  must  acknowledge  satisfaction  in  the  margin  of 
the  record  of  the  mortgage,  or  must  execute  an  instrument  in 
writing  referring  to  the  mortgage,  and  duly  acknowledge  it  for 
record.  If  he  fails  to  do  so  within  sixty  days  after  being  requested, 
he  forfeits  the  sum  of  twenty -five  dollars  to  the  mortgagor. 

1006.  Kansas.2  —  A  recorded  mortgage  may  be  discharged 
by  an  entry  on  the  margin  of  the  record,  signed  by  the  mort- 
gagee, or  his  attorney,  assignee,  or  personal  representative,  ac- 
knowledging satisfaction  of  the  mortgage,  in  the  presence  of  the 
register  of  deeds  or  his  deputy,  and  subscribed  by  him  as  a  wit- 
ness. A  mortgage  may  also  be  released  by  a  receipt  indorsed 
thereon  by  the  mortgagee,  his  agent  or  attorney,  which  receipt, 
when  recorded  on  the  margin  of  the  record,  has  the  same  force 
and  effect  as  an  entry  on  the  margin  of  the  record.  A  mortgage 
may  also  be  discharged  upon  the  record  by  the  register  of  deeds, 
whenever  there  is  presented  to  him  an  instrument  acknowledging 
satisfaction  of  the  mortgage,  executed  by  the  mortgagee,  his  duly 
authorized  attorney  in  fact,  assignee,  or  personal  representative, 
and  duly  acknowledged  and  certified.  Such  instrument  is  re- 
corded at  length,  with  reference  to  it  in  the  record  of  the  mort- 
gage. Upon  the  satisfaction  of  a  mortgage,  and  if  the  holder 
neglects  to  enter  satisfaction,  he  is  liable  in  damages  to  the  mort- 
gagor or  his  grantee  in  the  sum  of  one  hundred  dollars,  to  be  re- 
covered in  a  civil  action. 

1007.  Kentucky. '  —  Liens  by  deed  or  mortgage  may  be  dis- 
charged by  an  entry  acknowledging  satisfaction  of  the  same  on 
the  margin  of  the  record,  signed  by  the  person  entitled  or  his 
personal  representative,  and  attested  by  the  clerk  <>r  iiis  dtputy. 
which  will  have  the  eflect  to  reinvest  the  tith-  in  the  mortgagor. 

As  to  pleading,'  ami  practice  in  suit  for  any  one  or  nioro  of  the  notes  mimed   in 

cancellation  of  mortKiiKC,  see  Johnson  v.  any  mortj,'at;e  is  paid  or  otiierwine  itali.s 

Moore,  13  N.  E.   Rep.    JOG;    Thomas  c.  lied,  the  huhUr.  wlio  appears  of  record  to 

licynolds,  2'J  Kans.  304.  he  sucli  holder,   may  release  the  lien,  »o 

1  11.   S.   1881,  §  2265;   U.    Code    1880,  far  a»  such   note   or  notes  are  concerned, 

§  3327.  hy   release,  after  the  record  of  the  mort 

^  Dassler's  Compiled  LuwB  1885,ch.  08,  gage,  over  his  own  hand,  attested  by  the 

§§  5-8.  ilirk.     Cm.  S.  1881,  pp.  'JV.l,  974. 

3  G.  S.  1881,p.25C,ch.  24,§   12.     When 

b9d 


§§  1008-1010.]  PAYMENT   AND   DISCHARGE. 

or  grantor,  or  person  entitled  to  it.     There  may  also  be  a  com- 
mon law  release. 

1008.  Louisiana.^  —  Mortgages  are  discharged  by  the  fact  of 
payment.  The  erasure  of  record  is  made  on  presentation  to  the 
recorder  of  the  acts,  receipts,  and  judgments  which  operate  as  a 
release  of  the  mortgage,  with  the  certificate  of  the  notary  public 
before  whom  the  act  was  executed,  stating  by  such  act  a  release 
was  granted  and  the  erasure  allowed  ;  this  certificate  is  filed  in 
the  office  of  the  recorder  of  mortgages,  where  such  cancelling  is 
asked  for.  If  the  erasure  has  been  given  by  an  act  under  private 
signature,  the  erasure  only  takes  place  when  it  has  been  acknowl- 
edged by  the  mortgagee,  or  proved  by  the  oath  of  one  of  the 
subscribing  witnesses,  unless  the  register  be  acquainted  with  the 
signature  of  the  party  who  has  subscribed  the  act,  and  shall  agree 
on  his  own  responsibility  to  make  the  erasure  on  the  presenta- 
tion of  the  original.  If  the  debt  be  payable  by  instalments,  the 
debtor  may,  on  the  payment  of  each  instalment,  require  a  release 
from  the  creditor  in  relation  to  the  instalment  paid  ;  and  the  re- 
corder shall  make  mention  of  these  partial  releases  on  the  mar- 
gin of  the  record  ;  but  he  shall  not  erase  the  record  entirely  until 
the  whole  debt  has  been  discharged.^ 

1009.  Maine. -5  —  A  mortgage  may  be  discharged  by  a  deed  of 
release  from  the  person  authorized  to  discharge  it,  or  by  causing 
satisfaction  and  payment  under  his  hand  to  be  entered  in  the 
margin  of  the  record  of  such  mortgage  in  the  register's  office.  A 
guardian  of  a  mortgagee  may  execute  a  discharge.  So  may  an 
attorne}^  at  law  authorized  in  writing  duly  recorded. 

1010.  Maryland.'^  —  A  release  of  a  mortgage  may  be  made  in 
the  following  form,  or  to  like  effect :  "  I  hereby  release  the  above 
(or  within)  mortgage.  Witness  my  hand  and  seal  this  day 
of              .     (Seal.)"     This  may  be  written  by  the  mortgagee  or 

1  E.  Civil  Code   1870,  art.  3371-3385.  property.     De  St.  Komes  v.  Blanc,  20  La. 

The   erasure  can   only  be   made   by  the  Ann.  424. 

mortgagee's  consent  or  by  decree.     By  no  -  An  unauthorized  cancellation  by  the 

act  of  the  recorder  can   the  mortgage  be  recorder  cannot  impair  the  riglits  of  the 

destroyed.      Guesnard    i\    Soulie,    8    La.  holder     of     the    mortgage.      Mechanics' 

Ann.  58.    Neither  does  the  cancellation  of  Building  Asso.  v.  Ferguson,  29  La.  Ann. 

the  mortgage  by  the  recorder,  on  the  pres-  548.     The  holder  of  the  mortgage  may 

entation  of  a  false  certificate  that  the  note  show  that  the  recorder  acted  upon  insuflB- 

had  been  paid,  impair  the  rights  of  the  cient  evidence.     Horton  v.  Cutler,  28  La. 

mortgagee,  although  one  has  innocently  Ann.  331. 

bought  the  property  on  the  faith  of  a  cer-  3  n  g.  1883,  ch.  90,  §§  27,  28,  29. 

tificate  that  there  was  no  mortgage  on  the  *  R.  Code  1878,  art.  44,  §§  40-44. 

894 


PROVISIONS  FOR  ENTERING  SATISFACTION  OF  RECORD.     [§§  1011,  1012. 

his  assignee  upon  the  record  in  the  office  where  the  mortgage  is 
recorded,  and  attested  by  the  clerk  of  the  court ;  or  it  may  be 
indorsed  on  the  original  mortgage  by  tlie  mortgagee  or  his  as- 
signee ;  and  upon  such  mortgage,  with  the  release,  being  filed  in 
the  office  in  which  the  mortgage  is  recorded,  the  clerk  is  required 
to  record  the  release  at  the  foot  of  the  mortgage.  When  the 
mortgage,  with  the  release,  is  filed  for  this  purpose,  the  clerk  re- 
tains it  in  his  office,  and  does  not  permit  it  to  be  again  withdrawn. 
A  release  may  be  made  by  an  executor  or  assignee  in  the  same 
manner  and  with  like  effect  as  by  the  mortgagee. 

1011.  Massachusetts.!  —  Mortgages  may  be  discharged  by  an 
entry  on  the  margin  of  the  record  in  the  registry  of  deeds,  signed 
by  the  mortgagee,  or  his  executor,  administrator,  or  assignee,  ac- 
knowledging the  satisfaction  of  the  mortgage  ;  and  such  entry  has 
the  same  effect  as  a  deed  of  release  duly  acknowledged  and  re- 
corded. When  there  are  two  or  more  joint  holders  of  a  mort- 
gage, one  of  them  may  discharge  it  in  either  of  these  niodes.- 
When  the  mortgagee  or  the  holder  of  the  mortgage  is  under 
guardianship,  as  an  infant  or  otherwise,  the  guardian  may,  upon 
satisfaction  of  the  debt,  execute  a  release  of  the  mortgage.^*  If 
the  holder  of  a  mortgage,  after  full  performance  of  the  condition, 
whether  before  or  after  breach,  for  seven  days  after  being  re- 
quested, and  after  a  tender  of  his  reasonable  charges,  refuses  or 
neglects  to  make  such  discharge,  or  execute  and  acknowledge  a 
deed  of  release,  he  is  liable  for  all  damages  occasioned  by  such 
neirlect  or  refusal,  to  be  recovered  in  an  action  of  tort.^ 

1012.  Michigan.''  —  A  mortgage  may  be  discharged  by  an  en- 
try on  the  margin  of  the  record,  signed  by  the  mortgagee,  or  his 
personal  representative  or  assignee,  acknowledging  satisfaction, 
in  the  presence  of  the  register  or  his  deputy,  as  a  witness,  and 
such  entry  has  the  effect  of  a  deed  of  release.  It  may  also  bo 
discharged  upon  the  record  by  the  register  of  deeds,  when  a  cer- 
tificate of  payment,  duly  executed  and  acknowledged,  is  pre- 
sented;  or  upon  the  presentation  of  tlu;  certificate  of  the  circuit 
court  of  the  county,  under  its  seal,  that  it  has  been  made  to  appear 
that  the  mortgage  has  been  .luly  paid,  or  upon  preseiitatitui  of 
a  certificate  of  the  register  in  chancery  of  the  enunty,  certifying 
that  a  decree  of  foreclosure  has  been  entered,  and  that  the  recortl.s 

'  P.  S.  1882,  ch.  120,  §§  24-2C.  *   1'.  S.  \khu,  <1i.  ll'O,  §  2:>. 

-  r.  S.  1882,  ch,  120,  §  20.  '  Annotnlcd  StiiU.  IHH2,  §§  5701-5705. 

^  1'.  S.  1882,  ch.  181,  §  41.  SfO  Acts  1885,  No.  225. 

895 


§§  1013,  1014.]  PAYMENT   AND   DISCHARGE. 

of  his  office  show  that  the  decree  has  been  satisfied.^  A  neglect 
or  refusal  for  seven  days,  after  payment  and  request  and  tender 
of  reasonable  charges,  to  discharge  the  mortgage,  renders  the 
person  so  neglecting  or  refusing  liable  to  the  mortgagor,  his  heirs 
or  assigns,  in  the  sum  of  one  hundred  dollars  damages,  besides 
all  actual  damages,  to  be  recovered  in  an  action  upon  the  case, 
or  upon  a  bill  in  equity  to  procure  a  discharge,  with  double 
costs.^ 

1013.  Minnesota.^  —  Mortgages  may  be  discharged  by  an  en- 
try in  the  margin  of  the  record,  signed  by  the  mortgagee,  or  his 
executor,  administrator,  or  assignee,  acknowledging  satisfaction ; 
and  such  entry  has  the  same  effect  as  a  deed  of  release  duly  ac- 
knowledged and  recorded.  They  may  also  be  discharged  upon  the 
record  by  the  register  of  deeds  whenever  there  shall  be  presented 
to  him  a  certificate  signed  by  the  mortgagee  or  grantee,  his  per- 
sonal representatives  or  assigns,  dvily  executed  and  acknowledged, 
specifying  that  the  mortgage  has  been  paid  or  otherwise  dis- 
charged. This  certificate  is  recorded  at  length  with  a  minute  of 
reference  to  and  from  the  record  of  the  mortgage. 

If  the  holder  of  the  mortgage  neglects  for  the  space  of  ten 
days  after  being  thereto  requested,  with  tender  of  his  reasonable 
charges,  to  discharge  the  same,  he  is  liable  for  all  actual  damages 
occasioned  by  his  neglect  or  refusal,  to  be  recovered  in  a  civil 
action.  In  the  same  action  may  be  united  a  claim  for  the  satisfac- 
tion of  the  mortgage,  which  the  court  maj'  decree,  and  a  certified 
copy  of  the  decree  operates  as  a  discharge.  If  the  mortgagee  be 
a  non-resident,  the  action  may  be  maintained  at  the  expiration  of 
sixty  days  after  the  conditions  of  the  mortgage  have  been  fully 
performed,  without  any  previous  request  to  satisfy  the  mortgage. 

1014.  Mississippi.*  —  A  mortgagee  or  cestui  que  trust,  having 
received  full  payment  of  the  money  due  by  the  mortgage  or  deed 
of  trust,  shall,  at  the  request  of  the  mortgagor  or  grantor,  enter 
satisfaction  upon  the  margin  of  the  record  of  such  mortgage  or 
deed  of  trust,   in   the  clerk's  office,    which  entry  discharges  the 

1  Laws  1875,  No.  47,  p.  40.  purpose,  objects,  and  parties  in   the  two 

-  The  penalty  may  be  recovered  in  an  suits   being  different.      Eaton   v.    Eaton 

action  to  redeem.     Cowles  v.  Marble,  37  (Mich.),  36  N.  W.  Rep.  50. 

Mich,  158;  Acts  1877,  p-  9.  3  r   g.  1866,  p.  332 ;  1  Stats,  at  Large, 

The  pendency  of  a  suit  to  foreclose  a  1873,   p.  642;  Laws  1876,  ch.  38;  G.  S. 

mortgage  will  not  support  a  plea  in  bar  of  1878,  ch.  40,  §§  36,  37. 

a  suit  to  have  it  satisfied  of  record,  the  ^  R.  Code  1880,  §§  1206-1208. 
896 


PROVISIONS    FOR   ENTERING    SATISFACTION   OF   RECORD.       [§  1015. 

same  and  revests  the  title  in  tbe  grantor.^  A  neglect  to  enter, 
discharge,  or  make  I'elease  for  three  months  after  request,  and 
tender  made  of  reasonable  expenses,  makes  the  person  so  neglect- 
ing or  refusing  liable  to  forfeit  to  the  party  aggrieved  any  sum 
not  exceeding  the  mortgage  money,  to  be  recovered  by  action. 
Entry  of  satisfaction  may  be  made  by  any  one  authorized  to  do 
it  by  the  written  authorization  of  the  mortgagee  or  beneficiary, 
and  shall  have  the  same  effect  as  if  done  by  the  mortgagee  or 
beneficiary  ;  and  where  the  entry  of  satisfaction  is  made  under 
the  written  authorization  aforesaid,  the  mortgagor  or  grantor,  or 
his  heirs  or  assigns,  shall  be  entitled  to  the  custody  of  the  writing 
conferring  the  authority,  unless  it  shall  be  duly  acknowledged 
and  recorded  in  the  office  in  which  the  mortgage  or  deed  of  trust 
is  recorded.  Payment  of  the  money  secured  by  any  mortgage  or 
deed  of  trust  extinguishes  it,  and  revests  the  title  in  the  mort- 
gagor as  effectually  as  a  reconveyance  would.  The  trustee  in  a 
deed  of  trust  may  acknowledge  satisfaction  in  like  manner  as  the 
cestui  que  trust  ma}',  and  with  like  effect. 

1015.  Missouri.- — A  mortgagee  ov  cestui  que  trusty  his  exec- 
utor, administrator,  or  assignee,  upon  receiving  full  satisfaction 
of  any  mortgage  or  deed  of  trust,  shall,  at  the  request  and  cost 
of  the  person  making  the  same,  acknowledge  satisfaction  on  the 
margin  of  the  record,  or  deliver  to  such  person  a  sufficient  deed 
of  release  of  the  morte:ae;e  or  deed  of  trust.  A  ti'ustee  need  not 
join  in  acknowledging  satisfaction,  or  making  a  deed  of  release. 
An  assignee  acknowledging  satisfaction  must  product;  and  cancel 
in  the  presence  of  the  recorder  the  note  or  notes  secured ;  or  make 
affidavit  of  his  ownership,  their  payment,  and  loss.  Neglect  for 
thirty  days  after  request  and  tender  of  cost  renders  the  delin- 
quent liable  to  forfeit  to  the  person  aggrieved  ten  per  cent,  of  the 
amount  of  the  mortgage  or  deed  of  trust  absolutely,  and  any 
ither  damages  he  maybe  able  to  prove  he  has  sustained,  to  be 
iccovered  by  action.  An  executor  or  administrator  of  a  mort- 
gagee or  cestui  que  trusty  so  neglecting  to  acUnowledgo  satisfac- 
tion, is  personally  liable  for  the  penalty  prescribed.^  Any  at- 
torney in  fact,  to  whom  the  money  due  has  been  j)aid,  has  power 
to  execute  the  release."*     Such  acknowledgment  or  relea.s(;  has  the 

1  .Such  acknowlc.l^jiiiciit  oil  the  iiiiiiKiii  -  U.   S.   187'J.   §§   ;J.-II  l-;i:tl.l  :  uiikihIcI 

ia  equivalent  to  a  release  by  deed.     Miiirn     Liiwh  1887,  p.  2'.M. 
r.  IJank  of  Oxford,  .')8  Miss.  'Jl'J.  »  II.  S.  I8:<»,  §§  .Til.'..  :i;iir.. 

*  Ncitli(;r  (lie  uutliorily  of  llic  nlloriiey 

7    VOL.  I.  57  8U7  ' 


§§  1016,  1017.]  PAYMENT    AND   DISCHARGE. 

effect  to  discharge  the  mortgage  or  reinvest  in  the  mortgagor  or 
his  legal  representative  the  title  to  the  property. 

1016.  Montana  Territory.^  —  A  mortgage  may  be  discharged 
by  an  entry  in  the  margin  of  the  record,  signed  by  the  mortgagee, 
or  his  personal  representative  or  assignee,  acknowledging  satisfac- 
tion of  the  mortgage  in  the  presence  of  the  recorder  or  his  deputy, 
who  must  subscribe  as  a  witness.  Such  entry  has  the  same  effect 
as  a  deed  of  release  duly  acknowledged  and  recorded.  It  may 
also  be  discharged  upon  the  record  by  the  recorder  whenever 
there  shall  be  presented  to  him  a  certificate  executed  by  the  mort- 
gagee, his  personal  representative  or  assignee,  acknowledged  or 
proved,  specifying  that  such  mortgage  has  been  paid  or  other- 
wise satisfied.  The  certificate  is  recorded  at  length,  with  a  note 
of  reference  to  the  record  of  the  mortgage.  If  the  holder  of  the 
mortgage,  having  received  payment,  refuses  or  neglects  for  tlie 
space  of  seven  days  after  request  to  execute  and  acknowledge  a 
certificate  of  discharge,  he  is  liable  to  the  mortgagor,  his  heirs  or 
assigns,  in  the  sum  of  one  hundred  dollars,  and  also  for  all  actual 
damages  occasioned  by  such  neglect  or  refusal. 

1017.  Nebraska.^ — A  mortgage  may  be  discharged  by  an  en- 
try in  the  margin  of  the  record  signed  by  the  mortgagee,  or  his 
personal  representative  or  assignee,  acknowledging  satisfaction 
of  the  mortgage,  in  the  presence  of  the  county  clerk  or  his  dep- 
uty, who  must  subscribe  as  a  witness.  Such  entry  then  has  the 
same  effect  as  a  deed  of  release  duly  acknowledged  and  recorded. 
It  may  also  be  discharged  upon  the  record  by  the  county  clerk,  in 
whose  custody  it  may  be,  whenever  there  shall  be  presented  to 
him  a  certificate  executed  by  the  mortgagee,  his  pei'sonal  repre- 
sentatives or  assigns,  duly  acknowledged  or  proved,  specifying 
that  the  mortgage  has  been  paid  or  otherwise  satisfied.  Such  cer- 
tificate is  recorded  with  a  reference  to  the  record  of  the  mortgage. 
In  case  of  a  neglect  or  refusal  for  the  space  of  seven  days  after 
request  and  tender  of  reasonable  charges  to  make  such  discharge, 
the  person  whose  duty  it  is  to  make  such  discharge  is  liable  to 
the  mortgagor,  his  heirs  or  assigns,  in  the  sum  of  one  hundred 
dollars,  in  addition  to  all  actual  damages  occasioned  by  such  neg- 
lect or  refusal,  to  be  recovered  by  action. 

nor   his   acknowledgment    of   satisfaction  i  Compiled  Stats.  1887,  p.  663. 

need  be  under  seal.     Valle'  v.  Am.  Iron  -  Compiled  Stats.  1885,  ch.  73,  §§  26- 

Mountain  Co.  27  Mo.  455.  29 ;  amended  Laws  1887,  ch.  30,  p.  371. 
898 


PROVISIONS   FOR  ENTKRING   SATISFACTION   OF  RKCORD.     [§§  1018-1022. 

1018.  Nevada.^  —  A  mortgage  may  be  discharged  by  an  entry 
on  the  margin  of  the  record,  signed  by  the  mortgagee,  or  his  per- 
sonal representative  or  assignee,  acknowledging  satisfaction  in  the 
presence  of  the  recorder  or  his  deputy,  who  must  subscribe  as  a 
witness,  and  sucli  entrv  has  the  same  effect  as  a  deed  of  release. . 
It  may  also  be  discharged  upon  record  by  the  register  of  deeds  on 
presentation  of  a  certitic.ite  of  payment  duly  acknowledged  and 
certified.  Such  certificate  is  recorded  at  length  with  jjvoper  refer- 
ences. A  neglect  or  refusal  for  seven  days  after  request,  and  a 
tender  of  reasonable  charges,  to  execute  a  release,  renders  the  per- 
son whose  duty  it  is  to  do  tliis  liable  to  tlie  mortgagor,  his  heirs 
or  assigns,  in  the  sum  of  one  hundred  dollars,  and  also  for  all 
actual  damages  occasioned  by  such  neglect  or  refusal. 

1019.  New  Hampshire.^  —  Upon  the  performance  of  the  con- 
dition of  the  mortgage,  or  upon  the  tender  of  such  performance, 
the  mortgage  is  void.  If,  after  such  performance  or  tender,  the 
mortgagee,  upon  being  requested,  and  having  his  reasonable 
charges  tendered  to  him,  refuses  or  neglects  to  execute  a  release 
of  his  interest  in  the  moitgaged  premist?s,  the  mortgagor  or  per- 
son having  his  estate  may  apply  by  petition  to  the  supreme  court, 
in  the  county  where  the  premises  lie,  for  a  decree  of  discharge. 
If  the  court  finds  that  the  condition  has  been  performed  or  ten- 
dered, a  decree  is  entered  that  the  mortgage  be  discharged.  A 
copy  of  the  decree  is  then  recorded,  and  has  the  same  effect  as  a 
release  duly  executed. 

1020.  New  Jersey.-' —  Wiien  a  mortgage  is  paid  it  is  the  duty 
of  the  clerk  of  the  court  of  common  pleas  of  the  county  in  which 
the  mortgage  is  recorded,  on  application  to  him  by  the  mortgagor 
or  person  redeeming  or  paying  the  mortgage,  and  proihu-ing  to 
him  the  mortgage  cancelled,  or  a  receipt  upon  it  signed  liy  (li.- 
mortgagee,  his  representatives  or  assigns,  to  enti-r  in  a  margui,  to 
be  left  for  that  purpose  oppositci  to  the  abstra<t  or  rct-ord,  a  minutf 
of  the  redemption  or  payment;  which  miinilc  is  :i  full  ami  al«.s<« 
lute  bar  to  and  discharge;  of  the  entry  and  nu)rtgage. 

1021.  New  Mexico  Territory. — Then?  are  no  statutory  pio 
visions  relating  to  tin-  discharg*'  of  mortgages;  therefon'  a  th-'MJ 
of  release  should  !)••  ustti. 

1022.  New   York.'  — Any    innii-ag.-    that    has    been    ri;c»»r»led 

'   G.  S.  ISy.-i,  §§  2004-2007.  •   If   S.  |H",  |..  TOO  ;  Siipp.  1880,  p.  1.14. 

■-  «.  S.  1807.' til.  122.  §§   4.  .',.0;   C    L.  *  .1   K-    S.    1882.    pp.  -m^K    Vir, .     S.« 

1878,  ch.  136,  §§  4-7.  I-nw"  '*"*•».  »»'   •''■^'''• 

81»9 


§§  1023,  1024.]  PAYMENT   AND   DISCHARGE- 

may  be  discliarged  upon  the  record  by  the  officer  in  whose  cus- 
tody it  may  be  whenever  there  shall  be  presented  to  him  a  cer- 
tificate signed  by  the  mortgagee,  his  personal  representatives  or 
assigns,  duly  acknowledged  or  proved,  specifying  that  the  mort- 
gage has  been  paid,  or  otherwise  satisfied  and  discharged.  Such 
certificate  is  recorded  at  length,  and  a  reference  made  to  the  book 
and  page  of  such  record  in  the  minute  of  the  discharge  of  the 
mortgage  made  upon  the  record  of  that.  When,  from  lapse  of 
time,  a  mortgage  may  be  presumed  to  have  been  paid,  any  person 
interested  in  the  lands  may  petition  the  court  for  a  discharge  of 
it ;  and  upon  hearing  and  proof  the  court  may  order  the  mort- 
gage discharged  of  record .^ 

1023.  North  Carolina.^  —  A  deed  of  trust  or  mortgage  may 
be  discharged  by  an  acknowledgment  of  satisfaction  of  the  trust 
or  mortgage  in  the  presence  of  the  register  of  deeds,  whose  duty 
it  is  forthwith  to  make  upon  the  margin  of  the  record  an  entry  of 
such  acknowledgment,  which  entry,  being  signed  by  the  person 
discharging  it  and  witnessed  by  the  register,  has  the  same  effect 
to  release  and  discharge  all  interest  of  the  trustee,  mortgagor,  or 
representative  in  such  deed  or  mortgage,  as  if  a  deed  of  release  or 
reconveyance  thereof  had  been  duly  executed  and  recorded. 

1024.  Ohio.^  —  Upon  the  payment  of  the  mortgage  debt  the 
mortgagee  must  enter  satisfaction  on  the  mai'gin  of  tlie  record,  or 
upon  the  mortgage  itself,  which  entry  made  upon  the  mortgage 
the  recorder  of  deeds  for  the  county  copies  upon  the  margin  of 
the  record.  Such  entry  made  in  either  way  has  the  effect  of  a 
release.  These  provisions  for  the  entry  of  satisfaction  do  not  pre- 
clude a  release  made  in  any  other  customary  manner.  When  the 
mortgage  has  been  assigned,  the  assignment  must  be  recorded 
before  satisfaction  is  entered.  When  satisfaction  is  made  by  ap- 
plication of  the  proceeds  of  a  judicial  sale,  or  when  the  lien  is 
declared  invalid  by  judgment  or  decree,  it  is  the  duty  of  the  clerk 
to  enter  a  memorandum  of  the  proceeding  upon  the  record  of  the 

1  The  object  of  this  latter  provision  is  from  lapse  of  time  to  have  been  paid,  yet 

to  remove  an  existing  incumbrance  when  payment  must  be  alleged  and  proved.     If 

it  has  been  paid  in  fact,  and  not  by  mere  the  evidence  shows  no  payment  except  by 

presumption  of  law.     Tlie  petition  must  presumption  of  law,  no  remedy  can  be  had 

allege  that  the  mortgage  is  paid.    It  must  by  this  summary  proceeding.     Re  Town- 

also  allege  that  the  mortgagee  has  been  send,  4   Hun,  31  ;  6\  C.   6  Thomp.  &  C. 

dead  for  more  than  five  years,  and  that  227. 

letters  testamentary  or  of  administration  "^  Code  1833,  §  1271. 

have    not   been    granted.      Although    the  ^  r   s_  jggo^  §§  4135^  4136,  41C9-4142 ; 

statute    relates    to   mortgages    presumed  Laws  1888,  p.  284. 

900 


PROVISIONS  FOR  ENTERING  SATISFACTION  OF  RECORD.     [§§  1025,  1026. 

mortgage,   and    the   court   may   order   tlie   entry  of  such   memo- 
randum. 

1025.  Oregon.i  —  A  mortgage  may  be  discharged  by  an  entry 
in  the  margin  of  the  record,  signed  by  the  mortgagee,  or  liis  per- 
sonal representative  or  assignee,  acknowledging  the  satisfaction  of 
the  mortgage  in  the  presence  of  the  county  dork  or  liis  deputy, 
who  must  subscribe  the  same  as  a  witness ;  and  such  entry  has 
the  same  effect  as  a  deed  of  release  duly  acknowledged  and  re- 
corded. A  mortgage  may  also  be  discharged  upon  the  record  by 
the  county  clerk  in  whose  custody  it  may  be  whenever  there  shall 
be  presented  to  him  a  certificate  executed  by  the  mortgagee,  his 
personal  representative  or  assignee,  duly  acknowledged,  or  proveii 
and  certified,  specifying  that  the  mortgage  has  been  paid,  or  oth- 
erwise satisfied  or  discharged.  This  certificate  must  be  recorded 
with  a  reference  to  the  record  of  the  mortgage.  A  neglect  or  re- 
fusal of  the  mortgagee,  or  his  personal  representative  or  assignee, 
for  the  space  of  ten  days  after  request  and  tender  of  his  reasonable 
charges,  to  execute  a  discharge,  renders  him  liable  in  the  sum  of 
one  hundred  dollars  damages,  and  also  for  all  actual  damages  oc- 
casioned by  such  neglect  or  refusal,  to  be  recovereil  in  an  action 
at  law. 

1026.  Pennsylvania.-  —  A  mortgagee  upon  securing  satisfac- 
tion of  the  mortgage  is  required,  at  the  request  of  the  mortgagor, 
to  enter  satisfaction  upon  the  margin  of  the  record,  which  entry 
operates  as  a  full  release  and  discharge  of  the  mortgage.  If  he 
does  not  by  himself  or  his  attorney,  within  three  montlis  after 
such  request  and  a  tender  of  his  reasonable  charges,  repair  t  i  (hi- 
ollice  for  recording  deeds  and  there  make  such  acknowledgment, 
he  shall  forfeit  and  })ay  to  the  party  aggrieved  any  sum  not  ex- 
ceeding the  mortgage  money,  to  be  recovered  by  suit. 

The  amount  claimed  to  be  due  upon  a  morlgag«i  may  be  paid 
into  court,  whereupcjn  a  decree  is  made  that  sa(isfacti(»n  \w  en- 
tered upon  the  mortgage  or  that  the  prt)|)erty  be  reeonveyed,  and 
the  court  may  afterwards  proceed  to  hear  and  determine  thtMtbjec- 

tions  to  the  payment  of  any  part  of  the  ni y  in  •■ i.  an.l   may 

decree  accordingly.' 

Where  payment  has  been  made  ami  the  hoMer  of  the  nioitgage 
has  failed  to  enter  sat  isfaction   fornix   monthn,  the  mortgagor  or 

'   AiinotatccI   hiiwtlMST,  §§   .10.')0-.'J().I4.         •'  < )iily  ilic  m..ri;,Nij;or  i*  «Miiitlo.l  lo  iIip 
-  lJri;,'liily'H    J'linlon'H    Di^j.    18«.'J,    pp.     Iwiii'llt  of  tliii«  provj.ioei.     AMiirnnro  I'o. 
592-594;   LiiwM  \Hh:i,  p.  l.'J8.  r.  I'owir,  12  IMiilu.  .1". 

901 


§§  1027,  1028.]  PAYMENT    AND   DISCHARGE. 

owner  of  the  mortgaged  premises  may  petition  the  court  of  com- 
mon pleas  for  the  count}'  where  the  premises  are  situated,  and 
upon  service  of  notice  as  directed  by  the  court,  and  proof  of  pay- 
ment in  full,  the  court  may  decree  that  satisfaction  be  entered 
upon  the  record  by  the  recorder  of  the  county  ;  and  such  satisfac- 
tion discharges  the  mortgage  as  fully  as  if  the  satisfaction  had 
been  entered  by  the  holder  of  the  mortgage.  Issues  of  fact  may, 
at  the  request  of  either  party,  be  framed  and  tried  by  a  jury.^ 

So  also  in  case  there  is  a  legal  pi'esumption  of  the  payment  of 
a  mortgage  existing  from  lapse  of  time,  and  no  satisfaction  of  it 
appears  of  record,  upon  a  like  petition  to  the  same  court  a  decree 
may  be  rendered  that  satisfaction  shall  be  entered  on  the  record 
in  the  manner  before  provided. ^ 

1027.  Rhode  Island.-^  —  The  holder  of  a  mortgage,  upon  re- 
ceiving full  satisfaction  for  the  money  due  upon  it,  must  at  the 
request  of  the  mortgagor,  his  heirs,  executors,  administrators,  or 
assignee,  and  at  his  or  their  cost,  discharge  the  same  by  release, 
under  his  hand  and  seal,  upon  the  mortgage,  or  upon  the  face  or 
margin  of  the  record,  or  by  separate  instrument,  to  be  recorded 
on  the  face  or  margin  of  the  record,  or  in  the  record  book,  with 
suitable  references  to  the  original  record.  His  neglect  or  refusal 
for  ten  days  after  a  request  and  tender  of  all  reasonable  charges 
to  discharge  the  mortgage  in  one  of  these  modes,  or  to  execute  a 
release  and  quitclaim  of  the  mortgaged  estate,  renders  liim  liable 
to  make  good  all  damages  that  may  accrue  for  want  of  such  dis- 
charge, to  be  recovered  in  an  action  of  the  case  in  a  court  of 
record  with  treble  costs. 

1028.  South  Carolina.'*  —  Every  person  who  has  received  full 
payment  or  satisfaction  of  a  mortgage,  or  to  whom  a  legal  tender 
shall  have  been  made  of  his  or  their  debt,  damages,  costs,  and 
charges,  shall,  at  the  request  of  the  mortgagor  or  his  legal  repre- 
sentative, or  of  any  other  person  being  a  creditor  of  such  debtor, 
or  a  purchaser  under  him,  or  having  an  interest  in  any  estate 
bound  by  such  mortgage,  and  on  tender  of  the  fees  of  office  for 
entering  such  satisfaction,  within  three  months  after  such  request 
made,   enter  satisfaction  in  the  proper  office  on  such  mortgage, 

1  Laws  1879,  p.  141,  No.  149.  *  G.  S.  1882,  §§  1791.  1792.     This  stat- 

-  Laws  1881,  p.  97.  ute  does  not  authorize  the  recording  of  a 

3  P.  S.  1882,  ch.  176,  §§  6,  7.     A  mar-  paper   not   authenticated   as   required  by 

ried  woman  may  discharge  a  mortgage  in  statute  for  the  purpose  of  being  recorded. 

her  own  name.     Acts  1884,  ch.  399.  Lvnch  v.  Hancock,  14  S.  C.  66. 

902 


PROVISIONS  FOR  ENTERING  SATISFACTION    OF  RECORD.     [§§  1029-1032. 

which  forever  discharges  and  satisfies  it.  If  any  person  who  has 
received  such  payment  or  satisfaction  does  not  within  that  time, 
bv  himself  or  liis  attorney,  after  request  and  tender  of  fees  of 
office,  repair  to  such  office  and  enter  satisfaction,  he  shall  for  such 
refusal  or  neglect  forfeit  to  the  party  aggrieved  a  sum  of  money 
not  exceeding  one  half  the  amount  of  the  debt  secured  by  the 
mortgage,  to  be  recovered  by  action.  On  the  recovery  of  judg- 
ment by  the  plaintiff,  it  is  the  duty  of  the  judge  to  order  satisfac-  • 
tion  of  the  mortgage  to  be  entered  by  the  proper  officer. 

1029.  Tennessee.  —  There  are  no  statutory  provisions  as  to 
the  release  of  mortgages  and  deeds  of  trust.  A  deed  of  release  is 
used  for  this  purpose. 

1030.  Texas.  —  Mortgages  and  deeds  of  trust  are  discharged 
by  payment,  and  no  record  of  discharge  is  necessary  and  none  is 
provided  for. 

1031.  Utah  Territory.*  —  Any  mortgage  or  deed  of  trust  may 
be  discharged  by  an  entry  in  the  margin  of  the  record  thereof, 
siorned  by  the  mortgagee  or  trustee,  or  his  personal  representative 
or  assignee,  stating  the  satisfaction  of  the  mortgage  or  deed  df 
trust,  in  the  presence  of  the  recorder  or  his  ileputy,  who  shall 
subscribe  the  same  as  a  witness,  and  such  entry  shall  have  the 
same  effect  as  a  deed  of  release  duly  acknowledged  and  recorded. 

Any  mortgage  or  deed  of  trust  may  also  be  discharged  upon 
the  record  thereof,  by  the  recorder  in  whose  custody  it  shall  be, 
whenever  there  shall  be  presented  to  him  a  certificate,  executed 
by  the  mortgagee  or  trustee,  his  representative  or  assignee,  ac- 
knowledged or  proved  and  certified,  specifying  that  such  mort- 
gage or  deed  of  trust  has  been  paid,  or  otherwise  satisfied  (tr 
discharged.  Every  such  certificate,  and  the  pro(»f  of  acknowledg- 
ment thereof,  shall  be  recorded  at  full  length,  and  a  reterence 
shall  be  made  to  the  book  containing  such  record  in  the  minute 
of  the  discharge  of  such  instrument. 

If  the  mortgagee  fail  to  discharge  or  rel.-ase  any  mortgage  after 
the  same  has  been  fully  satisfied,  he  shall  he  liable  to  the  mort- 
<ragor  for  <h)ul)le  the  diiinages  resulting  from  siu^h  failure. 

1032.  Virginia.-  -When  payment  or  satisfaction  is  made  of 
a  debt  secured  by  morlu'ag'',  *\''*''^  "f  <••"'<''  v.ndor's  or  meehanic'rt 
lien,  it  shall  b.'  \\u'.  duty  of  such  iii-n  eredilor  to  caiisr  hiicIi  pay- 
ment or  Haiisfaction,  witliin  ninety   days  after  it    is   matle,  t<»  be 

•   Comp.  LnwH  1876,  §§  C4'J,  C'lO ;  Lu\v»  -  Code  1887,  $  a498. 

1884,  cli.  42,  §  '2. 

U03 


§§  1033,  1034.]  PAYMENT    AND   DISCHARGE. 

entered  on  the  margin  of  the  page  in  the  book  where  sucli  incum- 
brance is  recorded,  and  for  any  faihire  to  do  so  he  shall  forfeit 
twenty  dollars.  Such  entry  of  payment  or  satisfaction  shall  be 
signed  by  the  creditor,  his  duly  authorized  agent  or  attorney,  and 
when  so  signed,  and  the  signature  thereto  attested  by  the  clerk 
in  whose  office  such  incumbrance  is  recorded,  the  same  shall  oper- 
ate as  a  release  of  the  incumbrance  as  to  which  such  payment  or 
satisfaction  is  entered. 

1033.  Vermont.^  —  Mortgages  may  be  discharged  by  an  entry 
on  the  margin  of  the  I'ecord,  signed  by  the  mortgagee  or  his  at- 
torney, executor,  administrator,  or  assignee,  acknowledging  satis- 
faction of  the  mortgage ;  and  such  entry  has  the  same  effect  as 
a  deed  of  release  duly  acknowledged  and  recorded.  Mortgages 
may  also  be  discharged  by  the  mortgagee,  or  his  attorney,  execu- 
tor, administrator,  or  assignee,  acknowledging  payment  by  an 
entry  on  the  mortgage  deed,  signing  the  same  and  affixing  his 
seal  in  the  presence  of  one  or  more  witnesses,  which  entry,  upon 
being  recorded  on  the  margin  of  the  record  of  such  mortgage  in 
the  record  of  deeds,  discharges  the  mortgage.  If  a  mortgagee,  or 
other  person  whose  duty  it  is  to  discharge  the  mortgage,  refuses 
or  neglects  for  the  space  of  ten  days,  after  request  and  a  tender  of 
his  reasonable  charges,  to  discharge  the  moitgage  as  above  pro- 
vided, or  to  execute  and  acknowledge  a  deed  of  release,  he  is  lia- 
ble for  all  damages  occasioned  by  such  neglect  or  refusal,  to  be 
recovered  in  an  action  on  the  case ;  and  a  court  of  chancery  may 
grant  such  further  relief  as  justice  may  require. 

1034.  Washington  Territory.^  —  Whenever  the  amount  due 
on  any  mortgage  is  paid  and  satisfied,  the  mortgagee  or  his  legal 
representatives  shall,  at  the  request  of  the  mortgagor  or  his  au- 
thorized agent,  acknowledge  satisfaction  of  the  same  in  the  margin 
of  the  page  upon  which  the  mortgage  is  recorded,  or  by  executing 
an  instrument  referring  to  the  mortgage,  specifically  describing 
the  property  mortgaged,  giving  the  amount  for  which  it  was  given 
to  secure,  the  date  of  execution  and  date  of  record  of  said  mort- 
gage, and  shall  acknowledge  satisfaction  in  full  of  the  same, 
which  shall  be  duly  acknowledged  and  recorded  upon  the  records 
of  the  county  wherein  the  mortgage  is  recorded.  If  the  mort- 
gagee shall  fail  so  to  do  after  sixty  days  from  the  date  of  such 
request  or  demand,  he  shall  forfeit  and  pay  to  the  mortgagor  the  ■ 
sum  of  twenty-five  dollars,  to  be  recovered  in  any  court  having 

1  R.  L.  1880,  §§  1950-1952.  2  l^vvs  1886,  p.  116. 

904 


PROVISIONS   FOR  KNTERING   SATISFACTION  OF  RECORD.     [§§  1035,  1036. 

competent  jurisdiction  ;  and  said  court,  ^vhen  convinced  that  said 
mortgage  has  been  fully  satisfied,  shall  issue  an  order  in  writing, 
directing  the  auditor  to  cancel  said  mortgage,  and  the  auditor 
shall  immediately  record  the  order  and  cancel  the  mortgage  as 
directed  by  the  court,  upon  the  margin  of  the  page  upon  which 
the  mortgage  is  recorded,  making  reference  thereupon  to  the  order 
of  the  court  and  to  the  page  where  the  order  is  recorded. 

1035.  "West  Virginia.^  —  Any  person  entitled  to  the  benefit 
of  a  lien  on  any  estate,  real  or  personal,  may  release  it  by  a  writ- 
ing signed  by  him,  and  acknowledged  and  admitted  to  record  in 
the  proper  county.  It  is  sufficient  if  it  describe  the  lien  by  any 
words  that  will  identify  and  show  an  intent  to  discharge  the 
same.  The  release  is  presented  to  the  recorder  in  whose  office 
the  lien  is  recorded  ;  and  from  the  time  it  is  so  left  for  record  the 
lien  is  discharged  and  extinguished,  and  the  estate  is  redeemed 
and  vested  in  the  former  owner.  The  recorder  makes  note  of  the 
release  on  the  margin  of  the  record  of  the  lien.  In  case  of  the 
refusal  of  the  party  holding  such  lien  to  execute  a  release  upon 
request  of  the  party  entitled  to  it,  the  circuit  court  having  juris- 
diction, after  reasonable  notice  to  the  party  so  refusing,  and  if  no 
good  cause  be  shown  against  it,  may  direct  the  recorder  to  execute 
such  release,  which  has  the  effect  of  a  release  made  by  the  party 
himself.  The  proceedings  are  at  the  cost  of  the  party  refusing  to 
release. 

1036.  Wisconsin.^  —  A  recorded  mortgage  may  be  discharged 
by  an  entry  in  the  margin  of  the  record,  signed  by  the  mortgagee, 
his  personal  representatives  or  assignee,  acknowledging  the  sat- 
isfaction of  the  mortgage  in  the  presence  of  the  register  or  his 
deputy,  who  must  subscribe  the  same  as  a  witness  ;  and  such  en- 
try has  the  same  effect  as  a  deed  of  release.  Any  mortgage  may 
al&o  be  discharged  upon  the  record  by  the  register  of  deeds  wiien- 
ever  there  shall  be  presented  to  him  a  certificate,  executed  by  the 
mortgagee,  his  personal  representatives  or  assigns,  acknowledged 

1  CoiIc  1887.  th.  7t;,  §§  1-0.     Kek-asus  c-oriicd   in   llic   reioidor'-s    (»llic<-    nf 

and  their  acknowl(ili;ii.i;iit  niny  be  in  form  connty,  West  Vii-inia,  in  ilecl  liimk 

or  eff.ct  HS  follows,  in  cnso  of  Ji  n».)rlj;.ij,'e     liit;;e         .     (To  l.f  ^i;,'n^•^l)  A 11         . 

..r  trust  deed  :—  AcknowUMi(;id   before  ilic  HulmTilar  iIiIh 

"],A U ,  hereby  rf!ic-««.;  a  niort-  diiy  of         .     (To   be  m^nt'd)  <! 

^'H^e  (or  deed  of  trusi)   made  by   C H ,  j«'«iii-i-  ("r  record.  r.ii..luiy  \m\>- 

■  1) to   me    (or   to    K F .   my  li«',  tie.,  iih  the  ea>«  miiy  U-)." 

trustee,    or    to    ,    and   assigned    to  '-  H.  S.  1878.  ch.  100.  §§  a'-MT-aJSG. 

me),  dalcd  the  day  of  ,  and  re 


§  1037.]  PAYMENT    AKD    DISCHARGE. 

or  proved  and  properly  certified  to  entitle  it  to  be  recorded,  spe- 
cifying tliat  the  mortgage  has  been  paid  or  otherwise  satisfied. 
This  is  recorded  at  length,  with  proper  minutes  of  reference  to 
the  mortgage.  A  foreign  executor  or  administrator,  upon  filing 
in  the  county  court  of  the  county  an  authenticated  copy  of  his  ap- 
pointment, may  execute  a  certificate  of  discharge  of  a  mortgage  to 
like  effect  as  an  executor  or  administrator  appointed  under  the 
laws  of  the  state  may  do.  The  neglect  ^f  any  person  whose  duty 
it  is,  upon  the  payment  of  a  mortgage,  to  execute  a  discharge,  for 
the  space  of  seven  days  after  request  and  a  tender  of  his  reason- 
able charges,  to  discharge  the  mortgage  in  one  of  these  modes, 
renders  him  liable  in  the  sum  of  one  hundred  dollars  damages, 
and  also  for  the  actual  damages  occasioned  by  such  neglect  or  re- 
fusal, to  be  recovered  by  action. ^ 

1037.  Wyoming  Territory.-  —  A  mortgage  may  be  discharged 
b}'  an  entry  in  the  margin  of  the  record,  signed  by  the  mort- 
gagee, or  his  personal  representative  or  assignee,  acknowledging 
the  satisfaction  of  the  mortgage  in  the  presence  of  the  register  of 
deeds  or  his  deputy,  who  shall  subscribe  the  same  as  a  witness, 
and  such  entry  shall  have  the  same  effect  as  a  deed  of  release 
duly  acknowledged  and  recorded.  A  discharge  may  also  be  made 
upon  the  record  by  the  register  whenever  there  shall  be  presented 
to  him  a  certificate,  executed  by  the  mortgagee,  his  personal  rep- 
resentative or  assign,  duly  acknowledged  or  proved  so  as  to  be 
entitled  to  be  recorded,  specifying  that  such  mortgage  has  been 
paid  or  otherwise  satisfied.  This  certificate  is  recorded  at  length. 
If  a  mortgagee  or  other  holder  of  the  mortgage,  after  a  full  per- 
formance of  the  condition,  whether  before  or  after  the  breacii,  for 
the  space  of  seven  days  after  request  and  tender  of  his  reasonable 
charges,  refuses  or  neglects  to  discharge  it  on.  the  margin  of  the 
record,  or  to  execute  a  certificate  of  discharge,  he  is  liable  to  the 
mortgagor,  his  heirs  or  assigns,  in  the  sum  of  one  hundred  dol- 
lars, and  also  for  all  actual  damages  occasioned  by  such  neglect 
or  refusal,  to  be  recovered  in  a  civil  action. 


1  As  to  the  sufficiency  of  a  complaint         ^  11.  S.  1887,  §§  30-32. 
to  enforce  such  penalty,  see  Teetshorn  v. 
Hull,  30  Wis.  162. 

906 


U"^^ 


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